3 Reasons You Didn't Get that Restaurant for Lease Space

Posted by Robin Gagnon on Sep 29, 2020 10:58:06 AM


It should be easy to rent a restaurant for lease space today according to some in the industry. Landlords are desperate and space is sitting empty says the casual observer. As a tenant you can call the shots is the opinion of many. But that is a misinformed view and this Restaurant Broker can tell you the three reasons you didn’t get that restaurant for lease space you just made a run at. Better yet, We Sell Restaurants will increase the odds that the next one will be yours.

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Risk is still a factor. For those who believe that landlords will be more lenient than ever as they face unmatched levels of inventory for rent, think again. They are more concerned with risk than ever before. For some, banks are now involved and looking at every single credit decision. In addition, this restaurant broker is seeing acquisitions starting to occur at high levels among shopping centers meaning new buyers are studying the rent roll and proposed tenants.

     If you did not have a tried and true business plan, strong personal credit and money in the bank before the crisis, going shopping for a restaurant for lease space today without these elements is going to result in failure. Have a professional restaurant broker look at your business plan and personal financial statement. As we state in our book, Appetite for Acquisition, do a credit pull for anyone on the lease and best of all, no surprises. We will be happy to look at your package or better yet, assemble it and present you to the landlord to decrease the change of a turn down.

     Key Takeaway: Get that business plan and financial statement in tiptop shape before shopping that restaurant for lease space.

You overshot the goal. Yes, times are tough, but landlords have been able to renegotiate debt on centers at historically low interest rates over the past four to five years. Their carrying cost to hold the space has gone down. We call it overshooting the goal and it is a common mistake to go in with unrealistic expectations. There is only so large a bucket of money associated with each location and the landlords will not give you everything you want.

     Asking for free rent, tenant improvement money, a lower than market rate all at the same time may result in failure. Negotiations are a matter of give and take. Just because landlords are against the ropes today in this current market doesn’t mean they gave up a long range view of business. They entered shopping centers as twenty, thirty and forty year investments. They know that like all things, this will pass. They don’t want to suddenly be on the hook for drastically reduced rates that affect their business model for decades to come. 

     Key Takeaway: Don’t assume you can go shopping unrealistically and load a lease with freebies and get it all. Leave room in the discussion for negotiation.

Size Matters more than ever. With more dining than ever shifting to a takeaway and delivery model, landlords have never been more keyed into restaurant for lease space requirements. Does your business model truly need 3,600 square feet as customer dining habits shift for decades to come? If they can split the space, accommodate two tenants and improve the survival rate for both, it is an appetizing alternative to the risk tied to fewer tenants over larger space. Put your business model through a space planning exercise and for the long term health of your restaurant concept, find the smallest model that will work.  Then start talking to landlords about subdividing restaurant for lease space.

     Key Takeaway: Do the math and present a plan that minimizes your Occupancy Costs and maximizes the opportunity for the landlord.

At the end of the day, the reason you didn’t get that restaurant for lease space probably fell into one of these three buckets. Don’t rely on the landlord to reveal the true reason. Use the services of a Certified Restaurant Broker to draft a business plan that addresses each of these issues and more.

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Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.

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Topics: Leasing a Restaurant, Support for Restaurants - COVID19 Advice

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