A good restaurant lease is imperative for any business. More so for the restaurant business, it is a lifeblood of the business without the lease. There's really no business. Let's discuss this right now. Okay. You've just narrowed down to two or three sites and you're in the process of negotiating with the landlords.
[00:00:22] What do you do now? What do you look for? What do you negotiate with? Okay. Firstly, When it comes to restaurants and cafes with that matter, normally most people stay there for two, three years. On average, some might stay for 20, some might stay for one, depending on the circumstances. So taking into the average, say three year mark.
[00:00:47] Con: After three years, you need to have enough lease left over so that the next person can pay a decent price for your goodwill. And have a long lease so that they can [00:01:00] repay the, the price for the restaurant or the Goodwill and make a profit, and then look at negotiating a new lease down the track when they decide to move on as well too.
[00:01:12] So what do you ask for, what do you look for the essential components? Okay. The number one thing is obviously the, the price. What is the lease? Some landlords just pulled numbers out of the sky, but you need to be sure of what is a fair rent when you compare a price or the lease cost of a certain area, your restaurant that matter it is similar or should be similar to a similar area in the same location.
[00:01:46] If it. So if for example, the other property leased is similar position size, et cetera. And it's a bike shop or a [00:02:00] clothing store or some other purpose. There's no real reason why you should be paying a premium on top of that, unless there's some equipment comes with it or something different, but basically the got the same aspect, same size.
[00:02:15] Pretty similar. They should be similar rents. So you've got to do research. What, who, what is everyone else paying in the area then you've got to discuss incentives. Are you getting rent free period? Is your landlord contributing to the cost for your fitout? What are the increases? Are they fair? Are they the going rate in the current climate?
[00:02:43] You know, that three, 4% increase a year. If you are at the moment or they are some combination of CPI plus increases, have you got a sufficient option, period? Is it a straight out increase [00:03:00] or does it go to market value?
[00:03:01] A lot of leases, especially the retail leases. They ever got laws, certain laws. Now with retail leases, you, you can only have one or the other, either a set increase or a market increase option. You can't have both increases on a year to year annual increase. So when you get to your option period, Popular way is market value.
[00:03:32] Now this is a, each way bet the landlords and probably anticipating a surge of, popularity in the area and a surge of prices. And there could be a substantial jump.
[00:03:46] It doesn't always go that way. It can also work against them. It comes to the lease period option period. You may even prove to the landlord that the rents have gone down. So your rent may [00:04:00] actually go down. So work out whether this option is the best option for you or go for the straight increases like you have for the duration of the lease.
[00:04:13] So. They're the basic components. Now you have to ensure that you have to have a well qualified experience, lawyer who understands the way restaurant leases work to ensure that, that they can help you in the process. And more importantly, a good coach or an experience. Person in the industry to guide you along the whole process, to make sure that everything has been followed through and guide you to the next stage of opening a restaurant and make a success of it.
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