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.
To learn more about buying or leasing Atlanta restaurants CLICK HERE
Showing posts with label lease a restaurant. Show all posts
Showing posts with label lease a restaurant. Show all posts
Wednesday, May 19, 2010
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.
To learn more about buying or leasing Atlanta restaurants CLICK HERE
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.
To learn more about buying or leasing Atlanta restaurants CLICK HERE
Tuesday, March 30, 2010
Things You Should Get Ready If You’re Leasing an Atlanta Restaurant
Remember the Boy Scout motto and be prepared if you want the best Atlanta restaurant space for lease.
For a new restaurant owner, few things are more intimidating than facing a landlord with a prime Atlanta restaurant for lease if you don’t have expert help from a restaurant broker. If you want to be first in line to receive the space there are definite ways to package your restaurant and yourself to cast the winning bid. First and foremost, don’t try to negotiate first and introduce yourself second. A landlord wants to know who you are before he opens up discussions on terms.
Developers want to see certain items each and every time before they consider a new tenant on an Atlanta restaurant for lease. If you arm yourself with these materials at the outset, your presentation and completeness will leave competitors for the space by the wayside. Instead of dragging pieces and parts together a little at a time, tie everything together in one presentation for the landlord and your application is the one he will focus on. That’s very important in large restaurant areas like Atlanta where competition for space is fierce. Don’t make the rookie mistake of requesting a meeting before you present your materials. Your package is your introduction and the only thing the landlord cares about. He’ll meet after the fact and not before.
Successful Atlanta restaurant brokers have already cemented deals in the past with most developers and will use these relationships to improve your likelihood of winning the restaurant lease. That’s important since the Atlanta restaurant broker is representing you to the landlord. He’ll communicat with him about your restaurant and experience. When a landlord considers multiple offers, experience and relationships matter. The largest landlords in metro areas have in-house teams that check credit and perform background reviews but they still pick up the phone can call the expert Atlanta restaurant brokers for input.
A presentation that is missing key elements or the demand for an early meeting may railroad you with the landlord early in the game. It can indicate inexperience on the part of the broker or proposed tenant and find your application pushed back. This is especially true for REITS or large organizations while the smaller landlord is much more accommodating. Your expert Atlanta restaurant broker should have a good idea of where they landlord you’re inquiring about falls in the mix.
Your package must lead with a statement of net work or personal financial statement. This should be up to date with the latest information. Pull your own credit so you have an idea of what a landlord will see because they will do this too. Tax returns round out the initial list of financial requirements. This financial snapshot will tell a landlord if you pay your bills, if you have money to run the business and if you have assets on hand to secure his risk. Landlords will want credit checks so be prepared to give them approval to pull your credit. The least important elements to the landlord for Atlanta restaurants for lease is the menu and business plan, generally the most important to you.
Once the landlord has met you on financial terms and learned a bit about your business, deliberations on the lease begin. The more powerful your initial package, the more influence you’ll have over the outcome of the negotiations. This is where the advice of your Atlanta restaurant broker pays off since your package will win you the strongest position in discussions. Don’t panic if you credit or cash position is less than stellar. Overcoming credit risk should be no problem with the recommendations of an expert Atlanta restaurant broker familiar with lease negotiations.
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 and wesellrestaurants.com an online resource for buying and selling restaurants in Atlanta, Georgia and across the southeast.
To learn more about buying or leasing Atlanta restaurants CLICK HERE
For a new restaurant owner, few things are more intimidating than facing a landlord with a prime Atlanta restaurant for lease if you don’t have expert help from a restaurant broker. If you want to be first in line to receive the space there are definite ways to package your restaurant and yourself to cast the winning bid. First and foremost, don’t try to negotiate first and introduce yourself second. A landlord wants to know who you are before he opens up discussions on terms.
