10 dirty secrets landlords don't reveal about restaurants for lease

Posted by Eric Gagnon on Aug 15, 2010 1:29:00 PM


Hundreds of fully equipped restaurants for lease are free to qualified buyers but you need an expert restaurant broker to help you with secrets to getting them.

Secret number one.  The phone number on the sign rings to a leasing agent representing a shopping center owner or developer.  He or she will work hard to show you that restaurant for lease.  However, their duty of loyalty is to only one person–the landlord.  It is a myth that you will save money on leasing an restaurant without a broker and that’s secret number two.  The landlord has a set commission.  If you don’t use an expert restaurant broker, the landlord’s representative gets 100% of the commission as well as 100% control over the deal.  With no net difference in cost to you, why would give over 100% control to someone that is negotiating against you?

Secret number three.  The landlord’s leasing representative leases everything from dry cleaners to grocery stores.  He has no specialized experience about restaurants for lease.  He won’t be able to tell you about the average costs for build out of restaurant lease items like a grease trap and hood.  He won’t volunteer that the air conditioning is under-sized for a restaurant for lease or may not know that restaurants require more HVAC than retail space. 

Landlords contact the best restaurant brokers with their closed restaurant space for lease as soon as they suspect it’s going to be available and that’s secret number four.  The prime  restaurants for lease move very quickly.  If you find a space that’s been sitting, it could be an indication there’s a problem with the location. A strong restaurant broker can tell you. 

Secret number five.  There are multiple ways to overcome either a credit deficiency or lack of liquidity so you can lease a restaurant.  These can include:  extra months of deposit, a second guarantor on the lease, an irrevocable letter of credit or security against other assets.   Secret number six.  Tenant improvement money or “TI” is not free.  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 for  restaurants for lease.  This can seem like a huge amount of money in the short term but you pay it back in the long term.  

Secret number seven is the one no one likes to talk about.  You don’t enter the restaurant business planning to sell or close but it happens.  Exit strategies can and should be negotiated into the initial lease.  This includes transferability, relief of personal guarantee when the business sells, and the cost and time to get a new tenant approved.  Secret number eight.  Certain clauses are for the landlord’s benefit and should be eliminated in negotiating your restaurant lease. They include – an experience clause for a future restaurant tenant, a percentage amount on the transaction for change of ownership paid to the landlord and confidentiality regarding details of your Atlanta restaurant lease.

Secret number nine.  Though landlords don’t like to do it, you can and should get language inserted in your restaurant lease for rent reductions over anchor abandonment or high vacancy rates.  Ask for your rent to reduce if the center becomes more than 50% vacant.  Then if the grocery store moves out and your restaurant business drops, you’re paying less rent.

Secret number ten.  You can get an  restaurant for lease at a great deal. Just remember to use the services of an expert restaurant broker to protect you in the transaction.  They know all the landlords secrets and how to negotiate with the landlord using these secrets and more to get the best deal for restaurant buyers.

Read also, How to Understand Landlord Math when Leasing a Restaurant.

Download the Free Guide to Leasing a Restaurant

eric slugEric Gagnon, Certified Restaurant Broker®, CBI is the founder and president of We Sell Restaurants and co-author of Appetite for Acquisition, the definitive guide for anyone looking to enter the restaurant industry. He is a fellow of the International Business Brokers Association and serves as a board member for VetFran of the International Franchise Association and as a board member for the Southeast Franchise Forum. Eric is an industry expert in restaurant sale and valuation with 20 years of experience brokering restaurants for sale.

Topics: Leasing a Restaurant

New call-to-action