Leasing the right restaurant space is one of the most critical decisions for any aspiring restaurateur. The location, terms, and conditions of your restaurant lease will have a direct impact on your business’s success. Whether you're opening your first restaurant or expanding your business, it’s important to know how to navigate the process effectively.
One of our key specialties at Savory Hospitality is restaurant space evaluation for both new build outs and existing revamps. We understand the functional demands of running a restaurant, as well as the financial impact both positive and negative of a lease and its location. That’s where our team members, including experts like leasing consultant Diana Brandes and our founder at Salar Sheik, come in to help clients make informed decisions that will influence their business success and growth in the hospitality sector.
If you’re interested in exploring leasing restaurant spaces with the support of our consulting services, please don’t hesitate to reach out.
Here’s a step-by-step guide on how to lease a restaurant space.
1. Define Your Restaurant's Needs
Before you start searching for a space, clearly define what you're looking for in a restaurant location. Consider the following factors:
Size: How many square feet do you need to comfortably fit your kitchen, dining area, and storage?
Location: Do you need a high-traffic area, or would a more niche neighborhood work better for your concept?
Budget: What’s your monthly budget for rent, and how much can you spend on build-outs or improvements?
Amenities: Does the location need to have specific features like outdoor seating, a liquor license, or parking availability?
Permits: Understand what permits you need for the space and or your needs.
By having a clear vision, you’ll save time and avoid considering spaces that don’t fit your restaurant's goals.
2. Understand the Local Market
Research the local restaurant market where you plan to lease. Look at:
Competition: Are there similar restaurants nearby? How saturated is the market for your cuisine?
Customer Demographics: Does the area attract your target customer base? Understanding the foot traffic and surrounding businesses will help gauge potential customer volume.
Neighborhood Growth: Is the area experiencing growth, or is it in decline? Growing areas can bring long-term benefits to your business.
Understanding the local restaurant market helps you negotiate better lease terms and find a location that gives you a competitive advantage.
3. Find a Real Estate Professional Specializing in Restaurant Leases
Working with a real estate agent or broker who specializes in restaurant leases can make a huge difference. They’ll have a deeper understanding of restaurant-specific requirements, such as grease traps, ventilation, and zoning regulations, which are essential for running a restaurant.
A real estate professional can also help you negotiate favorable lease terms and ensure you're not overlooking key clauses in your contract.
4. Evaluate the Lease Terms
When reviewing a restaurant lease, there are several important factors to consider:
Rent: Is the rent within your budget, and does it reflect the market value of the space?
Lease Length: Typically, leases are 5 to 10 years. Consider your long-term goals and whether you want a shorter or longer lease.
Rent Increases: Many leases include annual rent increases or percentage rent (based on your sales). Make sure you understand these terms and how they’ll affect your bottom line.
Triple Net Lease (NNN): Be aware if the lease is a triple net lease, meaning you’ll be responsible for additional costs like property taxes, insurance, and maintenance.
Build-Out Costs: Some spaces will require you to invest in build-outs to meet health and safety codes. Clarify who will be responsible for these costs – the landlord or the tenant.
Permits and Licenses: Make sure the space is zoned for a restaurant and that it meets local health and safety regulations. Confirm whether you need to apply for any special permits, such as a liquor license, and whether the landlord will help facilitate this process.
5. Negotiate Key Clauses
Restaurant lease negotiations can involve several important clauses:
Exclusive Use Clause: This clause prevents the landlord from leasing other spaces in the building to a direct competitor. It can protect your business from unnecessary competition.
Escape Clause:Also called a "break clause," this allows you to exit the lease under certain conditions, such as a lack of foot traffic or failure to meet certain revenue goals.
Tenant Improvement Allowance (TIA/TI): Some landlords offer a Tenant Improvement Allowance, which helps cover the cost of renovations or build-outs needed to transform the space into a functioning restaurant.
Negotiating these clauses can save you money and help ensure your restaurant’s long-term success.
6. Inspect the Space Thoroughly
Before signing a restaurant lease, inspect the space carefully. Check the condition of the kitchen, plumbing, electrical systems, and HVAC. Confirm that the space can accommodate your equipment and meets health and safety codes. If necessary, bring in an inspector or contractor to ensure the space is up to code and identify any potential issues before you commit.
7. Sign the Lease and Prepare for Opening
Once you've reviewed all the terms and ensured the space is right for your restaurant, it’s time to sign the lease. After that, you'll need to begin the build-out process, get necessary permits, and prepare your restaurant for opening day.
Conclusion
Leasing a restaurant space requires careful planning, thorough market research, and a solid understanding of lease terms. By following these steps and working with professionals, you’ll increase your chances of securing the perfect location for your restaurant. The right lease can set the foundation for a successful business, while a poorly negotiated lease can lead to costly problems down the road.
With the right strategy in place, your restaurant lease can be the first step toward long-term success in the highly competitive restaurant industry. -Salar Sheik
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