What is escrow service and relevance of escrow service for restaurant business
escrow service

Doing business involves risk, and the most arduous task in starting a restaurant is raising capital and safeguarding the transactions. A business needs to raise money at attractive rates to keep the cost of borrowing low. At times you may have to borrow money from sources you have not dealt with earlier and cannot trust the financer blindly; in such a situation, if any of the parties refuses to abide by the contract, there can be problems, this is where escrow service for restaurant business can be useful. 

Lawsuits in India can drag for years due to very slow judicial verdicts and cause significant financial strain for the business; no wonder India ranks 163 in the group of 190 countries for enforcing contracts (source Department of justice). To avoid this kind of complication and ensure the rights of both seller and buyer are safeguarded, both parties can hire the services of an Escrow account or an Escrow based payment mechanism.

What is an Escrow Account?

When a sale takes place, the seller wants to guarantee his payment, and the buyer wants the goods or assets purchased to be as per the agreed dimension or terms. To avoid irregularities, these two parties open an escrow account to park the transaction’s amount. A third party will operate an escrow account until the terms of sales are met. The escrow agent safeguards the amount until the deal is finalised rather than remitting the transaction amount directly into the seller’s account. 

Once the sales deal is finalised, and both the parties are satisfied, the escrow agent will remit the funds to the seller. An escrow account can hold securities, assets and money and has been mainly used during mergers and acquisitions. With the advent of the digital revolution in India, many more sectors are using escrow services to safeguard their financial transaction.

How does Escrow Works?

The Escrow process starts with the appointment of an escrow agent on mutually agreed terms and opening of an Escrow account. The Escrow agent will then check if both sides fulfil the contract terms and if the business’s liabilities, like creditors, unpaid taxes etc., are either settled by the seller or taken over by the buyer as per agreement. 

The escrow process involves setting up a timewise release of payment against the fulfilment of contractual terms. An escrow agent is professional and well versed in dealing with the process, the fund transaction, thus minimising the chances of any fraud. Once all the terms are met, the payment is released, and the deal is closed.   

How has digitalisation helped many industries access Escrow services?

Pandemic has led to steady growth in online transactions; corresponding to this, there is also an increase in online frauds. As per a recent survey, there has been a 24% jump in online fraud from 2019. These factors have led to the escrow-as-a-service business gaining traction in real estate deals that involve many risks. 

An offline Escrow account takes around 8 to 16 weeks, with the entire documentation process being costly and cumbersome. A digital escrow account now can be opened in one day with 80% less cost. It is possible to open a digital escrow facility due to digital tools like eKYC and eAgreement, which drastically reduces turnaround time for documentation.


Players like Escrow India, Escrow Bharat, Escrow Pay, and WordPay have dominated Escrow service providers. When it comes to a digitised version of Escrow service Delhi based digital escrow service platform Castler has created a niche for itself by launching a white-labelled escrow solution for its corporate clients.

How can an escrow service for the restaurant industry help ?

In the restaurant industry, escrow service comes into the picture when purchasing or selling the restaurant business. As mentioned earlier, real estate in India involves many risks, and the chances of financial fraud are very high. Escrow agreement safeguards both the seller and the buyer of the restaurant business/estate. 

An Escrow sees that the capital needed for the transaction is available with the buyer and ensures that the seller meets all the sales obligations. The buyer also gets protection from unforeseen unpaid liabilities or discrepancies in the transfer process. If the seller fails to fulfil or makes undesirable changes in the obligation of the sales, the buyer can walk away from the contract.  

Conclusion:- Availing services of an escrow agent is not mandatory but highly recommended during the purchase or sale of the restaurant business. Earlier dues to complications of opening an escrow, businesses avoided using this service. With the advent of digitisation and subsequent reduction in the cost and opening an escrow, there is renewed interest in this service. 

An Escrow can safeguard property transactions while opening a restaurant, thereby removing a big hurdle of opening a food business. We hope budding entrepreneurs who intend to open a restaurant business will take note of the benefits of escrow service for the restaurant business and use it for ease of doing business. 

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