7 Tips for Negotiating a Restaurant Lease

  • September 27, 2017
  • Leasing

Many people dream about having their own restaurant. Or at least they think about great restaurant concepts their city should have. But for all those restaurants that succeed, there are many that fail. Certainly nobody starts a restaurant with the intent of their business failing. This leads us to the following question: “What can we do to most efficiently set ourselves up to have a successful and thriving restaurant?” Our friends at SVN | SouthLand Commercial recently wrote a blog post about this very topic! The blog post, which has an excerpt below, gives seven tips on how to negotiate your restaurant lease. A good lease negotiation is an important element of setting yourself up for success. Be sure to click the button below to read the full article! And, if you have any questions about starting a restaurant in the Baton Rouge or New Orleans area, don’t hesitate to reach out to us!

7 Tips for Negotiating a Restaurant Lease

Are you crazy? Don’t you know most restaurants fail? You’ve heard this before and while the statistics may be correct, too many people jump into the restaurant business without the proper ammunition. Arm yourself with the power of knowledge and improve your chances of success by negotiating a good lease. Here are 7 Tips to help make your dream a reality:

  1. The Offer: Start out with a detailed Letter of Intent (LOI). This can be a non-binding offer in writing to the Landlord. The LOI should include the initial lease term, option periods, lease rate, rate increases, specific space and size, occupancy date, lease start date, etc.
  2. Time is on your side: While you are likely risk averse, it’s important that you are not too short sighted. If you sign a short term lease and have the success you are planning, you open yourself up to significant lease rate increases at the time of renewal. Restaurants should have a minimum of 10 to 30 years to control a space or building. You may have an initial lease term of 5 years with two 5 year options to renew which total 15 years. You are committed to 5 years but have the options to renew which allows you to control your destiny. The renewal periods should have the rate negotiated at lease signing and not be subject to a new negotiation later.
  3. Love Free Rent: Ask for a free rent period to allow you time to get your permits, complete construction, and install of your FF&E (furniture, fixtures and equipment). This is typically 3 to 6 months depending on condition of the space.
  4. Other Peoples Money: Request a Tenant Improvement Allowance (TIA) which is often provided when a long term lease is executed and the space is in need of work. A TIA is a negotiating tool for both landlord and tenant but remember, a TIA requires a Landlord to put….

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