Advice for Buying a Restaurant and Selling a Restaurant

How to Understand Landlord Math when Leasing a Restaurant

Posted by Robin Gagnon on Jul 10, 2018 9:05:01 AM

Leasing a restaurant? There are some terms, in particular, associated with the calculation of leases that you should be aware of. Here’s are the basics of landlord math so you understand numbers on restaurant spaces for lease.

For starters, landlords price space as a price per square foot on an annual basis. That’s the first and most confusing part of a lease. The price per square foot has to be divided by twelve months to get the amount of the rent payment per month.

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Another confusing term is “Base Rent.” What is base rent? It’s the flat amount of rent to be paid every month. In addition to this amount, you will also have to pay, for most spaces, CAM fees, Taxes and Insurance as well.

CAM is an acronym for “Common Area Maintenance.” Common area maintenance refers to expenses for the common good of the shopping center which are distributed among those who benefit on a square footage basis. CAMS can include anything from garbage pickup to landscaping, security and exterior lighting.

It’s very important to understand the amount of CAM charges in the current time period and be aware of their ability to rise over time as they are not fixed amounts like your base rent. It is not uncommon for the monthly rent to increase as much as 30% if you are leasing a restaurant in a high tax area. When taxes to up, your rent goes up. When insurance costs increase, this is passed on to you as a tenant. The landlord can only quote you the current year and this amount, like base rent, is expressed on a cost per square foot.

To add more confusion, the AM fee is calculated on a pro-rata basis or “in proportion” to the square footage. If you are 1200 square feet of a 12,000 square foot shopping center, you are charged 10% of the total CAMS, Taxes and Insurance for the property. You will still be responsible for taxes and insurance on your personal property, your restaurant within the lease space.

Here’s an example of a rent calculation.

  • 1200 square foot restaurant space for lease.
  • Cost: $32.00 per square foot
  • Amount of CAMS, Taxes and Insurance: $7.85 (per square foot)
  • 1200 X 39.85 = $47,820
  • $47,820/12 months = $3985.00 per month

Another lease term you may hear is “Triple Net” which is frequently advertised as an “NNN” lease. In a triple net lease scenario, often associated with a free standing buildings, you will be responsible for all exterior upkeep to the restaurant space for lease. If the driveway needs paving, it’s your responsibility. In addition, you will have to keep insurance in full effect and pay all taxes.

Another important landlord math term to be aware of is TI or Tenant Improvement money. A Tenant Improvement Allowance, commonly referred to as the “TI” allowance, is the amount of money offered by a landlord to the tenant for improvement to the space. The funds are generally offered one of two ways: dollars per square foot of the leased premises or a set dollar amount. These funds are to be used strictly for the improvements to the leased space. They cannot be used for the purchase of equipment or inventory for your restaurant.

Here are of the little known details about TI money you should know. First, the money is not advanced to the restaurant owner. Typically, both the tenant and landlord meet to agree upon the plans or design and then the tenant pays the contractor for the expenses. The landlord later reimburses the tenant based on a full accounting. Sometimes the landlord will add language that if the project is not completed within a certain amount of time than the TI money is not reimbursed. Sometimes he will only repay funds if he chooses the contractor. Make sure you have control over who does the work and what you’re paying.

Secondly, tenant improvement money is expected to supplement the expense for build out. It does not cover the entire cost. The landlord’s contribution is for long term improvements to his property. He wants to see you invest as well and fully expects your contribution to the project at least match his.

This is a word of warning to the would-be tenant. Tenant improvement money, or TI, is not free money. You will be paying this back in the rent amount at some ridiculous rate of interest that’s never clearly calculated for you. It’s all part of the landlord’s top secret formula for arriving at a square footage price.

It may seem like a huge amount of money when a landlord is offering up $20 a square foot for a 2000 square foot space or $40,000 of “free” money. However, a typical build out of a restaurant will be much more than that. Average expenses range from $15,000 for a grease trap (in ground 1500 gallon) to $1000.00 per linear foot for a hood (average 12-14 foot or $12,000 to $15,000). Installation of mechanical, electrical and plumbing can easily run another $40,000 before you build any walls, add flooring, put in a bar or purchase any equipment. That’s why a “second generation” space or even the purchase of an asset sale is often less expensive and less work.

Approach leasing a restaurant the same way you would buying a restaurant. Go in with your eyes wide open, in full possession of as much knowledge as possible and make sure you know the numbers.

