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August 18th, 2014
Foodservice Tenants - Negotiate Your Commercial Lease or Renewal
For the past 10 years, The Lease Coach has been speaking at foodservice shows all across the United States and Canada. Some of the most popular shows where thousands of tenants have taken our seminars are the California, Florida and New York Food Service shows. By: Dale Willerton and Jeff Grandfield – The Lease Coach
With 600,000+ restaurants in North America, we are consulting to both independent and franchise foodservice owners, specializing in lease renewal rent reductions. If you are renewing your commercial lease, or negotiating a lease for the first time, here are a number of important tips for you to remember:
Negotiate to Win: All too frequently, foodservice tenants enter into lease negotiations unprepared and don`t even try winning the negotiations. If you are not even negotiating to win, you won`t. With big commissions at stake, you can be sure the landlord`s agent, on the other hand, is negotiating fiercely to win. Foodservice tenants should remember that it is okay to negotiate assertively.
Be Prepared to Walk Away: Try to set aside your emotions and make objective decisions. Whoever most needs to make a lease deal will give up the most concessions. A good restaurant in a poor location will become a poor business.
Ask the Right Questions: Gathering information about what other tenants are paying for rent or what incentives they received will position you to get a better deal. Ask the right questions. Consider that your landlord and his agent know what every other tenant in the property is paying in rent, so you must do your homework too.
Brokers … Friend or Foe? Real estate agents and brokers typically work for the landlord who is paying their commission. It is not normally the agent`s role to get the foodservice tenant the best deal – it is their job to get the landlord the highest rent, the biggest deposit, etc. The higher the rent you pay, typically, the more commission the agent earns. If you are researching multiple properties, try to deal directly with the listing agent for each property, rather than letting one agent show you around or show you another agent`s listing. Your tenancy is more desirable to the listing agent if he can avoid commission-splitting with other agents.
Never Accept the First Offer: Even if the first offer seems reasonable, or you have no idea of what to negotiate for, never accept the leasing agent`s first offer. In the real estate industry, most things are negotiable and the landlord fully expects you to counter-offer.
Ask for More Than You Want: If you want three months free rent, then ask for five months. No one ever gets more than they ask for. Be prepared for the landlord to counter-offer and negotiate with you as well. Don`t be afraid of hearing `no` from the landlord – counter-offers are all part of the game.
Negotiate the Deposit: Large deposits are not legally required in a real estate lease agreement. Deposits are negotiable and, more so than anything else, often serve to compensate the landlord for the real estate commissions he will be paying out to the agent(s). If you are negotiating a lease renewal and your landlord is already holding a deposit of yours, negotiate to get that deposit back. The Lease Coach is frequently successful in negotiating for the return of a tenant’s deposit.
Measure Your Space: Foodservice tenants frequently pay for phantom space. Most foodservice tenants are paying their rent per square foot, but often they are not receiving as much space as the lease agreement says.
Negotiate, Negotiate: The leasing process is just that – a process, not an event. The more time you have to put the deal together and make counter-offers, the better the chance you have of getting what you really want. Too often, foodservice tenants mistakenly try to hammer out the deal in a two- or three-hour marathon session. It is more productive to negotiate in stages over time.
Educate Yourself and Get Help: Unless you have money to throw away, it pays to educate yourself. Taking the time to read about the subject or listen in on a webinar will make a difference. And, don`t forget to have your lease documents professionally reviewed before you sign them. With hundreds of thousands of dollars in rent at stake, personal guarantees and other risks, you can`t afford to gamble. In leasing, restaurant tenants don`t get what they deserve, they get what they negotiate.
To learn more about commercial leasing and commercial lease negotiating, plan to attend The Western Foodservice & Hospitality Show (August 17 – 19, 2014 at the Anaheim Convention Center in Anaheim, CA when Dale Willerton will be a featured speaker. Dale will also be presenting at the Florida Restaurant & Lodging Show (September 07 – 09, 2014 at the Orange County Convention Center in Orlando, FL).
For a copy of our free CD, Leasing Do’s & Don’ts for Restaurant Tenants, please e-mail your request to DaleWillerton@TheLeaseCoach.com.
Dale Willerton and Jeff Grandfield - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals For Dummies (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.
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