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Two numbers usually land on the table first in any takeover: the rent, and what the business itself is worth. Key money is the third one — legally required almost nowhere, rarely explained, and usually the amount a takeover actually falls apart over.
The broker or the outgoing operator calls it "key money": an amount on top of the rent and on top of what the business is worth, just to get the keys to this one specific address. There's no invoice for it, no law that governs it in most countries, and usually no clear answer to what it's actually paying for.
This isn't a one-country quirk. France has two entirely different sums people routinely confuse — the pas-de-porte, paid to the landlord, and the droit au bail, paid to the outgoing tenant. Italy flips the logic completely: there, a comparable amount is written into the law as a tenant's right, not a landlord's favour. Three countries, three completely different sets of rules for what looks, on the surface, like the same conversation.
This guide doesn't hand you a formula — there isn't one, because the right answer depends on the country, the contract and the location. Instead: five questions, in the order you actually need to ask them — where you stand legally, what the amount concretely covers, what this one address is really worth to you, how long it takes to pay itself back, and what's left if it goes wrong.
At the bottom, run it with your own numbers: the key money asked, the extra profit versus your best alternative, and the months left on your lease. Everything runs in your own browser — nothing is sent or stored.
The ultimate guide Restaurant Finance: 6 Numbers That Decide Your Profit Prime cost, cash flow, break-even, RevPASH and ROI — the complete financial system for restaurant operators. Open the guideThe 5 questions before you pay key money
They build on each other: first you know which legal system you're in, then what you're actually buying, then what it's worth to you, and only then whether it pays for itself — and what happens if it doesn't.
1. Which country are you in, and who is it actually owed to?
In Belgium and the Netherlands, there is no legal category for key money at all. Commercial lease law governs terms, notice periods and renewal rights — not an entry payment on top of rent. What happens instead is a private deal, often partly or fully in cash, with no statutory floor and no legal protection if it goes wrong. That same large cash flow is exactly why local police forces in the hospitality sector have run public campaigns warning specifically against criminal investors using takeovers like this to launder money.
France has two different sums that get confused constantly. The pas-de-porte goes to the landlord and is sometimes taxed as prepaid rent, sometimes as a capital gain — the landlord's own characterization decides which. The droit au bail goes to the outgoing tenant, as compensation for transferring their lease rights, and can be depreciated by the new tenant over the term of the lease. Always ask explicitly which of the two is actually on the table — they are not the same conversation.
Italy inverts the logic entirely. Legge 392/1978, Article 34, requires a landlord who terminates a commercial lease through no fault of the tenant to pay that tenant an indemnity of 18 months' rent — 21 months for a hotel activity — doubling to 36 months if the same or a related activity returns to the premises within a year. There, it isn't a favour you pay a landlord; it's a statutory right a landlord owes YOU on the day you leave. So know not just what you're paying, but which of these three conversations you're actually in.
2. What are you actually buying — and are you paying for it twice?
A key money ask is almost never one thing. It's usually the sum of three very different components that are rarely broken out separately: the value of a lease sitting below current market rent, the equipment and fit-out that comes "with it", and pure locational value — the fact that this is this specific address.
The component that slips in unnoticed most often is equipment you're already paying for once, through the business's own takeover price. A real valuation prices the kitchen's substance value separately — what the oven, refrigeration and fit-out are still worth after depreciation. If that same equipment is quietly folded into the key money as well, you're paying for the same combi oven twice: once in the takeover price, once in the "entry fee".
So always ask for a breakdown: how much of the amount covers the lease itself, how much covers equipment — with its own inventory list, not the same list already used in the takeover price — and how much is pure locational value with nothing tangible behind it. A seller who can't or won't break that down can't explain where the number came from either.
Three parts — and you may be paying for one of them twice.
- Equipment — often already in the takeover price — €14,000
- Pure locational value — never recoverable — €12,000
- Below-market rent — the one hard-value part — €9,000
The equipment here is typically already counted once in the business's own takeover price — ask for the breakdown before you sign.
3. What is this ONE address worth to you, over the next-best alternative?
The amount asked is the seller's number. The number that matters is yours: how much extra profit does this exact location actually generate compared to the realistic best alternative you could rent instead? Not "is this a good location" — "how much better is it than plan B", because plan B is usually a perfectly good location too, just not this address.
Take a corner unit on a busy street versus a slightly quieter one four doors down, at the same rent. More foot traffic doesn't automatically mean proportionally more profit — it depends on your concept, your spend per cover, and how much of that extra footfall actually walks in. Run that through your own revenue simulator before you turn a feeling about an address into an actual number.
Watch for the pressure that comes with this conversation too: "there's another candidate waiting" is a negotiating tactic, not information. An address that's still empty in a month is often still empty in three — and key money accepted under time pressure is rarely the number that survives a calm second look.
4. How many months of extra profit does it need to earn back — and do you have that long?
Once you have a figure for the extra profit from question 3, the payback period is a simple division: key money divided by extra profit per month. Ask €35,000 and this location earns you €800 more per month than your best alternative, and it takes roughly 44 months — just under 3 years and 8 months — for the amount to pay for itself.
That number means nothing without holding it against your lease. On a lease with 96 months remaining — including any guaranteed renewal option, not just the bare first term — that payback consumes 46% of what's left. That's a zone you accept with your eyes open, not one that automatically feels fine: comfortable is under 40%, tight between 40 and 70%, risky between 70 and 100%, and above 100% it never pays for itself within your current term at all.
The graphic below sets that example side by side — 44 months to pay back against 96 months remaining. Enter your own numbers at the bottom and you'll see immediately which zone your deal falls into.
44 months to pay back against 96 months remaining — 46%, just inside the tight zone.
- Comfortable
- Tight
- Risky
- Never pays back
Share of the remaining lease term, including any guaranteed renewal option — not just the bare first term.
5. What if it goes wrong — is any of it recoverable?
Key money is almost never a deposit you get back if things go wrong — it behaves more like a bet than a security. If the landlord refuses to renew your lease, the business doesn't work out within two years, or you need to leave early yourself, you're simply out the money in most countries, regardless of why.
Italy is again the exception that makes the difference visible: there, a tenant terminated without cause is legally owed an indemnity back. Nowhere else in the EU does that protection exist by default, and that gap belongs in your risk assessment, not just in the price you're willing to pay.
Three things genuinely limit the damage. Get the remaining lease term and every renewal option in writing before you pay — not as the seller's spoken promise. Never hand over the full amount in cash with no paperwork at all — that's exactly the pattern behind the earlier warning about criminal investors. And where possible, ask to tie the payment to milestones — part at signing, part at the first lease renewal — rather than handing it all over before you've sold a single cover.
Calculate your own payback period
Calculate your own payback period
Enter the key money asked, the extra profit this location earns you per month over your best alternative, and how many months are left on your lease — including any guaranteed renewal option.
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Raise the months remaining with the same numbers and watch the same amount shift from "risky" to "comfortable" — the same key money is a different risk on a 3-year lease than on a 9-year one.
Five questions, one signature
Key money isn't illegal and it isn't automatically a rip-off — it's a real amount for a real advantage: an address you wouldn't otherwise get. The problem was never that it exists. It's that most buyers sign without ever asking the five questions above.
Ask for the breakdown between lease value, equipment and pure locational value. Cross-check the equipment list against the takeover price to rule out paying twice. Run the payback period against your remaining lease term, not against a gut feeling. And make sure everything you agree to is on paper before any money changes hands.
Want to know what the business itself is worth next, separate from this key money? The full valuation guide and tool below runs the takeover price itself with the same kind of grounding.