Do you have questions about leasing a restaurant or restaurant math? Reach out to We Sell Restaurants for more help and information on this topic.  

Topics: Leasing a Restaurant

5 Lies about Leasing a Restaurant Everyone Thinks Are True

Posted by Robin Gagnon on May 25, 2018 5:29:48 AM

It’s every man for himself when you are leasing a restaurant and here’s why. The landlord is out for himself and no one else. Here are five things you don’t want to learn the hard way – the five lies about leasing a restaurant used by landlords.

It’s the time of year when all the landlords in the world are gathered in Las Vegas at the ICSC (International Council of Shopping Centers) convention. They are drinking by night and plotting by day on ways to bring down you, the little guy who’s leasing a restaurant. Here are the top five lies they will tell you when leasing the restaurant.

I’m the landlord and I’m here to help is lie number one.

President Ronald Reagan referred to these words, “I’m from the government and I’m here to help” as “the most terrifying words in the English language.” He might say the same thing about landlords today. Any landlord that says, “I’m here to help…” is practicing lie number one. Here are some examples you should be aware of when leasing a restaurant.

“I’m the landlord and I’m here to help you with tenant improvement money. I’ll invest in your business along with you.” Is this true? No. The landlord is pricing that tenant improvement money into your lease rate and being paid back a very healthy (or should we say unhealthy and obscene?) amount.

“I’m the landlord and I’m here to help you with lease rates. I want you to succeed.” Is this true? No. The landlord is looking at only one person in the transaction to help. He wants to improve his checkbook, his bottom line and his earnings. He has no interest in helping you succeed. Consider this. If you fail, he still gets paid. If you fail, he gets the property back, fully improved AND your equipment (in most cases).

The Personal Guarantee is non-negotiable is lie number two.

Everything in life is negotiable. Just because the landlord says he wants a blanket guarantee over the entire term of the lease does not make it true. You can negotiate for a limited guarantee – meaning, limited to just two years or just the first term or just $50,000 or just one year of lease payments or whatever you want. Always propose something other than a full and unconditional guarantee of t

Lies about leasing a restaurant

he lease for the full term. Do not believe this cannot be negotiated in some form or fashion, particularly when you have good credit, a strong concept and money in the bank. The minute you sign, you lose all leverage.

I will not “unreasonably withhold” consent to transfer is lie number three when leasing a restaurant.

As a restaurant broker interacting with landlords every single day on lease assignments, I can assure you this is the biggest whopper of them all. Do not rely on this language when leasing a restaurant (even though it has been litigated and has precedent in legal cases) as a “catch-all” to believe your lease transfer will go easily.

Insist on specific, measurable steps with a timeline in the event you ever transfer the store when leasing a restaurant. Set up clauses that say a new franchisee of the same concept with a net worth of $500,000 shall be accepted upon notice and such notice shall constitute a 30 day window for landlord approval. Should he or she not object within 30 days, then the assumption is granted.

Work with an attorney on the language (disclaimer: I’m not an attorney and am not offering legal advice). My business advice as a restaurant broker is for you to be as precise as possible around costs to transfer, timeline to transfer and any net worth requirement. What you don’t want is for a landlord to be able to delay a transfer, charge whatever he wants and arbitrarily designate what’s acceptable net worth requirements.

Refuse to sign anything that is vague. Require the business terms to conform to language like this.

  • Costs
    • “Reasonable Attorney fees” – NO – what’s reasonable to the landlord is not reasonable to you.
    • Lease transfer fee not to exceed $1000 – YES – defined and specific.
  • Timeline
    • Shall not unreasonably withhold – NO
    • Shall be approved within 30 days - YES
  • Net Worth number
    • Same net worth as current tenant -- NO, too subjective, how do you prove what yours was and what his will be?
    • Net worth of $500,000 or more – YES.

We Sell Restaurants is working with landlords daily that are trying to charge immense fees, drag their feet and then will not approve a franchise candidate who has already been through an approval process for both lending and the franchise brand without any issues. Don't fall for the landlord's lies when leasing a restaurant.

The Property Manager and Leasing Agent are there to help is lie number four.