Developers want to see certain items each and every time before they consider a new tenant on an Atlanta restaurant for lease. If you arm yourself with these materials at the outset, your presentation and completeness will leave competitors for the space by the wayside. Instead of dragging pieces and parts together a little at a time, tie everything together in one presentation for the landlord and your application is the one he will focus on. That’s very important in large restaurant areas like Atlanta where competition for space is fierce. Don’t make the rookie mistake of requesting a meeting before you present your materials. Your package is your introduction and the only thing the landlord cares about. He’ll meet after the fact and not before.
Successful Atlanta restaurant brokers have already cemented deals in the past with most developers and will use these relationships to improve your likelihood of winning the restaurant lease. That’s important since the Atlanta restaurant broker is representing you to the landlord. He’ll communicat with him about your restaurant and experience. When a landlord considers multiple offers, experience and relationships matter. The largest landlords in metro areas have in-house teams that check credit and perform background reviews but they still pick up the phone can call the expert Atlanta restaurant brokers for input.
A presentation that is missing key elements or the demand for an early meeting may railroad you with the landlord early in the game. It can indicate inexperience on the part of the broker or proposed tenant and find your application pushed back. This is especially true for REITS or large organizations while the smaller landlord is much more accommodating. Your expert Atlanta restaurant broker should have a good idea of where they landlord you’re inquiring about falls in the mix.
Your package must lead with a statement of net work or personal financial statement. This should be up to date with the latest information. Pull your own credit so you have an idea of what a landlord will see because they will do this too. Tax returns round out the initial list of financial requirements. This financial snapshot will tell a landlord if you pay your bills, if you have money to run the business and if you have assets on hand to secure his risk. Landlords will want credit checks so be prepared to give them approval to pull your credit. The least important elements to the landlord for Atlanta restaurants for lease is the menu and business plan, generally the most important to you.
Once the landlord has met you on financial terms and learned a bit about your business, deliberations on the lease begin. The more powerful your initial package, the more influence you’ll have over the outcome of the negotiations. This is where the advice of your Atlanta restaurant broker pays off since your package will win you the strongest position in discussions. Don’t panic if you credit or cash position is less than stellar. Overcoming credit risk should be no problem with the recommendations of an expert Atlanta restaurant broker familiar with lease negotiations.
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 and wesellrestaurants.com an online resource for buying and selling restaurants in Atlanta, Georgia and across the southeast.
To learn more about buying or leasing Atlanta restaurants CLICK HERE
Tips on Leasing a Restaurant in Atlanta Georgia –What Landlords Expect From a Tenant
You can get great deals on Atlanta restaurants for lease as long as you take the time to assemble a package with the help of an expert restaurant broker.
Leasing property in a major market like Atlanta, Georgia can be a daunting task for the inexperienced restaurant owner. Here’s everything you need to know to present your offer in a way to get serious consideration from landlords who see multiple submissions for the best space. Start and end your negotiations with the landlord on the best foot by treating this as a serious business deal.
Lending covenants or other restrictions on landlords often dictate the mandatory materials he needs to consider any new tenant. This can be for a new lease or even a transfer of an existing one. By understanding the requirements early in the game and presenting a well organized and complete package, your application moves to the top of the list, important in competitive bidding major markets like Atlanta. Once the landlord has a package, he will meet with the proposed tenant and generally not before. The best spaces move quickly and often Atlanta restaurant brokers have relationships with landlords that give them the first look at new restaurants for lease in the market.
Using a restaurant broker that has established a rapport with the landlord increases your chance of success. Since the landlord isn’t meeting directly with you as the tenant, he’s relying on the expertise of the Atlanta restaurant broker to communicate information about your concept and you personally. That’s important when the developer is weighing multiple offers or considering tenants that do not have as strong a credit position. Locations that are in demand like most Atlanta restaurants for lease are typically managed by firms who are very experienced in conducting background reviews and credit quality reviews on would-be tenants.
