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I am a landlord who has three restaurant spaces that I lease out. I have had some very successful tenants and some very unsuccessful tenants in my spaces. Whenever I have an empty space I try to be fair with the potential new tenant but it doesn´t seem to matter. Some owners make it, others don´t. Do all landlords have the same problems or am I just expecting too much from my tenants?
Raising questions, not rent in Knoxville.
Dear Knoxville;I guess congratulations and condolences are simultaneously in order. I can imagine being the landlord in buildings that play host to restaurants can be tough at times. But, at other times it can be very rewarding in both a culinary and financial state. You appear to have the formula down. But often, even good operators take a plunge into the world of failing dining rooms.
A concept seldom explored in the landlord-restaurateur relationship is the partnership concept. It is so important to have a great relationship with your landlord that the marriage must be defined as a partnership.
I was extremely fortunate as I had more great landlords than lousy ones. And, in all cases, the owner´s of the spaces I occupied celebrated and suffered depending on the economic climate of the economy and my dining room. However, the landlords that profited the most from my restaurants were the ones that used common sense as a negotiating tool and business sense as background for making a decision on rent, increases and terms.
It is quite easy to figure- on paper at least- whether a restaurant has any chance of making a profit. And, only the fool disguised as a landlord would implement a rent rate that will eventually cause financial constraints and ultimately account for financial disaster for both the tenant and landlord. Going down the same road, only a fool of an owner with totally clouded vision would sign a lease where the rent was so high it would take four turns a night to accumulate enough cash flow to accommodate a monthly rent check. Yet, restaurant operators do this continually thinking there concept is fool proof and their talents unstoppable.
Surely landlords understand that the rent they charge defines the restaurant. If rent is reasonable, the owner can operate with a balanced budget across the spread sheet allowing for quality, professionalism and fair pricing. If the tenant enters into an agreement with a landlord whose rent rate is based on perceived value and a touch of greed, the operator will soon learn that corners need to be trimmed in order to make the rent, payroll, and profit. Of course, this begins the downward spiral of the business. When the first financial Domino tumbles, the rest rapidly follow. Landlords and potential tenants must analyze if the concept can support the rent and a decision has to be made based on financial ability to meet monthly obligations. Many landlords become as enamored with a concept as the restaurant owner becomes with the space and both enter into an agreement on emotion. The landlord wants the restaurant in his building. The restaurateur wants the space. The numbers only matter later in the game when it is too late to play any more.
In one of my final restaurant experiences I was in the process of signing a lease even though the landlord had allowed me- almost encouraged me- to begin construction work on the site before we had come to signed document terms. While in the middle of signing my contractor attempted to interrupt me a few times to tell me of a problem he was facing. After explaining to the contractor more than a few times that I didn´t want to be interrupted I signed the lease. As soon as I handed the landlord the certified check for $40,000.00 I asked the contractor what he needed.
"I don´t need anything. You need new plumbing underneath the entire space since all the pipes are broken and the water isn´t making it to the street," he said.
Looking at the landlord I quickly realized our relationship would be based on very adversarial terms. Yet he defined that when he told me that the plumbing problems were my problems. He only fixed the roof. And those terms were stated in the lease.
Immediately I should have gone to court, but the adrenaline of opening suppressed the surfacing rage and I paid the plumber and eventually the piper for not checking out my landlord as much as he did me.
The one other tactic landlords frequently use to attract hard working tenants is the low ball short term lease. This is the one where the deal seems too good to be true for five years and then the rent skyrockets because the eatery has become a destination with a line out the door and the owner of the building decides the rent increase can be monumental because the restaurateur is holding heavy in the cash department. Often, this is a financially disastrous move for all involved.
The only way a landlord-restaurateur relationship works is to use fairness as a guideline for negotiations. As we look around at the spaces that run well, are constantly doing business, filled, and have a track record of struggle turned into success, a good landlord is one of the cornerstones of that business. Seldom can an operator become successful while enduring the antics of a poor landlord. And, the same holds true for the landlord. A bad restaurant tenant is an equally disturbing nightmare.
A great landlord-restaurateur relationship is a charm.
Nothing beats a landlord who uses common sense to develop a relationship with a tenant. And, nothing is better than a restaurateur who uses the same principles to operate their business.
The pairing of both could be an all-win situation.