Leasing an Atlanta Restaurant: Five Essentials to Include in Your Letter of Intent

Before you lease an Atlanta restaurant here are some things you should include in your Letter of Intent.

Leasing an Atlanta restaurant can be a positive experience if you know a few tips on what to include in your Letter of Intent. One of the first items to include is a definition of the existing furniture, fixtures, and equipment to remain in the restaurant during the terms of your lease. This is especially important when you are leasing a second generation restaurant or former restaurant that is already equipped with furnishings and other accessories. When you define the equipment also include an itemized list of furnishings and equipment that are to be left in the restaurant for your use. The reason this step is important is because you will encounter situations where the equipments and furnishings may be removed by the previous tenant or the landlord without notice and before you sign the lease agreement.

If the restaurant includes a patio area it is not necessary to include it in the amount of square footage you rent unless the patio is enclosed with walls, ceiling, heating, and air conditioning. Therefore if you are renting restaurant space with an open patio you should include “approximately” in the terms when you define the amount of square footage you will rent.

Negotiate the terms of the lease to reflect an initial period of five years with the option to renew the lease at the end of the term. If you request a lease that is anything less than five years you can expect the landlord to return with a counter-offer. When negotiating the lease terms it is also important to keep in mind if you request initial months of free rent, the fewer you request the less amount of months of discounted rent you will have because the landlord must amortize the amount during the preliminary term of the lease.

When it comes to calculating the Commercial Area Maintenance fee it should be determined on an annual basis in addition to the base rent fee. Once this amount is determined it should be divided by twelve to determine the amount of the monthly rent.
For example, if you are renting a restaurant space with 1,631 square feet of space and the CAM fee plus the base rent amounts to $18.50 for each square foot the calculation would be as follows: $18.50 x 1631 = $30,173.50 which is the annual amount. Divide this amount by twelve and you will pay $2,514.46 in monthly rent.

An important point to keep in mind when calculating Common Area Maintenance you must consider the location of the restaurant space you are renting. If you rent restaurant space in a mall in the Atlanta area it is a general rule that the CAM fees are divided among all of the businesses that occupy the total square footage of the mall. The CAM fees are calculated by the mount of square footage you are renting and the fees cover garbage pickup, landscaping, and other services associated with the upkeep of the mall. If the restaurant is located in a single building, under a net, net, net, lease or triple net lease you will be responsible for covering the taxes and building insurance.

Include a pro-rata share agreement that is based on the amount of square footage you are renting and is termed as “in proportion” in your lease. Agree to a specific pro-rata share and make sure that it does not exceed the agreed upon amount. Let’s use a Common Area Maintenance of 10,000 square feet as an example: If you are renting 1631 square feet of space in a shopping center of 10,000 square feet the CAM fee should not be above 16.31%. If it exceeds this amount and for some reason the other businesses vacate the mall, you will be left with all of the CAM fees and insurance. Also, try to keep the CAM fees at a minimum during your first couple of years to allow yourself some breathing room for getting your restaurant business off the ground.

By placing limitations on the Common Area Maintenance fees you will also be protected against unreasonable increases in taxes and insurance that result from the landlord not taking the necessary steps to keep insurance costs at a minimum and battle the city against outrageous tax increases. Sometimes landlords do not act on these circumstances and then they pass the cost increases on to the tenants if there is no cap placed on the CAM fees.

These are the essential five points that you should include in your Letter of Intent. If you include these items it will give you a place to start with negotiations and will result in an agreement that both parties can live with. You should also hire an attorney to work out the small details that follow the general terms and then make sure you understand the entire agreement before you sign the lease.


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