You have spent years building your restaurant. You know your numbers. You've got a buyer interested. Then, somewhere between the letter of intent and the closing table, the deal starts to unravel.
Not because of your sales figures. Not because of the equipment. Because of your lease.
It happens more often than most sellers expect. In our book, Appetite for Acquisition, written in 2012, an entire chapter was devoted to the subject, that “A Landlord is Not Your Friend” and those words ring as true today as ever before.
At We Sell Restaurants, we've seen lease issues delay transactions, reduce valuations and completely derail deals. We’ve seen landlords play games to earn more on a lease transfer than the broker, or exaggerate market rent to benefit themselves. A lease that looks fine on the surface turns into the single biggest obstacle in the entire transaction.
In many cases, the problem could have been identified and corrected before the restaurant ever went to market.
Here are three lease mistakes restaurant sellers and inexperienced brokers make that end up costing themselves or their clients the deal.
Mistake #1: Not Reading the Assignment Clause Before You List
Virtually every lease includes an assignment clause. This is the section that govern whether and how you can transfer the lease to a buyer when you sell the restaurant.
The problem is that most sellers weren’t focused on this language at the time the lease was negotiated and have read it since the day they signed. After all, at the time you are signing the lease, you are only worried about what it costs you to get in, not what it costs you to exit. Costs can include the actual fees charged but may also include the cost of continuing to be required on the guarantee, the cost to attract a new tenant if there is no defined language about the requirements and the cost of lost deals while dealing with unreasonable landlord.
Assignment clauses vary significantly. Some are straightforward and simply require landlord approval that cannot be unreasonably withheld. Others contain provisions that can seriously damage a transaction.
Unreasonably Withheld – What does it Mean?
Even language that says an assignment cannot be “unreasonably withheld” is still subject to the whims of the landlord. What does that language actually mean?
It means the landlord can’t say no for any reason (or no reason). It generally means they must have a legitimate, defensible justification to refuse. What’s reasonable?
What counts as reasonable grounds to withhold approval
What is generally unreasonable
The reality is that even with this language, the burden is on the tenant to show the landlord is being unreasonable, meaning you have to take them to court to enforce it. Landlords are notorious for slow walking this and the lease will be over and the buyer long gone before you get your day in court.
Other Assignment Landmines
We have seen leases that allow the landlord to terminate the lease entirely if the tenant requests an assignment. We've seen "recapture" provisions that allow the landlord to take the space back rather than approve a sale, effectively ending your transaction before it starts. We have seen clauses requiring approval within unrealistic timelines where their failure to respond automatically becomes a denial.
Here is why this becomes expensive.
This is an email from a landlord for a publicly traded property group to We Sell Restaurants.
“Since negotiation of term is required the Landlord requires a consent fee and there is nothing in the lease that indicates they don’t have the right to require one.
The Landlord consent fee is 10% of purchase price which in this case is $80K.
This covers our legal team and their time to review all the lease amendments, etc. as well as drafting a new lease.”
In this case, the landlord is requiring $80,000 for a lease transfer and according to their attorney, “nothing in the lease requires they don’t have the right” to do so.
When sellers do not understand the assignment clause before listing the business, they cannot properly prepare, negotiate, or position the restaurant for sale. Instead, the issue surfaces in the middle of due diligence, after the buyer is emotionally and financially invested.
At that stage, the seller has very little leverage. The landlord knows the deal is already in motion and negotiations become far more costly.
Here’s what to do:
Pull your lease and have it ready for review with a Certified Restaurant Broker and your attorney. Together, you should find the assignment clause and read it carefully. Get a commercial real estate attorney to review it. Ideally, you’re looking for some very specific language regarding transfer which can include:
A lease rider, frequently found in franchise transactions, allowing the transfer to a new approved franchisee. This is the gold standard. Essentially, the landlord has ceded his approval to the franchisor. Get your candidate approved with the franchisor, and there’s no issue.
Known approval standards. Language that says something like, the new tenant must have a net worth greater than the old tenant and have liquidity greater than $200,000. This type of specific language is powerful as you know who you are seeking as a tenant.
Ability to Sublet. It is possible that the lease will allow you to sublet, though this is rare, to a new tenant. If so, understand this up front but be aware that in most instances, a sublet does not absolve you of any requirements under the lease to remain responsible for the financial risk.
Knowing what your lease says about assignment, or better yet, negotiating those clauses at the point of the original lease will affect the value of your restaurant and your ability to transfer the store.
Mistake #2: Having Too Little Time Left on the Lease
Remaining lease term is one of the most overlooked drivers of restaurant value.
Buyers care about it.
Lenders care about it.
SBA financing depends on it.
Yet many restaurant sellers underestimate how much it impacts the transaction.