If you call the sign on the door when leasing a restaurant, that number goes to the landlord’s leasing agent. You are under no obligation to work directly with them but they will not disclose this to you or ask if you wan to bring your own representation to the table.  After you open the business, it’s common to develop a close working relationship with the property manager who is either onsite or responsive when you have an issue. Often the landlord’s representative will even tell you that as soon as the lease assigned, the Property Manager is your “go to” person. Remember, they do not work for you. They work for the landlord.

This lie is very similar to lie number one. When either of these parties agree to “help,” it is the landlord who receives the benefit. The leasing agent is paid a commission based on the size of the lease he negotiates. The bigger the number, the more he earns.

When it comes time to transfer, the property manager onsite, your good buddy, has absolutely nothing to do with the deal. It’s a common fallacy to equate this person with the landlord. He or she does not have decision making authority. Typically the property manager cannot even receive documents related to a lease transfer. Don’t fall into a trap of thinking they are you ally and can get your assignment done or will take your side in any form of a landlord dispute no matter what they say.

Remember, when leasing a restaurant, the Property Manager and Leasing Agent’s loyalty (and paycheck) reside with the landlord. We always advise you to use the services (usually at no charge to you) of a qualified restaurant broker to represent you with negotiations on leasing a restaurant.

We’re exclusively working with you is lie number five.

A landlord is like a girlfriend (or boyfriend) that cheats. Don’t ever trust them to be exclusive. You may have thousands of dollars in legal fees invested in leasing a restaurant and the final draft in hand but if the landlord gets a better offer, he’ll drop you like a hot potato. Leasing a restaurant starts with an LOI or letter of intent but is not final until you have a lease signed by both you, the tenant and the landlord. Letters of intent are not binding. Most do not have a ‘no-shop’ clause, allowing the landlord to continue to shop this with anyone and everyone until it’s inked.

It’s not uncommon to see landlords take your letter of use it to leverage someone else into leasing a restaurant despite that fact that you’re putting time and money, drawing plans, and otherwise investing in this opportunity.

We have seen landlords accept signed leases from tenants and then decide to go with someone else if a big brand throws enough money their way. Don’t let them fool you into thinking you’re the only game in town. Until it’s inked, it isn’t real. If it isn’t stated in the lease, it isn’t real. Don’t leave any points out of that lease that were discussed. Never agree that such and such was discussed and when the time comes, the landlord will handle it.

Above all, by reading this article, please understand that when it comes to landlords, you can never underestimate them. Use what you learned to get the best deal possible for leasing a restaurant. Cover yourself going in and have a secured strategy for getting out. If you need help, contact one of our restaurant brokers to help you negotiate a deal. Don’t get caught by one of these five lies about leasing a restaurant landlords often use.

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Topics: Leasing a Restaurant

Restaurants for Lease are a Great Option for Many Buyers, and The Restaurant Brokers Have the Most Restaurants for Lease Listings.

Posted by Robin Gagnon on Oct 23, 2017 10:26:30 AM

 

Restaurant space for lease.png

Restaurants for lease have some advantages as far as not having to put all of your capital up front to purchase the business outright or for a hefty down payment on a loan. This money that gets to remain in your hand can be used to upgrade the décor in the dining room and for marketing purposes. If you are on the hunt for restaurants for lease, to keep the most money in your pocket, your best bet is to purchase an existing location that is up to code and already equipped with all or most of the equipment and appliances you will require.

Restaurants for lease are a great option for someone who has never owned a business before, or someone who is not well-known in the area. Someone buying an eatery who is popular within the community will have an easier time bringing patrons to their business and will therefore generate more income as opposed to someone who is almost unknown within the area. The lesser-known individual will have to shell out significantly more money on marketing and advertising expenses to bring business in.

Many restaurants for lease spaces are second generation – meaning before the space was vacated it was a dining establishment. This mean that you won’t have the extra expense of installing kitchen equipment, and in many cases the restaurants for lease space will include the tables and chairs for your use, if you wish to use them. If the restaurants for lease you are looking at were not previously dining establishments, you need to make 100 percent sure that the space you are interested in can be made into one. It is absolutely crucial to bring in a code enforcement officer, health inspector, and a fire marshal so that they can tell you everything that will need to be added or updated. The next step is to discuss with your potential landlord how much, if any, of the repairs and updates they will cover.

