So I found a location that suits my needs, it won’t cost me a fortune to operate, has plenty of parking and takes less than 20 seconds to give directions by phone, all that is left is making “The Deal”.
“The Deal” is negotiating with the owner of the business and the landlord to set the purchase price and the lease terms. In this instance there is no ongoing business so I am only dealing with the landlord who happens to own all the furniture, fixtures and equipment since the last tenant left in the middle of the night. This should make things simpler but it doesn’t.
We started our negotiations on October 12 of 2009 and finally inked the deal on January 26 of 2010. All I can say about negotiations is find a good lawyer and stick with your game plan. A lease is a lot like a marriage. If you want to stay happy with your landlord and make some money in the process you need a lease that is going to make that possible. A good lawyer is your best friend in making that happen. The key ingredients to a good lease is long term affordability. Can I survive the slow times? How long will it take to be profitable? What are the hidden cost in your lease? Your landlord should be an affordable expense and not your partner. Many restaurants fail because the landlord feels that his or her property is worth much more than the restaurant can afford to pay. There are hundreds of variables that can affect opening a restaurant with the biggest one being under capitalization (not enough $$$). Your monthly lease payments will have long term consequences on your ability to pay your other bills so negotiate wisely and if necessary walk away from “the deal” if your landlord is inflexible.
The second isuue in the lease is the CAM’s (common area maintenance or triple nets). These expenses include things such as property taxes, building insurance, and general building maintenance. As a general rule these can run from $.30 a square foot to $1+++. A fancy shopping center will have much higher CAM’s due to other factors such as advertising, security, administrative cost and the like. CAM’s are the hidden tax in a lease so beware how you negotiate these. I once had a restaurant in which the property sold several years after I had established my restaurant. The property tax base on this property tripled overnight and my CAM’s went from $.30 a foot to $.70 a foot. The net increase in my total CAM’s was $2000 a month. Ouch!!!!
One last thought. Read everything thoroughly. Nothing is more boring than reading what I call “lawyer write”. Lawyers have their own language and reading a 40 page “lawyer write” document is guaranteed to put you to sleep in record time. Lawyers exist to confuse the rest of us and they are very good at that. However, be patient and read through every word of every document that is presented to you and ask lots of questions. Your future may depend on it.
I could write forever on my experiences in negotiating deals but the idea of this blog is to keep you coming back and not boring you to death so I will move on.
Thank you for the post.