BlogLease Management5 Restaurant Lease Mistakes That Will Cost You the Big Bucks

5 Restaurant Lease Mistakes That Will Cost You the Big Bucks

Negotiating a good restaurant lease or lease renewal can be a challenge. 

While restaurateurs are well-versed in the ways of marketing, managing, and menus, they are not always knowledgeable about real estate. Most restaurant tenants may through the leasing process once or twice in their lifetime, yet they find themselves up against seasoned professionals who negotiate leases every day for a living.

Their job is to sell tenants on leasing their location at the highest possible rental rate.

So, how can you be sure to get the best rates when you’re leasing restaurant space?

Whether you are negotiating a lease renewal, or leasing a new location for the first time for your restaurant, here are a few insider tips every restaurateur should have in their back pocket.

Ignoring That Little Voice Inside

Set aside your emotions and make objective decisions. Whoever most needs to make a lease deal will concede in order to secure the location. Developing a mindset that includes walking away from any deal that doesn’t suit your needs will save you a lot of time, money, and aggravation. A good restaurant business in a poor location will become a poor business.

Not Having a Poker Face

A good quarterback can take the snap from center, fake the handoff to his running back, and then pass the ball to an open receiver, thereby not broadcasting his intentions. As a prospective restaurant tenant, avoid saying phrases like:

  • When I move in I would get the carpet replaced, or…
  • This large room could easily accommodate bigger groups or private functions.

These are called buying signals and they always serve to weaken your bargaining position. Don’t let what you say, and the words you choose, work against you. 

Not Negotiating

If you want three months free rent, then ask for five months. No one ever gets more than they ask for, so ask for more than you actually want. 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.

Paying Rent Too Soon

Unlike residential leases, where you start paying rent as soon as you move in, many restaurant leases will provide you with several months before you have to make your first monthly rent payment. This delay is to permit you to do whatever buildout you may need to do for your restaurant, and perhaps even give you some time to get up and running before you must start meeting that monthly rental obligation. How long you will be permitted before you have to start paying will of course be a key topic of negotiation, and every extra month will make a big difference in whether you get off on the right foot or are playing from behind right from the start.

Overlooking Second-Generation Space

Try to avoid going directly for spaces that need to be customized. Small restaurants especially can get much more value for their dollar by going with second-generation spaces, or buildings that have already housed restaurants. They should already have the necessary equipment in place, so you have fewer upfront costs to consider.

To learn more about how Leasecake can help you simplify commercial real estate lease management, schedule a demo today.

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