Tips on Leasing a Restaurant – What Landlords Expect from a Tenant

Posted by Robin Gagnon on Nov 27, 2017 10:00:00 AM


You can get respect from the landlord when leasing a restaurant as long as you take the time to assemble a package with the help of an expert restaurant broker.

Leasing a restaurant can be a daunting task for the inexperienced restaurant owner. Here’s everything you need to know to present your offer in a way to get serious consideration from landlords who see multiple submissions for the best space. Start and end your negotiations with the landlord on the best foot by treating this as a serious business deal.

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Lending covenants or other restrictions on landlords often dictate the mandatory materials he needs to consider any new tenant leasing a restaurant space. This can be for a new lease or even the transfer of an existing one. By understanding the requirements early in the game and presenting a well organized and complete package, your application moves to the top of the list, important in the current competitive market for leasing a restaurant. Once the landlord has a package, he will meet with the proposed tenant but generally not before he has a package. Why? The landlord wants to understand who he or she is dealing with and their credit quality before they meet with a would-be tenant and enter into negotiations.

How can using a qualified restaurant broker assist you in leasing a restaurant? There are multiple ways. First, the best spaces move quickly and restaurant brokers with established relationships with landlords often get the first look at spaces that will be available. Secondly, using a restaurant broker that has established a rapport with the landlord increases your chance of success when leasing a restaurant. Since the landlord isn’t meeting directly with you as the tenant, he’s relying on the expertise of the restaurant broker to communicate information about your concept and you personally. That’s important when the developer is weighing multiple offers or considering tenants that do not have as strong a credit position. Leasing a restaurant for locations in demand are typically managed by firms who are very experienced in conducting background reviews and credit quality reviews on would-be tenants. Lastly, a qualified restaurant broker is going to prepare your package for the landlord and help you put forth as the best candidate.

You can indicate a lack of sophistication or inexperience on the part of your broker if your package is incomplete or missing elements. For big landlords, this can be a deal breaker when there are competing packages though less established or single unit operators are more forgiving. Anyone leasing a restaurant should get a full list of requirements from the broker.

Be prepared to produce any or all of the following items. The most important item is your financial statement. This should be accurate and dated within the last 30 days. Landlords will want credit checks so be prepared to give them approval to pull your credit. Often they will want two years of federal income tax returns. Most of this is a required need to have; not a nice to have. The landlord is looking for three things: cash on hand to operate, assets sufficient to secure the lease and history of paying bills on time. In addition, they want to understand how you will operate in their restaurant for lease so provide a copy of your menu and outline of your business.

The actual discussions on lease terms begin after the full package is submitted. If you have a powerful package and strong financial results you’ll have more negotiating room in leasing a restaurant and the terms. If there are lots of people vying for the same space and your restaurant brokers submits the best package on your behalf, you’ll win out. Weak credit or insufficient cash positions can be overcome in multiple ways. A strong restaurant broker can offer you suggestions to overcome or secure the landlord’s risk on these elements.

Want more information on leasing a restaurant? Learn the 3 Reasons You Didn't Get that Restaurant Space for Lease

Read also, 4 Must Know Landlord "Gotcha's" to Avoid When Leasing a Restaurant.

Download the Free Guide to Leasing a Restaurant

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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.


Topics: Buying a Restaurant

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