3 Tips for Leasing a Restaurant Space
Restaurant leases can be complex and involve negotiations on some very important details to a lease. In general, restaurant commercial leases are generally much longer than a typical residential lease. The restaurant tenant is making a much larger financial commitment.
Regardless of whether you are an experienced restaurateur, franchise concept, or up-and-coming restaurateur, carefully review and consider the lease terms, and the language in the lease.
Even with the difficulty of negotiating lease terms, some restaurateurs try to negotiate with the landlord by themselves without professional representation. This practice sometimes leads to restaurant tenants signing lease agreements they fully don’t understand.
Leasing a restaurant can be a fairly straightforward process if you understand the steps required and seek help from a professional such as restaurant real estate advisors, attorney, contractors, and architects if you have questions. Finding a restaurant space can be the easy part, negotiating the lease terms can be the difficult part.
EATS Restaurant Brokers 3 Tips for Leasing a Restaurant Space
Don’t Call that For Lease Sign
Unless you have experience in negotiating multiple commercial real estate leasing contracts, don’t call that For Lease Sign without contacting a trained Restaurant Broker. The individual who is advertising the commercial real estate space is a trained professional in contract negotiations representing the landlord’s best interest. Once you have called the For Lease Sign directly, you are letting the leasing agent know that you are representing yourself in negotiations.
Why is this important? Once the landlord’s representative starts negotiating with you and sends you a Letter of Intent and then you contact a Restaurant Broker to represent you it’s too late. The landlord will not pay your professional representative a commission and you will be responsible. This will be a personal expense you will incur and have to decide if you want to pay.
Most people don’t know the landlord pays the leasing company usually a 6% commission to lease the space. This commission is usually split between a tenant representative and a landlord representative in a co-op deal.
Be prepared with your documentation
Today’s leasing agents want to know they are working with a quailed tenant before they open the doors to show the space or start negotiating on a lease. The worst feeling as a potential restaurant tenant is to find the ideal and perfect space but you are not ready to move forward. Before you start your restaurant search, you should have the following items ready to present to the landlord if needed.
- Business Plan with 3 years forecast
- Copy of Menu
- Resume or Bio
- Proof of liquid assets-Bank Statement, 401K statement, or letter from your bank
- Personal Financial Statement
- Copy of Tax Returns
Prepare Letter of Intent
The first step of the lease negotiation is the offer to lease, typically referred to as the Letter of Intent (LOI). The Letter of Intent is to facilitate the start of negotiations between the tenant and the landlord. The complexity of the Letter of Intent depends on the person drafting the form, the tenant’s demands, and the landlord’s willingness to negotiate. This documentation should cover the majority of the key points to the lease:
- Rent structure
- Term of Lease
- Options to extend
- Permitted Use/Exclusive Use
- Rent Commencement Date
- Landlords Delivery Condition
- Lease Assignment Rights
- Tenant Improvement Allowance (TI)
- Rent Abatement
- Personal Guaranty
For more information on restaurant leasing and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at firstname.lastname@example.org. Visit our website at www.EATSbrokers.com
People ask me all the time What is a Restaurant Broker? Restaurant Brokers are specialists trained to facilitate a restaurant transaction between sellers and buyers. On a daily basis Restaurants, Brokers are working with professionals in the Restaurant Industry. Some Restaurant Brokers know the financials of a business better than the restaurant owners due to years of daily experience reviewing restaurant financial statements.
Unlike some brokers that sell everything from a dry cleaner, gas station, to an automobile shop, Restaurant Brokers deal exclusively with the restaurant industry.
Some of the beneficial services Restaurant Brokers offer buyers and sellers during the sales process include:
– Restaurant Brokers work on 100% commission and take their fee as commission out of the price agreed upon by seller and buyer. Broker and seller have a separate commission agreement signed. This means the benefit of the broker’s experience and knowledge without personal cost.
– Restaurant Brokers help the buyer client with analyzing the seller’s financials, collects sales tax filings, tax returns, leases, equipment list, utility providers, and does an introduction to the landlord for lease assignment.
– Every restaurant broker has a network of local vendors a buyer may need during the purchase process. These professional relationships were built over the years and help the buyer with a stress-free closing.
– A Restaurant Broker is a skilled professional who provides a restaurant price valuation based on the financials provided by the sellers. Restaurant Brokers know the guidelines for qualifying business for bank lending to help sellers get the most for the business.
– A Restaurant Broker is skilled in negotiation and document handling. Restaurant negotiations are complex, a Restaurant Broker can negotiate an agreement that works for everyone.
– Selling a restaurant can be a process that takes 6-9 months, the whole time a Restaurant Broker is screening buyers, pre-qualifying buyers, answering questions about your business to buyers, and marketing your business.
-Most importantly a Restaurant Broker only gets paid at the closing table when the business is sold. The commission ranges from 10%-15%, but the broker puts up all the money to market the business, spends the time with buyers, and only gets paid once the deal is closed. For the seller, this is professional representation without putting upfront fees!
A Restaurant Broker is a professional that can help you buy a restaurant, sell a restaurant, or lease a restaurant at a price you can afford.
EATS Restaurant Brokers is a full-service Real Estate Business brokerage practice focused on the restaurant industry. The company specializes in selling Restaurant Franchise Resales and Restaurant Sales. We also help clients with Restaurant real estate site selection, Tenant Representation, Franchise Consulting, and Business Price Evaluation.
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at email@example.com. Visit our website at www.EATSbrokers.com