A New Lease or Life?

Knowing the difference between a business asset and a business liability is an important step in the development of a concept and business plan. Many people fail to realize that a concept must fit the needs of not only one market- the one you have your eye on- but many other markets that may come into play down the road.

And, I do mean down the road. That may be where you will end up if your lease negotiations are not forthright and aggressive with a long term picture hanging in the balance.  As mentioned before, there are two businesses within the restaurant biz- one is running the restaurant and the other is running the business. Lease negotiation definitely falls into the business side of the equation. Yet time and again the owner chef or another creative member of the restaurant team negotiate the lease for the space that dreams are made of. It is similar to a duck negotiating with an alligator. One snap and it's over.  It may of course take longer for the duck for alligators tend to be more sympathetic to fowl than landlords are to chefs.

In a recent article in The New York Observer the Chocolate Bar – that Manhattan hot spot for chocoholics and the likes was moving from the West village to the east Village because their lease was up – after only six years- and the rents were soaring. One space, according to the article was 600 square feet and the price was $18,000 per month. That is a lot of Cocoa even in Manhattan.

It's unfortunate that a mere puppy of a business- six years is nothing in the real world, yet in the world of eateries that is actually computed to be 25 years- has to relocate from what was sure to be a landmark location to other digs across town. Now don't fret, the chocolate Bar will survive as they are opening in Dubai and other locations a bit further east, however, when they negotiated their lease the long term picture of success probably escaped them.

Look at your lease as money in the bank. It is a real estate deal. If your lease for a property is fair and equitable with either a long term clause in it or numerous options to sign over a period of time the lease is almost more valuable than your restaurant will be. Especially, if the incremental increases that every lease offers are minimal and both the landlord and the tenant can afford to co exist.

Another thing to watch for when signing a lease- make sure the landlord takes some responsibility for something as simple as building ownership. Many owners think that the tenant is so lucky to rent their building that they expect the tenant to make all of the improvement and repairs. Be leery of this type of landlord. Usually, they are only in the business for themselves and the tenants they attract are often placed in financial jeopardy due to numerous hidden costs and repairs.

So when you go to negotiate that dream lease, remember to bring some additional fire power- an attorney who knows leases- and also keep a keen eye out for come ones that may be too good to be true.

The best practices in lease negotiations is to know a good space, negotiate a fair and equitable price and lock that price in for a long time. If you don't want the space, somebody will. And, you could make some money in the long run.