Leasing property in a major market 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. Once the landlord has a package, he will meet with the proposed tenant and generally not before. The best spaces move quickly and often 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 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 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 a 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 broker 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 restaurant broker can offer you suggestions to overcome or secure the landlord’s risk on these elements.