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Negotiating A Lease That Allows Your Business To Thrive

Jul 14, 2021
Article #407
Author: Kyle Swanson


The Current Leasing Market

As we all know, Covid-19 nearly killed the restaurant industry like nothing we’ve experienced in history, resulting thousands of restaurants failing. But that’s when opportunity knocks on the door and the smart money starts to move!  Merely leasing a second generation restaurant will save tens and even hundreds of thousand of dollars in build out costs! Today, landlords are looking for new concepts and tenants to fill the vacant spots.  That's where SellingRestaurants can help!

Our Services

At SellingRestaurants, we've been helping new & existing restaurant owners establish or expand their concepts for nearly 20 years. At SellingRestaurants, we go the extra mile with preparing a complete packet for the landlords review & approval, making you look good! The goal is to ensure the landlord is provided with an accessible and concise proposal making the decision process easy! We make you look good to the landlord and increase your chances of getting into your dream spot!  Here are some examples of the documents we include in our landlord packages that we help prepare for you:

Executive Summary

The executive summary is a way of introducing your concept to the landlord. Aside from the letter of intent, this is the most important document as it is the first impression with the landlord. The Executive Summary describes your concept including the history, the process, the financial expectations, the staffing, and the menu.

Putting together an executive summary is a cumbersome and tiring process. At SellingRestaurants, we gather all of the necessary information and help you put together the executive summary.

Resume

You’ve introduced your business, now the landlord wants to know about YOU! A good resume demonstrates a timeline of accomplishments and work history telling the landlord you are a super candidate for that spot. It should provide your accomplishments in the restaurant business.  

LETTER OF INTENT (LOI)

The landlord now knows your business and know a bit about you.  Now it’s time to hammer out the lease details.   A LOI is the tool used to do this.  It is a document that itemizes the terms and conditions you're willing to accept in order to lease the property.   In writing an LOI, it is crucial to have an agent on your side to make sure your interests are protected and all too often commercial agents double sides the transaction and frankly, they naturally side with the landlord because that's who butters their bread.  You NEED an exclusive agent to help protect your interests.

WHAT ELSE DO LANDLORDS WANT?

We’ve worked with hundreds of landlords for over nearly 20 years. In addition to the Executive Summary and the Resume, landlords will want the following: 

1. Extensive experience & proven success in owning or operating a restaurant.

2. Plenty of working capital in the bank.

3. Credit score in the 700's+.

4. Good business and/or personal tax returns.

Ensuring you have all of the above requirements and done in a professional manner, significantly increases your chance of getting the lease. Remember, you're not the only rodeo in town!

INCREASE YOUR CHANCES

Increase the Term

The greater the duration of the lease term, the more attractive it’s going to be for the landlord. Landlords are looking for successful, long-term tenants to fill their spaces. Restaurant industry standard is a five-year lease with a five-year option, but a ten-year lease with a ten-year option is incredibly attractive to a landlord.

Does The Concept Fit?

Most landlords take the viability of the concept within a specific plaza or center into consideration. It’s important to ensure there are no competing concepts within a center. In addition, does the concept mesh well with the other businesses in the center? Don't put a hot dog stand in a high-end retail center!  Landlords know their demographic well and like to see a concept move-in that's going to satisfy the center's demographic. This is why we take significant measures to screen potential spaces for our clients!

Provide Strong Assurances

Landlords care about many things, but the most important is getting the rent paid. They are looking for a financially strong candidate to guarantee payment.  Have your CPA prepare a personal financial statement. Unless you own many restaurants, you're going to be required to provide a guarantee, so accept it because to reject is to lose the lease. 

Know the rent in the area

Landlords are tough characters to deal with. They tend to be emotionless people. If you know the rent was $60 Sq. Ft. annually before you started negotiating and you're going to ask for $30 Sq. Ft., forget it!  Move-on!  Provide a scaled rent getting the landlord to where he/she wants the rent and do it in a reasonable amount of time. 

Tenant Improvement Credits

This one always amuses me. Often tenants are looking for the landlord to help finance the building of a restaurant via the landlord providing credits to the new tenant. DON'T BE FOOLED!  You're paying for those improvements via higher rents, usually in the back-end of the lease.  So just know this, it isn't free money.

Assignment Language

Some day you're going to want to sell the restaurant.  Having assignment language that allows you to do transfer the lease is crucial and often overlooked by new tenants. That's where SellingRestaurants come in with your attorney to help you. 

Option Language

Some of the value you're trying to build is in your ability to not only transfer the lease, but also transfer the options on the lease. Options are likely personal to the original lessee and that's where we can help you and your attorney draft language make the option transferrable. 

These are but a few tips to help you improve your leasing chances. SellingRestaurants proudly serves the California & Arizona restaurant buyers Markets. We know landlords and how they operate, what they are looking for, and how to get leasing deals DONE!  Start the process on the wrong foot, and you'll likely never see a successful lease completed.  It is CRUCIAL to protect your interests in the signing of a new lease, and no one knows how to do it better than Selling Restaurants. Best of all, there is no cost to you! 

Give us a call today to schedule a free over-the-phone consultation 480.274.7000.

 

 


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