What Most Buyers Don’t Understand When Leasing an Atlanta Restaurant

There are three misconceptions that can cost restaurant buyers time and money.

Misconception #1: I can get a better deal if I negotiate the lease myself because the landlord will not be required to pay a commission. This is a common misconception since the landlord has already determined the commission which remains the same even if you do not use the services of a restaurant broker. The only difference is that the landlord’s representative gets 100 percent. You do not gain any commissions if you do not have a broker. Since he is familiar with the restaurant, the leasing agent for the landlord can provide you with valuable information that pertains to the location, tenants, and demographic information however you can still acquire this information through a restaurant broker. Additionally, you have to be concerned with what the leasing agent is not sharing with you which a restaurant broker can reveal to you.

Remember that a restaurant broker will be representing you which means they will be loyal when it comes to looking out for your best interests. Before a lease is finalized they will be able to notify you if another space is available and they will negotiate the lease while providing information on the location and other restaurants in the area.

Misconception #2: I do not see the need for a restaurant broker if all they are going to do is use the contact number on the billboard to set up a time for me to see the space. It is much easier if I just do it. The truth is that the leasing agent for the landlord will like it better if you let them handle the transaction because they do not want to split the commission with someone who is representing you. What’s more is they will not want to deal with someone that is acting in your best interests and they will challenge them on just about anything. A restaurant broker who is familiar with the process will protect your interests and add real value to the transaction.

This scenario is the very reason why you should never have a relative with experience in real estate negotiate the transaction so you can collect a hefty commission. You may net $12,000 in the commission but if the decision is bad you will lose your shirt in the process. An experienced restaurant broker can also provide you with information that the leasing agent for the landlord cannot. For example, if the HVAC unit is not the right size for a restaurant operation, chances are a leasing agent representing the landlord would not know this. Once you complete the negotiations, move in and start running the unit, the costs of replacement will outweigh any commissions you have gained.

Additionally, an experienced restaurant broker has extensive knowledge related to competing rents and market level data that the leasing agent for the landlord most likely does not. The restaurant broker has gained this knowledge from his experience of dealing with many landlords and restaurant lease negotiations. The restaurant broker will have the latest information on tenant improvement money, rent abatements and concessions, as well as current leasing rates and available terms. The leasing agent for the landlord may also have this information but they will not negotiate against themselves by offering it to you.

Misconception #3: I don’t need a restaurant broker if my lawyer is taking care of the lease. The truth is that you can use all the representation you can get when it comes to negotiating a commercial lease. When you think about it, a commercial lease can amount to as much as $8000 per month with a typical lease of five years which totals to a whopping $480,000. If you have many resources at your disposal you can minimize the risks associated with a deal of this magnitude and reduce your costs in the process.

Although your lawyer will be knowledgeable with focusing on the language of the lease and act in your best interests in this regard, he will most likely not have the restaurant business expertise that a broker has when they look over your lease. The restaurant broker can help you to refine business terms that your lawyer cannot. Since the restaurant broker can focus on the business terms they will know how to make sure you are covered from the standpoint of getting in and out of the lease. If things to not work out with your landlord, it is important to have those bases covered which is similar to getting out of a marriage with a pre-nuptial agreement.

Eric Gagnon is a designated industry expert in Restaurant Leasing, Restaurant Sales and Restaurant Business Brokerage. He is a frequent writer and speaker on the topic of restaurant sales and restaurant valuation. He is the president of We Sell Restaurants an online resource for buying and selling restaurants in Atlanta, Georgia and across the southeast.

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