Imagine signing a lease for your dream restaurant, only to discover later, that the landlord was the winner in the transaction with terms that heavily favor him. This can lead to unexpected costs or unfavorable restrictions around menu, food, operating hours or more. This scenario is all too familiar, and it occurs because landlord representatives are there to protect their client, the landlord, leaving the tenant vulnerable. That’s why we recommend that anyone leasing a restaurant obtain the services of a Certified Restaurant Broker for independent representation.
Navigating complex lease agreements is not a simple task. The nuances of commercial leases are learned through years of experience. That is why you want to be sure your interests are protected and that you get fair and favorable lease terms. That only happens when you have your own representation.
The Role of Landlord Representatives
Landlord representatives play a pivotal role in the leasing process, but their primary goal and the way in which they are compensated is to lease the shopping center. Their loyalty is to the landlord who issues their paycheck. They are working to secure the terms and conditions for their client, not you. This can lead to an inherent conflict of interest when negotiating a lease deal.
Leasing a restaurant is a zero-sum game and maximizing the landlord's benefit can come at the expense of the tenant’s best interest. To avoid unfavorable lease terms, make sure someone is advocating for you interest as a tenant, to ensure a balanced and fair negotiation process.
Key Benefits of Using an Independent Restaurant Broker: Using an independent restaurant broker offers multiple benefits that improve your position in the leasing process.
👉Costs – An independent Restaurant Broker knows the local market rental rates. He or she will make sure you are not signing up for initial lease terms or escalations that exceed fair market value.
👉Expertise - The expertise of a Certified Restaurant Broker in the space means they understand specific infrastructure requirements like a grease trap or vent hood that may not be top of mind for someone who typically handles retail space. For example, the amount of air conditioning to cool a kitchen and keep customers comfortable far exceed the requirements for a shoe store. You may need two or three times the “tonnage” for a restaurant. Negotiating for these items or upgrades to existing infrastructure is only one example of how a Restaurant Broker’s expertise can pay off for you in lease negotiations.
👉Market Knowledge – A Restaurant Broker will be able to tell you if the traffic flow for this center is on the “AM” or “PM” side of the road based on traffic patterns. He or she will know how many competing concepts are already offered in the local area and may have inside intel on how they are performing. He knows about local licensing and regulations including what permitting transfers and must start from scratch. This is invaluable insight as you negotiate terms for free rent before opening.
👉Specialized Resources – A Restaurant Broker will have access to other resources to assist you including legal advisors for lease review or restaurant construction or contractors for these specialized spaces.
Overall, brokers manage the time-consuming and stressful aspects of leasing a restaurant, locating properties, staging resources, and negotiating terms, allowing tenants to focus on their core business operations. By handling the intricacies of the leasing process, restaurant brokers reduce the burden on tenants, ensuring a more efficient and less stressful process. r unattainable.
Examples:
Case Study 1: A restaurant owner in Midtown Atlanta was initially negotiating a lease renewal directly with the landlord’s representative. The landlord's terms included a significant rent increase and additional maintenance responsibilities. The owner then engaged We Sell Restaurants to negotiate the deal terms. Leveraging market knowledge, the Certified Restaurant Broker secured a much smaller rent increase, got a cap on future maintenance costs, and a more tenant-friendly lease structure. This not only saved the owner considerable expenses but also provided more predictable financial planning.
Case Study 2: A restaurant owner in Denver decided to rely solely on the landlord’s representative for their new lease. They had their attorney do the lease review but while he looked at the legal terms, he did not focus on the business terms. Trusting the representative and attorney, they signed a lease that included a very cumbersome personal guaranty, accelerating escalation clauses and restrictive operating terms. When the owner wanted to sell the restaurant to a new party, all the “bad parts” of the lease also transferred. We Sell Restaurants renegotiated new lease terms in order for the business to even be marketable to a new party. This experience underscored the inherent conflict of interest and the pitfalls of not having independent representation.
Case Study 3: A restaurant owner in a downtown city center used We Sell Restaurants to negotiate his lease. Part of the negotiations includes a cap on his CAM (Common Area Maintenance Charges) for a period of 5 years. One year into his lease, the chef called the broker in a panic as the landlord was raising fees and the tenants were banding together to fight a 20% increase to everyone’s CAMS. This would have raised his rent by several thousand dollars a year. We pointed out that he need to simply lay low and let the other tenants fight it out. His lease was capped and his costs were managed.
Lessons Learned: These case studies clearly illustrate the importance of having an independent restaurant broker. In the first case, the broker’s involvement resulted in favorable lease terms that protected the tenant’s interests. In the second case, the lack of independent representation led to unfavorable terms and financial strain. In the third example, overlooking or simply signing off on CAM charges could have been very costly for the chef leasing a restaurant. These examples highlight that engaging an independent broker is not just beneficial but essential for navigating the complexities of restaurant lease negotiations effectively.
How to Choose the Right Restaurant Broker
Choosing the right restaurant broker is essential for a successful leasing experience. Start by speaking with a Certified Restaurant Broker who will have both experience and credentials. These seasoned brokers with extensive industry knowledge can provide valuable insights and navigate complex lease negotiations. Reputation is equally important, so seek out client testimonials and references to ensure they have a track record of successful transactions and satisfied clients. Look at Google reviews, their online presence and the social proof from other sellers sharing stories of their success.
Reach out and then gauge the any broker's working style and responsiveness. These must align with your preferences for a smooth, collaborative process. Lastly, understand the fee structure upfront to avoid surprises. In most instances, the landlord is paying the Restaurant Broker and his or her services are free or very low to you as a tenant leasing a restaurant. By carefully considering these factors, you can select a broker who will effectively advocate for your interests and secure the best lease terms for your restaurant.
Steps to Take When Leasing Restaurant Space: Leasing restaurant space involves several critical steps to ensure a successful outcome.
👉Step 1: Begin with an initial consultation with an independent restaurant broker to discuss your needs, goals, and expectations. Ask if he or she has a tool like the one developed by We Sell Restaurants called the Restaurant Assessment Tool available at this link. This helps set a clear direction for the search process.
Download our Restaurant Assessment Tool Here
👉Step 2: The broker will assist in the property search and evaluation, identifying potential spaces that meet your criteria to gauge their suitability for your concept in leasing a restaurant.
Step 3: View the property. Visit during the center during the hours you will be operating to understand traffic patterns and parking issues. The last thing you want when leasing a restaurant is find that the doctor’s office takes all the parking first thing in the morning and there’s nowhere for your breakfast customers to park.
👉Step 4: Negotiations commence. The Restaurant Broker will handle the negotiation of lease terms, leveraging their expertise to secure favorable conditions. After the agreement is finalized, the broker continues to provide support, helping you navigate any post-lease requirements and ensuring a smooth transition into your new space.
This comprehensive approach minimizes stress and ensures that your interests are protected throughout the leasing process.
✨Contact a Certified Restaurant Broker in your market
In conclusion, navigating the complexities of leasing a restaurant requires careful planning and the right support. Independent representation by an experienced Certified Restaurant Broker ensures that you are protected and the lease terms are favorable. From understanding the role of landlord representatives and the importance of independent advocacy, to appreciating the key benefits and practical steps involved, having a dedicated broker can make a significant difference. Real-life case studies underscore the risks of going it alone and the advantages of professional assistance.
By choosing the right broker and following a structured leasing process, you can mitigate risks, as well as save time, money and stress. This ultimately positions your restaurant for success. If you are considering leasing a restaurant space, take the proactive step of engaging an independent broker to guide you through the journey and help you achieve the best possible outcome.