Leasing a restaurant building is an alternative to being a new business owner with limited start-up cash. Prospective restaurant owners should do their homework and research before considering leasing a building. Research should be done to see if the building will be a profitable and desirable location for the restaurant. Traffic flow in and out of the area at the operating times of the restaurant will give an indication as to whether there will be a steady stream of customers in the area.
Items you will need
- Restaurant building
- Restaurant lease
Research whether or not the desired building is zoned for a restaurant and what permits you will need to have in order to open the restaurant in that location. If the building is zoned for restaurant use, the following permits may be needed: sales tax, alcoholic beverage and building permit (if renovating). Make sure to check with the local and state government for your area to determine what permits and licenses are necessary. Budget these permits into the start-up time and cost.
Meet with the landlord and obtain a copy of the proposed lease. Ask questions about the building, such as "How long has it been vacant?", "Why did the previous tenant leave?", and "What problems did the previous tenant have with the building?" If the landlord does not want to answer any of these questions, then this may not be the place for you to start your restaurant business.
Review the lease, paying careful attention to the "use" clauses,"rental increase" clauses,"operating covenant","insurance" clauses and "term of lease". In the Fall 2008 issue of The Wendell Report, Daniel B. Myers explains "use" and "operating covenant". He states that "use" clauses are often "drafted as narrow as possible" so that the property can be only be used for one specific purpose. He further states that "operating clauses" are included so that the landlord can ensure that the business will actually be open at the agreed upon times and if it is not, then the landlord can collect fees from the tenant for failure to operate the business.
The clause for insurance usually states the amount of insurance that the landlord will require the restaurant owner to carry on the business. "Term of the lease" is the clause that specifies how long the lease will run, the lease amount, and whether you can sublet the property.
Negotiate with the landlord on any clauses in the lease that you would like to see changed. It may be necessary to bring in an attorney or a lease broker at this point if you cannot come to an agreement on the terms of the lease.
Adjust the business start-up budget to reflect permit and license fees, renovations and repairs, rent, utilities, insurance, equipment and staff salaries. Make sure that the budgeted numbers are affordable to you at this location. If not, you will need to find another location and start the leasing process over. However, if the budgeted numbers are affordable and the terms of the lease are agreeable, sign the lease, get the permits, and open for business.
Walk away from the negotiations if the landlord is not willing to "give" on anything.
If you are using a lease broker, do not let them pressure you into taking a property that you do not feel is appropriate for your restaurant.
- mimosa et restaurant. image by Bruno Bernier from Fotolia.com