Buying a food distribution business in Florida

Food distributors buy from manufacturers, importers, growers and packers and deliver to restaurants, grocery stores, convenience stores, schools, hotels and other food businesses. Small distributors usually specialize in a kind of food (produce, seafood, meat, dairy, bakery goods, specialty and imported foods, beverages), a kind of customer (independent restaurants, ethnic grocers, convenience stores) or a region. Many Florida distributors import from Latin America and the Caribbean.

Distributors earn a markup that's often thin, so volume, efficient routes and low waste matter a lot. Customers usually order once or more a week, on credit. Exclusive rights to a brand in a territory can bring better margins and be a large part of what you'd buy.

The assets are a warehouse with coolers and freezers, refrigerated trucks, inventory, the customer list and supplier agreements. A small distributor usually has buyers, warehouse staff, route drivers who often take orders too, salespeople, and a bookkeeper who manages customer credit.

• Exclusive or long-standing supplier agreements, in writing, with brands customers ask for by name.
• Many customers, careful credit checks and little bad debt.
• Tight, well-planned delivery routes, so each truck makes many stops a day.
• A well-run cold chain (keeping food cold door to door): temperature monitoring and logs, reliable refrigeration, and backup power for hurricanes.
• A clean inspection history with the state and the FDA, and no recalls.
• Low spoilage and shrink (product lost to damage, theft or errors), tracked by product, with slow sellers dropped.
• Buyers and salespeople who know the customers and suppliers.
• Some customers on standing orders that go out weekly without a sales call.

• State food permit. Food warehouses and wholesale distributors need a food permit from the Florida Department of Agriculture and Consumer Services (FDACS), renewed yearly. Permits don't transfer to another person or location, and a new one requires an FDACS inspection first (section 500.12).
• FDA. Facilities that hold food must register with the FDA and renew every other year. On a sale, the seller cancels its registration within 60 days and the new owner registers (21 CFR 1.234). The FDA's food traceability rule will require more records for certain foods; Congress has barred enforcement before July 20, 2028.
• Produce. Dealers handling 2,000 pounds or more of fresh or frozen produce in a day, and most produce brokers, need a USDA license under the Perishable Agricultural Commodities Act (PACA). A change in the firm's ownership requires a new license (7 CFR 46.13).
• Alcohol. Wholesalers need a Florida distributor license, which transfers only with state approval (section 561.32). They also need a federal basic permit, which ends 30 days after a change of control unless the new owner applies (27 CFR 1.44). Selling a beer distributorship takes each brewer's written consent, which a brewer can't unreasonably withhold from a qualified buyer (section 563.022).

• Supplier agreements: exclusivity, territory, termination and consent to a sale. Many can be ended on short notice, so talk to the main suppliers before you commit.
• How much rides on the biggest customers, and how many are restaurants that could close or switch suppliers.
• Overdue customer bills and past bad debts. Small restaurants and stores can be slow to pay.
• Inspection reports, recalls, customer complaints, and temperature logs for the coolers and trucks.
• Age and condition of coolers, freezers, trucks and their refrigeration units, and what breaks most often.
• An inventory count, with expired or nearly expired stock written off before the price is set.
• Fuel, insurance and driver costs, and driver turnover.
• For importers, customs records, tariffs and how long goods take to arrive.
• For produce, whether growers and shippers have been paid. Under PACA, unpaid sellers hold trust rights over a dealer's produce, inventory and receivables (money customers owe).

• Which brands are exclusive to you, and can those agreements be transferred?
• How much of your business comes from your top ten customers?
• What happens if a cooler fails, or the power goes out after a hurricane?
• What did your last state and FDA inspections find?
• How much product do you throw away each month?
• How do you decide which customers get credit?
• Do any of your suppliers sell directly to your customers?