The Restaurant Brokers have the most restaurants for lease listings, and we can help you find the perfect spaces all across the United States. Is the mountain lifestyle what you love? We have the perfect location for you! This is one of our restaurants for lease that comes with a view – the Great Smoky Mountains specifically! This space is only 50 miles outside of Atlanta and is a free-standing building with nearly 10,000 square feet of space. Not only do you get a fantastic dining space, but the additional space could be used for a second business! Some ideas would be a health food market, art gallery, or even a space to hold events! Don’t miss checking out this listing here.

Are you more of a beach person? No problem. We have plenty of restaurants for lease listings on the coast. Take for example this listing in Broward County, Florida that used to be an iconic barbecue joint. All of the equipment is there for you to turn this space into the business of your dreams, and the landlord recently replaced the floods and updated the facility to be up to code. The landlord is ready for you to bring your own concept! Check this one out here.

These are just two of the restaurants for lease the Restaurant Brokers have to offer. Why choose a We Sell Restaurants listing? Our Certified Restaurant Brokers have the knowledge and tools necessary to make your transition from browsing restaurants for lease listings into lessee in record time. Take a moment to read our FREE Leasing Guidebook that includes indespensible information for someone considering restaurants for lease. Visit our website and check out all of the restaurants for lease we have to offer, and get ready to get into your business!

Topics: Leasing a Restaurant

University Restaurant Space for Lease in Atlanta

Posted by Eric Gagnon on Sep 2, 2014 1:32:26 PM

4277_mainpic-1Rent this restaurant space for lease in a location surrounded by thousands of potential customers.  Located in downtown Atlanta, this restaurant space for lease, offered by the restaurant brokers, is the perfect new locale for your business.  The monthly rent is $4,995 for 2,900 square feet which includes a 600 square foot mezzanine open to the downstairs.  Public transportation provided by the Metro Atlanta Rapid Transit Authority (MARTA) offers plenty of transportation options.  Patrons can easily access the district by either the MARTA rail stations and/or the city bus routes.


This is currently a closed location however it has a hood, grease trap, flat top, fryers, refrigeration and some other remaining equipment.  The front of house includes everything down to the chairs and  tables so it could be turned over to a new concept quickly.  Your new business will be located directly on a university campus with access to more than 32,000 students and 3500 faculty members.   Landlord is willing to do both Tenant Improvement Money and free rent for a period of time for the right tenant to offset an upfront charge of $25,000.  The landlord is willing to make a sweet deal but he wants experienced operators or franchises for this one of a kind location.  His preference for the concept includes a breakfast and lunch operation.  Come a break a few eggs on this college campus today with the many concepts that are right for this daypart.    
 
The area is thriving and allows for a terrific opportunity.  This restaurant space for lease is surrounded by major retailers, high-end businesses, and outstanding foot traffic.  This area is the central business sector for Atlanta and is the largest of the city’s districts.  This Atlanta neighborhood hubs many corporate headquarters as well as city, county, state, and federal offices. 
 
This restaurant space for lease is within a region which measures approximately four square miles and has the median income of $87,000.  Due to the exponential growth of the district, the downtown area has undergone a significant transformation.  Renovation of historic buildings and construction of new housing/condos has welcomed the arrival of new businesses and residents alike.
 
This restaurant space for lease allows for endless inspiration and numerous concepts.  A spacious 2,900 square foot floor plan, the site can effortlessly mold to concepts such as a coffee shop, doughnut, fast food franchise, or even a yogurt shop.  Your options are limitless.  Quick-casual concepts have become extremely popular and allow the customers convenience and speed of service.  The rise of the “foodies” has also permitted significant growth for fine dining joined with casual dining prices.
 
Make an offer today on this restaurant space for lease and contact Certified Restaurant Broker Eric Gagnon at 404-800-6000.

Topics: Leasing a Restaurant

Leasing a Restaurant is Harder Than You Think

Posted by Robin Gagnon on May 11, 2013 7:48:00 AM

leasing a restaurantIt seems simple enough.  You drive down the road and like the childhood game of “I Spy,” played with your sisters and brothers in the car, you spot the vacant restaurant for rent in the shopping center.  It’s the perfect location.  It seems like the right size.  There isn’t another pizza place in the shopping center (your concept).  Lastly, it’s close to your house.  Immediately, you whip out your cell phone, make a call and get connected to the leasing agent. STOP.  You just made your first mistake in leasing a restaurant. Here’s why.

The leasing agent who took your call works for the landlord.  He is under contract for the landlord.  That means he or she has no interest in protecting your concern in the transaction.  His loyalty is to the person paying his bill and that isn’t you. 

