Negotiating leases

Negotiating Leases

You did it! You were awarded a great franchise and are gung-ho looking for a place to collect revenue. Strategically negotiating that lease is as important as the physical address. Site selection is key to a successful and profitable business, but overpaying for the perfect site will bring you nothing but headaches later. Many franchisors include site selection and negotiation of the lease with the franchise package. Unless you are a seasoned lease negotiator and familiar with the current and local trends, hire help as this is NOT the time to be thrifty.

Negotiate, negotiate, negotiate! Tenant improvements are a big-ticket item. Those handicapped accessible restrooms, drop ceiling, flooring, upgraded HVAC and double door entry become permanent fixtures in the landlord’s property for eternity. There is no sense in you paying for every dime of this expense.

Did I hear free rent? It is commonplace for a few months of free rent to be included in any lease. Estimate a timeline for hiring a contractor, submitting plans, receiving a building permit, taking possession of equipment, installing said equipment and inspections. Ask for twice that time in free rent. You want to assure you are collecting revenue before you start paying it out.

Negotiate additional option(s) in your lease. Then you secure a place to conduct your business. The franchisor and your lender will need that documentation as well. Many commercial leases are triple net leases where you pay taxes, insurance and CAM (common area maintenance) in addition to rent. These numbers add up quickly, so take your time and negotiate your best rent now! Unless you simply need four walls and parking, relocation can be a huge (although sometimes necessary) expense. Unless available property is in extremely short supply, you can always walk away if you cannot come to mutual terms. Take the time to negotiate your best lease now and put more of your revenues to the bottom line later.

Julie Kreider is a franchise consultant who is expert in hiring, training, site selection, lease negotiations and marketing. She knows all about the day-to-day requirements of being a franchisee. You can reach her at 540-645-0915 or Julie@TheFranchiseConsultingCompany.