Here's the basic math: if you have two years left on your lease with no renewal options, a buyer is purchasing a business that could be forced to close or relocate in 24 months. That's not a business, it's a countdown clock. Most SBA lenders won't finance a restaurant acquisition if the lease term (including options) doesn't cover the full loan repayment period, which is typically 10 years. If you don't have the term to match, your buyer pool shrinks to cash buyers only. And cash buyers know they have leverage.
We've seen sellers lose deals entirely because a buyer's lender flagged insufficient lease term late in due diligence. We've seen buyers walk because a seller had two years left and no options and the landlord was unwilling to extend before closing. In both cases, the seller left money on the table, or left without a deal at all.
The most common version of this mistake: sellers wait until they're ready to sell to think about lease renewals. By then, the landlord has all the leverage. You're a motivated seller on a timeline, and the landlord knows it. Renewals that might have been routine become negotiations, and landlords sometimes use the moment to push rents to market rate, add new restrictions, or demand personal guarantees they couldn't have gotten mid-lease.
What to do instead: If you're thinking about selling in the next one to three years, look at your lease term now. If you have options, consider exercising or locking them in before you list. If you don't have options, approach your landlord for a renewal or extension before the sale is in motion. You'll negotiate from a far stronger position when you're not on a clock and under pressure to close a sale.
Mistake #3: Missing the Hidden Clauses That Scare Buyers Away
Lease assignment and term are the two big ones. But there's a third category of lease problem that's harder to spot and just as damaging: the buried clause that a buyer's attorney flags during due diligence and suddenly becomes a deal condition.
A few examples we've seen derail or damage restaurant transactions:
Co-tenancy clauses. These provisions tie your lease rights to the presence of an anchor tenant in your shopping center or plaza. If the anchor leaves, you may have the right to reduce rent, terminate early, or renegotiate. At first reading, this sounds like a protection, until a buyer's lender sees it as a risk. If the anchor is already gone, or at risk, it becomes a material issue that can affect financing and valuation. Think about the number of shopping centers with large anchor tenants like Bed Bath and Beyond, Toys’R” Us or even JCPenney that have gone under in recent years, leaving a large gap in the center’s space.
Radius restrictions. Some leases prohibit the tenant from operating a competing concept within a certain radius of the leased location. If you're a franchise seller, this can complicate what a buyer is allowed to operate even after the purchase. It can also affect a buyer's ability to grow, which affects what they're willing to pay.
Exclusivity provisions ot the lack of them. Many restaurant tenants assume their lease gives them exclusivity in their concept category within a shopping center or development. Often it doesn't, or the language is vague. When a buyer discovers there's nothing preventing the landlord from leasing the next suite to a direct competitor, it changes their view of the investment.
Personal guarantee language. Many leases include personal guarantees from the original tenant. Sellers often assume those guarantees go away when the lease transfers. That’s not always the case and again, should be understood and negotiated at the time of lease signing, not transfer.
Until proven otherwise, assume that a landlord is going to require you to stay on the guarantee unless it’s in writing that it is removed upon transfer. The buyer also has to be willing to assume a personal guarantee. This is an education point for a restaurant broker to convey, early in the deal.
None of these clauses are dealbreakers on their own. But when they surface for the first time in due diligence, they create uncertainty. And uncertainty slows transactions, weakens negotiations and reduces buyer confidence.
What to do instead: Before you list, do a full lease review with your Certified Restaurant Broker and, ideally, a commercial real estate attorney. The goal isn't just to understand the assignment clause. The goal is identifying any provision that buyers, attorneys, or lenders are likely to question so you can address concerns proactively instead of reacting under pressure.
The Common Thread
All three of these mistakes share the same root cause: sellers treat the lease as background paperwork rather than a core asset of the business. But for a buyer, and for a buyer's lender, the lease is foundational. It determines the restaurant’s location, operating rights, financing viability and long-term stability. weak lease or an unfavorable clause doesn't just complicate a deal. It changes what the business is worth.
At We Sell Restaurants, lease review is part of how we prepare every seller before a listing goes live. We've been through enough transactions to know exactly what buyers and lenders will scrutinize — and to help you get ahead of it before it becomes a problem.
If you're thinking about selling your restaurant and you haven't looked closely at your lease in a while, that's the first conversation we want to have with you.
Ready to understand what your restaurant is really worth — lease and all? Your lease can increase value, reduce value, or stop a transaction entirely.
Get a confidential valuation from We Sell Restaurants and learn how buyers, lenders, and landlords will view your business before you go to market. Get a Free Valuation from We Sell Restaurants »
We Sell Restaurants is the nation's largest restaurant brokerage, specializing exclusively in restaurant sales, acquisitions, and franchise resales. Our brokers operate in markets across the country and have facilitated hundreds of millions in restaurant transactions.