Here’s what the Landlord’s Representative will tell you.    

  • Base rent level
  • CAMS
  • Size of Space

Here’s what he won’t tell you

Why the last guy left

If the last tenant was a pizza place that defaulted on the lease because the guy one shopping center over has a lock on the business for a three mile radius, he’s under no obligation to tell you this.

If he’s Overpriced

If the average rents in this area are $15.00 per square foot and they are charging 20% more because the landlord “wants” that number, he’s under no compunction to share that information.

If the Infrastructure is Sufficient for a Restaurant

If the HVAC unit is 2 tons for 1400 square feet (undersized for a restaurant) and the last restaurant shut down because the patrons couldn’t take the heat, he won’t feel the need to disclose this.  Likewise, if the electrical panel is a basic 200 amp one that shut down every Saturday night as soon as they brought on the extra pizza oven to handle the traffic, he probably won’t feel the need to reveal that information if you don’t ask.     

If Competing Properties are Available

If the restaurant space in the next shopping center (owned by a different landlord) in a better location is available for less rent, he will feel no requirement to share that since he doesn’t represent that shopping center.

Is it becoming apparent why you should STOP before calling the number on that sign?  Want to know what to do instead?   

Contact a restaurant broker to represent your interest in the transaction.  There is no additional cost to you for this effort (at least not from We Sell Restaurants).  When our restaurant brokers represent your interest they will:

1)      Give you an overview of other operators in the area and any information available on how they are doing

2)      Review comparable and/or nearby centers for lease rates and availability (even if listings aren’t publicly known).

3)      Ask the landlord to provide HVAC, Electric, Grease Trap and Hood information/capacities so you can verify with your contractor, electrician or architect whether they will handle your equipment and/or cooling needs.

Here’s what the Landlord’s Representative wants from you

  • Personal Financial Statement
  • Menu
  • Business Plan
  • Lease Application
  • Maximum Rent
  • Maximum Personal Guarantees

The Restaurant Broker will have the forms, documents and templates to prepare you for submission to the landlord including personal financial statement forms, business plan templates and applications.  He will review the data before it is submitted so it puts you in the strongest negotiating position.

Here’s what the Restaurant Broker will negotiate to get FOR you

  • Best Base Rent Rate
  • Best CAMS deal including locks, fixed levels or maximum increases
  • Minimal Personal guarantees
  • Exclusivity for your concept
  • Vacancy clauses

It seems pretty apparent to the restaurant brokers that leasing a restaurant is a little tougher than simply the childhood game of “I Spy” and a phone call.  Do you agree?

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Topics: Leasing a Restaurant

How to be SMART About Leasing a Restaurant

Posted by Robin Gagnon on Apr 22, 2013 11:13:00 AM

leasing a restaurantAs restaurant brokers helping with site location for restaurants, we’ve seen every mistake in the book.  There is a however, a SMART way to lease a restaurant

Do you remember the age old requirements for goals taught in every business class, performance review seminar and all self-help books?  It’s easy to remember since goals should be S.M.A.R.T. where S is Specific, M is Measurable, A is Attainable, R is Relevant, and T is Time Bound.  The restaurant brokers recommend you apply this to your goal of leasing a restaurant. 

S is Specific

If you are vague and totally unlimited in where you want to be, expect to get results consistent with this goal. As a restaurant broker, I routinely get calls from people saying, “It doesn’t really matter where the restaurant space goes, just find me a location.”  That is absurd.  You must be Specific as it DOES matter where you lease a restaurant.  The demographics matter.  The traffic flow matters.  The surrounding business community matters.  It ALL matters and it’s all relative to the future success or failure of your restaurant.

M is Measurable

Secondly, you must have Measurable requirements.  What’s measurable when leasing a restaurant?  How about rent?  Someone who calls a restaurant broker and says, “Find me a space and as long as it’s a good one, it doesn’t matter what the rent is” will not be taken seriously and why should they?   Your rent should be a function of your sales.  If you’re doing a breakfast and lunch business that only operates Monday through Friday, there’s only so much volume you can do in a given space so yes, there is a number of rent that is too high no matter what.  Another measurable component is space.  It DOES matter how large your space is.  If you’re doing a sports bar, it can’t be handled in 1600 square feet.  By the same token, a delivery and carry out location shouldn't be 4,000 square feet (usually).  Be prepared to give your restaurant broker measureable requirements for square footage, lease amount, traffic count, lease term and every other element critical to your business. If not, neither one of you will be productive in your search.

