Oct. 30, 2017

By Jeff Grandfield and Dale Willerton/The Lease Coach

Restaurateurs are often at a loss just going in to a lease negotiation. After all, as restaurant leaders you are skilled in all things food service. That’s your world. But real estate agents and brokers specialize in selling space at the rates that are most beneficial to them and their companies.

In fact, agents and landlords go through the process of negotiating and finalizing a lease one or more times daily, while restaurateurs often maneuver this same complex game just one or several times in their entire lives. If you concur with the notion that practice makes perfect and also profitable, then it becomes clear that the restaurateur is often at a disadvantage in these negotiations from the very start.

So, to arm you with some vital knowledge to stay “in the know” in negotiating your restaurant lease, here are eight essentials to give restaurateurs a leg up in the negotiation game

1. Negotiate to win:

Often, restaurant tenants enter lease negotiations unprepared and don't even try to win the best deal by simply setting their sights on striking a fairagreement. But you can rest assured the landlord’s agent is in the game to win, so if you aren’t going in with that attitude also, you are at a distinct disadvantage. Restaurant tenants should remember that it is okay to negotiate assertively.

 

2. Be prepared to walk:

Try to set aside your emotions and make objective decisions. Remember,  the player in this game who most needs to make a lease deal will give up the most concessions. Developing a mindset that includes walking away from any deal that doesn’t suit your needs will save you a lot of time, money and aggravation. After all, a good restaurant business in a poor location will become a poor business.

 

3.  Broker … friend or foe? 

Real estate agents and brokers typically work for the landlords paying their commissions. It is not normally the agent's role to get the restaurant tenant the best deal, but instead to get the landlord the highest rent, largest deposit and other wins. So, the higher the rent you pay, the more space you lease and the longer term you sign all go to yield higher commissions for agents. To get  the best deal when you’re looking at several properties, try to deal directly with the listing agent for each one, rather than letting one agent show you around or show you another agent's listing. Your tenancy is more desirable to the listing agent if that agent can avoid splitting a commission with others.

 

4. Talk to tenants:

Some of the best inside information available is from current tenants in the same property, so introduce yourself as a prospective tenant and ask for their honest opinion of the landlord. Inquire about the level of property maintenance, the rental rates and the tenant’s future intentions to stay another term. What you learn may surprise you and can be used wisely  in  negotiations.

             5. Never accept the first offer:

Even if the first offer seems reasonable or you don’t have a clear direction on the kinds of perks you’d  like to negotiate, do not accept the leasing agent's first offer because typically it is an inflated one that allows the agent some wiggle room because most agents fully expect potential tenants to counter their offers.

6. Ask for more than you want:

This is the idea of asking for five months rent-free when you may be only seeking three because it’s quite likely the landlord will counter-offer whatever you request. Don't be afraid of being denied your requests, as this is all part of the negotiation game.

 

7.  Measure your space:

Restaurant tenants often pay for phantom space and since most tenants pay rent by the square-foot, make sure you’re receiving as much usable space as the lease agreement states.  

 

8. Educate yourself:

Kudos for taking a step in this direction by reading this article because it truly does pay to educate yourself. And don't forget to have your lease documents professionally reviewed before signing them. After all, with hundreds of thousands of dollars in rent at stake, along with personal guarantees and other potential risks, professional back-up can take some of the gamble out of the game of negotiating the prime location for your next restaurant business.


Topics: Business Strategy and Profitability, Financial News, Operations Management


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