A well-executed lease is an important asset. It offers protection when problems arise, and adds value when you decide to sell your business. Unfortunately, most restaurant operators don't know what makes a good lease, and the typical realtor knows even less. When renewing, assuming, or negotiating a lease, review these key points before you sign on the dotted line:
Landlords and developers are not the enemy. They are risk takers, providing "patient" capital for up to 20 years, and sometimes longer. They also understand the risk-reward dimension of a lease and expect to share in a restaurant's financial success. A lease is a joint-venture partnership and should be approached accordingly.
A successful restaurant lends high public visibility to real estate, greatly enhancing property values. City planners and lenders are beginning to realize that an economically viable office complex, shopping center, or industrial park must feature a certain amount of space designed solely for foodservice. It's common sense and sound business. Use this leverage to your advantage.
You should read and thoroughly understand every clause, paragraph, footnote, annex, and provision contained in the lease. Your lease can be your most valuable asset, and it may be your salvation. And many times, it's all you've got to sell.
A successful restaurant-lease negotiation means having an appreciation of the risk from your landlord's perspective. But never apologize for the presence of risk—it's the driving force behind any business negotiation.
Fly With The Pros
An affordable lease is the cornerstone of a profitable restaurant. You should consider having a professional restaurant consultant or other professional with restaurant lease experience represent your interests in any negotiations. When buying a restaurant and assuming an existing lease, experts can save you big dollars and heartache down the road by bringing issues to light that demonstrate that the deal may not be economically viable.
Finally, you must have the ultimate control; a consultant or attorney is the navigator, but you are the pilot. The more guidance, direction, and insight you and other experts can offer, the more favorable your final lease will be.
We've put together a list of 10 key provisions for structuring a lease that you can share with an accountant or real estate agent who is helping you with negotiations. You can also get our complete Special Report on leases in our on-line store.