If you choose to lease a site for your restaurant business, negotiating your lease correctly can save you from losing all of your investment. Always ask questions about anything you don't understand and remember you may have to compromise in some areas.
Here are some tips to help along the way.
1. Always get a written lease!
2. Be sure that rent is reasonable and comparable with other properties in the same market area.
3. Rent escalations (Usually yearly) need to be clearly stated in the agreement.
4. An ideal lease term should be for at least ten years with rent fixed by the lease. If possible you should have automatic one year options (this only covers you and not the landlord) so that if your business fails, you will only be liable for the remaining amount of the year.
5. You should have an assignment and subletting clause in case you sell the business so that the new owner can continue with the existing lease.
6. Another important clause would be that if the landlord chooses to sell the property, your lease stays intact and the new owners can not ask you to move. It should also state that you have ten days to match the offer of the prospective buyer.
7. Have a contingency for permits clause. You should be able to cancel the lease if you are unable to procure the necessary permits to do any needed build out and open your business.
8. Make sure it includes the exact description of the property to be leased.
9. State who is liable for the building. Will the owner be responsible for insurance on the building? You will need to keep fire and liability insurance for your improvements and assets and business, but fire and liability insurance for the building and parking lot should be covered by the landlord.
10. Make sure you are released from the terms of the lease in case of force-majeure or catastrophe such as a hurricane or fire.
11. Make sure you can afford it .
For a sample of a commercial business lease click here.
