Setting yourself up for an exit strategy when you sell your business is paramount whenever entering into a new lease. But don't think that the other broker, who really represents the landlord, is going to design a lease with a good exit strategy. So you need to take care of yourself, or give us a call to help you.
First, always make sure the assignment language is fair. Language such as "won't unreasonably withhold consent" is what needs to be in the assignment paragraph. Offensive language such as "landlord can withhold consent" for any reason is a sure sign this landlord wants to leverage their lease when and if you sell your business, possibly killing a deal.
Second, the option need to transferrable. This is where some many new tenants fail to understand that landlords aren't your friend and they will stick land mines around every corner of a lease and the option is one of the most notorious places - because it is often at the end of the lease and by the time one gets to reading the lease to the end, they've about had it! So the landlord will place language in the option making it personal. This means the option isn't transferrable and it means if the business is sold, the landlord isn't required to transfer the options - and what buyer would pay thousands of dollars for a business with virtually no lease - no one!
But landlords use this as leverage against a seller of a business. The landlord will says "sure, I'll transfer the option too, but I want an increase in the rent or I want the seller to remain liable on the lease options too and so on.
So don't allow yourself to be sucked into these two exit strategy tragedies that often I see in lease agreements. If you're going to lease a restaurant or for that fact lease any business, let us help you with your exit strategy.
SellingRestaurants is a professional restaurant brokerage firm specializing in the sale and leasing of restaurant businesses for sale. We are the premier restaurant for sale company with locations in California, Arizona, Washington, Georgia. Contact me at 480.274.7000
We at SellingRestaurants feel obligated to educate the public, our customers and our clients with information that can help them make more intelligent buying and selling decisions.
Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry. Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer. Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world. There he participated in more than $11.5 billion of merger and acquisition transactions. He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University. Give Mel a call at 480.274.7000 or e-mail him at [email protected] if you have any questions.