You can indicate a lack of sophistication or inexperience on the part of your broker if your package is incomplete or missing elements. For big landlords, this can be a deal breaker when there are competing packages though less established or single unit operators are more forgiving. Anyone leasing an Atlanta restaurant should get a full list of requirements from the broker.
Be prepared to produce any or all of the following items. The most important item is your financial statement. This should be accurate and dated within the last 30 days. Landlords will want credit checks so be prepared to give them approval to pull your credit. Often they will want two years of federal income tax returns. Most of this is a required need to have not a nice to have. The landlord is looking for three things: cash on hand to operate, assets sufficient to secure the lease and history of paying bills on time. In addition, they want to understand how you will operate in their restaurant for lease so provide a copy of your menu and outline of your business.
The actual discussions on lease terms begin after the full package is submitted. If you have a powerful package and strong financial results you’ll have more negotiating room in the lease terms. If there are lots of people vying for the same space and your Atlanta restaurant brokers submits the best package on your behalf, you’ll win out. Weak credit or insufficient cash positions can be overcome in multiple ways. A strong Atlanta restaurant broker can offer you suggestions to overcome or secure the landlord’s risk on these elements.
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 and wesellrestaurants.com an online resource for buying and selling restaurants in Atlanta, Georgia and across the southeast.
To learn more about buying or leasing Atlanta restaurants CLICK HERE
Leasing property in a major market like Atlanta, Georgia can be a daunting task for the inexperienced restaurant owner. Here’s everything you need to know to present your offer in a way to get serious consideration from landlords who see multiple submissions for the best space. Start and end your negotiations with the landlord on the best foot by treating this as a serious business deal.
Lending covenants or other restrictions on landlords often dictate the mandatory materials he needs to consider any new tenant. This can be for a new lease or even a transfer of an existing one. By understanding the requirements early in the game and presenting a well organized and complete package, your application moves to the top of the list, important in competitive bidding major markets like Atlanta. Once the landlord has a package, he will meet with the proposed tenant and generally not before. The best spaces move quickly and often Atlanta restaurant brokers have relationships with landlords that give them the first look at new restaurants for lease in the market.
Using a restaurant broker that has established a rapport with the landlord increases your chance of success. Since the landlord isn’t meeting directly with you as the tenant, he’s relying on the expertise of the Atlanta restaurant broker to communicate information about your concept and you personally. That’s important when the developer is weighing multiple offers or considering tenants that do not have as strong a credit position. Locations that are in demand like most Atlanta restaurants for lease are typically managed by firms who are very experienced in conducting background reviews and credit quality reviews on would-be tenants.
You can indicate a lack of sophistication or inexperience on the part of your broker if your package is incomplete or missing elements. For big landlords, this can be a deal breaker when there are competing packages though less established or single unit operators are more forgiving. Anyone leasing an Atlanta restaurant should get a full list of requirements from the broker.
Be prepared to produce any or all of the following items. The most important item is your financial statement. This should be accurate and dated within the last 30 days. Landlords will want credit checks so be prepared to give them approval to pull your credit. Often they will want two years of federal income tax returns. Most of this is a required need to have not a nice to have. The landlord is looking for three things: cash on hand to operate, assets sufficient to secure the lease and history of paying bills on time. In addition, they want to understand how you will operate in their restaurant for lease so provide a copy of your menu and outline of your business.
The actual discussions on lease terms begin after the full package is submitted. If you have a powerful package and strong financial results you’ll have more negotiating room in the lease terms. If there are lots of people vying for the same space and your Atlanta restaurant brokers submits the best package on your behalf, you’ll win out. Weak credit or insufficient cash positions can be overcome in multiple ways. A strong Atlanta restaurant broker can offer you suggestions to overcome or secure the landlord’s risk on these elements.
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 and wesellrestaurants.com an online resource for buying and selling restaurants in Atlanta, Georgia and across the southeast.
To learn more about buying or leasing Atlanta restaurants CLICK HERE
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