So you’ve started the whole process of opening a restaurant. You’ve gotten the funding that you’ll need to get started with equipment and a property, so that is where you stand. It’s time to choose a location. This can be a pivotal decision when it comes to your business, not only because of having a location great for foot traffic and business, but also because it will determine the costs of your overhead. An expensive spot on main street or a cheap location in a bad area will limit who will actually come through the door. So, there is a lot to consider that can seem overwhelming.

Here we’ll look at what you should be considering and you’ll be more at ease for the better afterwards.

Leasing vs. Buying A Restaurant

Buying may be what you think is the best choice, but for a burgeoning restaurant startup, there are too many unknowns to make this a smart decision from the start.

Buying a building or specific space only pays off when staying in the same location for 7 years, and that is only if your restaurant is a success. What if you’re so successful that you want to move to a better location? Your firmly bought location could actually be limiting and troublesome. If your business is so successful you’ve outgrown your location, that is a good thing.

So, bottom line, new restaurants should lease.

Other Options?

Not everyone is ready to open its doors literally and there are some other choices to consider if you’re one of those:

Food Trucks – great for mobile restaurants that move their location, so instead of looking at properties you should be looking at food trucks.

Building New – you can buy land and build a new place all together. It costs more, but allows you to build everything to your specific requirements or designs.

Existing Space – have a commercial space or looking to add a restaurant or food service variety to your current business? Use that space.

Leasing Your Restaurant

This will be the most suitable option for most restaurant startups. There are different types of leases and some may be better than others, so let’s look at the options.

Gross Or Flat Lease

This is a monthly fixed cost lease that you pay the same amount each month. Landlords do not pay any utilities, maintenance fees, or operating costs. The costs are included within the final monthly pricing of the restaurant. This protects you from any costs that would be unexpected, like increases in energy costs through the winter.

Net Leases

These leases have a lower flat monthly cost but the business is then expected to cover other costs out of pocket. Property taxes, utilities, insurance, and janitorial services are just some of the costs not covered in this variety of lease. Be sure you are discussing the specific fiscal responsibilities of your lease before signing anything so that you know exactly what you are or not paying for.

Negotiating Your Lease

Not all leases are cookie cutter and almost never do two leases look identically the same. When you’ve got your location and building chosen, you’ll have to meet with the property owner or specific landlord along with your lawyers and theirs to draw up a contract.

Because it is a negotiation, there is some different ways to make adjustments and negotiate. Be sure you have questions already in mind and ready to go, the same with your lawyer.

Questions To Ask:

How long is the terms of the lease in years?

Remember that shorter leases come up for re-negotiation faster and also leave you the option of leaving to a new location more quickly if needed. Longer terms will mean a better rate down the line and you can really establish your business in one location and/or community.

Is there any annual changes to the costs?

If yes how much can rent raise year to year? Don’t move forward without this being written into the contract, specifically saying how and if the rent can be raised.

What are costs or additional fees for renovations? Who pays for the renovations?

Are subleases possible on this lease if you are forced to or need to change locations?

What are other legal obligations of this property?

When can the lease be re-negotiated?

The right location and commercial space can be something that is difficult to find. Remember the types of leases and negotiation tactics that need to be kept in mind throughout this entire process. Hire a reputable and trustworthy lawyer who knows property law and has been doing these sort of restaurant and business property leases for a long time. Ask questions, get answers, and get your restaurant off the ground and running.

After you get the least, don’t forget Restaurant Menus, they are equally as important to building your business.

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