A is Attainable

Leasing a restaurant requires that your goal be Attainable.  Asking for Buckhead lease space in Atlanta or beachfront property in Fort Lauderdale at $15.00 a square foot isn’t going to happen no matter how much you want it.  The same thing is true of someone who says, “I just want to be in all the A+ shopping centers nearby Chipotle as a start-up” (this space is going to established multi-unit or franchisees).  Do your research so that your requirements can be attained or you’re setting yourself up to fail in leasing a restaurant.

R is Relevant

Your search for leasing a restaurant should also contain Relevant criteria that you share with the restaurant broker.  What’s relevant?  How about your concept?  We have had people approach us to do a search for them that don’t want to reveal their concept, menu or financials.  That’s RELEVANT to the search and highly relevant to a landlord.  In many cases, landlords aren’t even willing to show space until they see preliminary concept information and a menu.  Why?  Some centers clauses that restrict other operators.  For example, a Publix anchored shopping center probably excludes leasing to any other bakeries.  Even if there are no exclusions, a landlord doesn’t want two pizza restaurants in the same center.  You have to be willing to share relevant information about you as a tenant (meaning menu, concept, background and financial information) if you are going to avoid mistakes in leasing a restaurant.

T is Time Bound

Lastly, your search should be Time bound.  Let your restaurant broker know when you are planning to open.  Looking for a restaurant for rent today when you don’t have your money together yet and aren’t sure when you can be open is just a waste of time.  A deadline of opening in 30 days when you are just starting a search is alo unrealistic.  Begin about six months in advance of your opening and make sure you’re ready for your search before you start drawing on resources.

That’s it.  Avoid stupid mistakes by being S.M.A.R.T. about leasing a restaurant.  You’ll get a lot more respect in your search and better results as well.

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Topics: Leasing a Restaurant

Renting a Vacant Restaurant Space? It Might Cost More than You Think

Posted by Robin Gagnon on Apr 8, 2013 11:08:00 AM

restaurant for saleThe restaurant brokers often have buyers approach us on vacant restaurant space.  The price is listed at $0 so it seems like it’s pretty cheap to get into business, right?  But before you go down the path of renting a vacant restaurant space to save money, consider all the real costs involved.

Renting a vacant restaurant usually means there’s some basic infrastructure in place.  Often, the business will have the hood and grease trap or even walk-in refrigeration.  After all, the last guy in business there couldn’t really take those items with them when he left.  That means you are left to put the rest of the equipment in place when renting a vacant restaurant.  Let’s consider the costs.

A typical equipment line will consist of a flat top, multi-burner stove, fryers, convection oven and then any other specialized equipment for your concept (a wok or pizza oven for example).  That’s for the “hot” side of things.  In addition, you will need refrigeration and prep station space to put the food together and move it from preparation to cooking.  In all, most kitchens will have a minimum of 8 – 10 feet of equipment under the hood and another 8 – 10 feet of equipment in the prep area.  That’s on top of the equipment you need in the dish bay or dishwashing station area, the sinks required by code or any other refrigeration you may need if there isn’t a walk-in cooler or freezer.    

You can buy this equipment second hand when you’re renting a vacant restaurant space.  In most major cities, there are multiple dealers if you simply Google, “Equipment Supply Companies.” 

Look at the pricing on the seller’s websites and you’ll find that the cost to put a minimal kitchen together even with secondhand equipment runs about $30,000 to $40,000 so the restaurant brokers recommend you use around $35,000 as a baseline in your calculations.   On top of that you will need assorted mixing bowls, dough mixer, tongs, pans, pots, spatulas and cooking equipment in order to prepare food and move it from one place to another.  That may cost another $500 to $3000 new or used.

The next items you will need are for the front of the house.  First, you will need a POS or point of sale system to register sales transactions and also handle credit card payments.  You also need booths, tables, chairs or counters for the customers.  Lastly, you will need “small wares” or the silverware, salt and pepper shakers, etc. in order to serve the customers.  You’ll also need a couple of booster chairs and high chairs to accommodate children.  Depending on what you find available second hand, you could potentially furnish the front of the house for $2,500 to $10,000 including the POS system.

