Small Business Brief

Restaurant

3 Secrets to Negotiating a Restaurant Lease That Benefits You


The restaurant industry is going through a lot right now. Between 5 million and 7 million restaurant workers will lose their jobs because of the coronavirus pandemic.

The restaurant industry will survive, but it’s going to look different. Restaurant investors will need to prepare themselves now so they can hit the ground running once the pandemic passes. 

It all starts with a restaurant lease agreement. If you don’t sign a deal that works for you, then you may not be around for long regardless of current events.

Do you want to know how to negotiate lease deals? Keep reading for three tips. 

1. Use Your Leverage (If You Have It)

Recognizing when you have leverage is vital when discussing restaurant rental rates. Chances are, a lot of restaurants will go under in the next few months.

That could mean landlords are eager to get new tenants into buildings. That may mean you can ask for more than you would normally.

You can use your leverage without being ruthless or vicious. But if the area has a lot of vacant lots, it could make sense to negotiate a short-term lease at first.

Potential landlords may want you to sign a five-year deal right away. Be careful about making a major commitment right off the bat. 

What if you’re looking at renting space in the hottest building in town? In that case, you won’t have as much bargaining room. You can still negotiate, but you should also get ready to walk away if the price hits a certain point. 

2. Know the Area and Your Landlord

Not every restaurant owner can start a business in the same zip code where they grew up. If you just moved to the area a year or two ago, then it’s time to do some research.

A real estate agency can be an invaluable resource here. Companies like Compass Real Estate won’t make recommendations based on vibes or feelings. Instead, they’ll use market research. 

Opening a restaurant is already a leap of faith. Before you lease a restaurant space, you need hard data about the market you’re entering. 

Real estate agencies will also have experience with local landlords. They’ll know which ones are the most likely to be fair and helpful. 

3. Don’t Get Carried Away

You should believe in your vision. But that doesn’t mean you should indulge in a fantasy.

If you want to open a breakfast cafe in your neighborhood, that’s great. But be realistic about what kind of money you can bring in, especially in the first year. 

A tiny breakfast place with limited seating can succeed, but don’t project $100,000 worth of breakfast sales by your third month. 

In other words, don’t pay restaurant rental rates that you can’t afford based on sales that will almost certainly never materialize. It’s not fair to you, and it’s also not fair to your landlord. 

Going Beyond a Restaurant Lease Agreement

These are scary times for anyone thinking of signing a restaurant lease agreement. But eventually, people will be ready to eat out again. They’ll be eager to get out of the house and enjoy a meal with loved ones.

We’re here to help small business owners through whatever happens next. Bookmark our website for articles that will help you stay informed! 



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