As you begin adding all this up, you’ll see that the restaurant brokers have already demonstrated that you need quite a few dollars to start up when renting a vacant restaurant space and that’s before you pay an electrician, plumber and carpenter to install the equipment, permit it appropriately and get it inspected. 

You’re still not ready to go however because you also need to get deposits together for the power, gas and landlord when you’re renting a vacant restaurant space.  That can run around $3,000 for electric, $1,500 for gas and 2-3 months of rent with the landlord.  All told, that can amount to another $7,000 TO $15,000 depending on the monthly rent. 

Let’s add this all up:

Equipment (Back of House)

$35,000

Small Wares (Back of House)

$500 - $3,000

Front of House (Furnishings & Smal Wares)

$2,500 – $10,000

Deposits

$7,000 - $15,000

Total Outlay:

$45,000 to $63,000

So, despite a zero cost, you can see from this example, that in many cases the option of renting a vacant restaurant space to save money can cost more than simply buying the assets of a restaurant for sale.  If you’re considering renting a vacant restaurant space, go through listings for sale that are offered for under $30,000 first.  You may be pleasantly surprised to learn it’s a cheaper option to simply buy someone else out and be ready to go.

Want to see some restaurants for sale?  Visit this link. restaurants for sale

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Topics: Leasing a Restaurant

Used Restaurant Equipment and Vacant Space - A Recipe for Success

Posted by Robin Gagnon on Jan 28, 2013 4:25:00 PM

restaurant for lease

Starting on a shoestring?  Here’s the restaurant brokers recommendation – rent a vacant restaurant with used restaurant equipment.

We know that not everyone is loaded with capital or has a rich uncle on the sidelines ready to finance your restaurant dream.  Thankfully, that’s not the only way to get started in this business.  For those on a fixed budget, limited budget or even no budget, consider looking at a vacant space that has used restaurant equipment in place.  It’s a cheap and simple solution to get into business quickly and with the lowest costs. 

What are the pros and cons of renting a vacant space with used restaurant equipment?  Well, the positives definitely outnumber the negatives.

Pros:

A fully equipped kitchen is very costly to set up.  Compare pricing on just basic elements like a double fryer on popular equipment seller websites and a single piece ranges from $1,175.00 to $2,195.00 for new or used.   A stainless steel prep station with refrigeration on bottom can be $5,668 according to at least one website.  With these figures, it’s no wonder that a commercial kitchen costs upwards of $50,000 to $100,000 to set up.  Compare that with taking over a vacant restaurant for rent and paying nothing for the business.  Which sounds better to you?

Need another positive reason for taking over a vacant restaurant for rent with used restaurant equipment?  How about opening fast?  Time is money.  You can cut your time to open your business dramatically by taking over something ready to go versus trying to purchase equipment, deal with equipment cancellations or supplier back orders.  Even if you do assemble everything you need, you still have to schedule and deal with plumbers, electricians and more to get it all installed.

Want another helpful reason to take over a vacant restaurant for rent with used restaurant equipment?  Here’s a hint.  It also saves you money.  Landlords often provide a few months of free or reduced rent when you’re starting out.  You can use that free rent period to be making sales instead of arranging equipment and getting the business ready.  That’s free cash flow – just what you need when you’re launching a new restaurant.

Cons:

Are there some minuses?  Yes, but the biggest negative to getting a vacant restaurant for lease with used restaurant equipment is finding one.  This type of listing is a hot commodity and though these restaurant brokers have several of these listed at any given time, they move quickly.

One other disadvantage to leasing a business with used restaurant equipment could be equipment condition.  Depending on the situation, the used restaurant equipment may have a few miles on it.  It may not be clean, shiny and perfect.  It may even need minor repairs but compare that to the cost of buying new equipment and you’ll be saying, “oh yeah, this makes some sense.”  On the other hand, as restaurant brokers we have seen six burner stoves with ten years on them going strong.  The very construction of most kitchen hardware means it is built to last.

How do you overcome the down side to leasing a vacant restaurant space with used equipment?  The best advice we can give you is to find a strong restaurant broker.  He or she will have an entire list of inspectors and repair specialists to assess the condition and operation of the used restaurant equipment before you take it over.  Another hint from the restrestaurants for saleaurant brokers – do not sign the lease before you get the gas and electric turned on for the inspections.

At the end of the day, if you’re low on funds but want to open a restaurant, taking over a vacant space for lease with used restaurant equipment is an inexpensive and practical way to get started.

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Topics: Leasing a Restaurant

Who Wants an Existing Restaurant Space for Lease?

Posted by Robin Gagnon on Nov 29, 2012 12:09:00 PM

Restaurant Space for LeaseIf you want an existing restaurant space for lease, you're part of a pretty large crowd seeking these prime opportunities from the restaurant brokers. After all, one man’s failure is another man’s opportunity. It makes a lot of sense to take over what's known in the industry as "second generation" space if you want to open a new restaurant and here are just a few of the reasons.

Cost Savings.  An existing restaurant space for lease includes important assets you can use going forward.  Original infrastructure items like a hood, grease trap or refrigeration are expenses that the first operator incurred.  You can take advantage of these items which are generally left behind when the concept is abandoned.  Many states have laws that require an owner to leave behind anything that was permanently affixed to the space so that always means the hood and refrigeration.  The grease trap (at least underground ones) can’t be moved and are pretty much permanent once installed.  The difference between taking over a 2000 square foot space that already has refrigeration, a grease trap and hood and a “white box” space where you have to install these items is $50,000 dollars or more.  That money can go into your new concept’s advertising and marketing program to drive your success instead of in items critical to your success but not too fun to buy or show off.

Time is money.  If you have a great idea for a restaurant; second generation restaurant space is ideal.  You can be open and operating in a very short period of time when the location has already been permitted, licensed, and operating as a restaurant.  Reducing the amount of red tape and time spent dealing with government entities is a winning idea in more ways than one.  You can also get your concept to market first.  When a lot of competition is taking place and new concepts are launching, being first in the market place assures you greater market share than following by even a few months.

Customer Habits. An existing restaurant space for lease has already developed some traffic patterns from the initial operator, even if it wasn’t a great concept.  You have the opportunity to banner to front entrance and market a new location that customers are used to visiting.  Don’t underestimate the value to that original traffic pattern when taking over an existing restaurant space for lease.

Expertise.  Face it.  You’re going into the restaurant business.  You’re probably better at assembling a menu than you are at swinging a hammer (at least we restaurant brokers hope so).  Your effort and energy needs to be one hundred percent focused on your new concept instead of chasing down the electrician or plumber to finish a job or finding a painter that will show up on time. 

The corresponding reason why some owners don’t want an existing restaurant space for lease is much less practical and a lot more tied into emotion.  As restaurant brokers, we find the number one reason people don’t want to lease an existing restaurant space is because of ego.  As an owner, you want to put your stamp on something and “build” it from the ground up.  Our best advice to you is to put aside these emotional elements and focus on the success of the business.  You will be much better positioned to build the “ideal” restaurant after you have on successful model open and operating.  Renting an existing restaurant space for lease is the most cost effective and quickest path to opening that first unit.

If you’re in the market for an existing restaurant space for lease, contact the restaurant brokers or visit our listings online.

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Topics: Leasing a Restaurant

Leasing a Restaurant in Atlanta - Vacancy Rates Falling

Posted by Robin Gagnon on Apr 23, 2012 6:25:00 PM

An article in today's Atlanta Journal Constitution confirms what restaurant brokers at We Sell Restaurants have been saying for a while.  Landlords aren't desperate.  The latest numbers reveal that Atlanta's vacancy rate is improving faster than other parts of theleasing a restaurant country.  While the rest of the nation had a vacancy rate that improved by .1 percent (a decrease) in the last three months, Atlanta's fell at three times that rate or was down .3 percent.

The Atlanta Journal Constitution published the article bearing these statitics today from Reis, Inc. a commercial real estate analysis firm.   The average national vacancy rate is 10.9% versus Atlanta's 14.1% but for our region, the rate been on decline for two straight quarters.

That's two pieces of good news for Atlanta.  A rate falling faster and six months of a positive trend. Our restaurant brokers and have experienced a resurgence in activity around restaurants for lease over the past six months.  We predicted in fourth quarter of 2011 that the best deals in Atlanta had peaked.  That's in line with this research. 

This doesn't mean you can't still get a good deal on a restaurant for lease.  There are plenty of spaces available.  It is not realistic however, to believe you can walk into prime areas and take over a prior owner's furniture, fixtures and equipment for free AND get a great lease rate.

Landlords are also asking for more from prospective tenant.  It's a good idea to be prepared up front with a current credit report, personal financial statement, business plan and a menu. 

Topics: Leasing a Restaurant