Lease negotiation and landlord proposal

supergirl

New member
Apr 17, 2007
3
0
Hi Everyone,
I am in the process of opening a coffee bar and am slowly narrowing down options for locations. I have found a couple that I am interested in. As the lease negotiation gets underway, I am wondering what the prospective landlord will want from me. I am planning to put together a proposal inlcuding the following elements: the basic concept description, copy of planned menu, renderings of interior done by my architect specific to site, a general description of how my business will add value to the site and what our competetive edge will be.
I''m wondering if I will be required to present information on financial projections. I have of course completed these, but I''m not sure if it is customary to present this to the landlord? Anything else that I should provide that I have not mentioned?
Thanks in advance for all of your help!
 

John P

New member
Jan 5, 2007
1,045
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Salt Lake City
First, and most important: They are not choosing you, you are choosing them. Let them know that others are interested as well, but you are exploring all options to find the best fit.

Have all your info, including financials, formatted well in a nice binder. They are there for the landlord to see you've done your homework. It is for them to see while you are there, but not for them to keep. After you get them to say a little about what they can offer you, I would then hit on how you can add value to his location, why you are unique, and your business experience.

Oh... very important point. Make sure YOU end the meeting -- you have another appointment scheduled at XX O'Clock. It serves as a good psychological negotiating. If you scheduled 1/2 hour, make it twenty minutes, that sort of thing. If they see you have all kinds of time on your hand, then they know THEY are your only option and will use that to their advantage. And if you don't yet have multiple locations... please find some... even if it is only for negotiating purposes (landlord A vs. landlord B).

Good Luck!
 

dant

New member
Feb 13, 2006
25
0
Philadelphia, PA
I don't see what the point is of playing games like pretending you have another appointment. If you're looking at other options tell em that you're looking at other options.

If you are unsure what the landlord would like to see I would simply ask him or her. They will be more interested in your proposed use than your financials. Besides, wouldn't you want to low-ball your projected sales so you can argue for cheaper rent? Even if you don't the landlord may suspect that you are doing so in which case you will have backed yourself into a corner. Either way the landlord has a price per square foot they will be looking to get--it is up to them to convince you that you should pay what they are asking. (as a rule of thumb you'd like to pay rent that equals 3-4 days of sales, assuming you're open every day)

You will be taken seriously and create a good impression by asking good questions and simply knowing what you are talking about.

Something else to consider as you look at locations and talk with landlords: Although this will be a business relationship based on numbers, it is also important to consider whether the landlord seems like someone you would like to partner with. It's important to get all agreements down on paper with a good lease but you also want to be able to trust that your landlord will do you right. A good relationship with your landlord will be mutually benificial.

-Dan
 

John P

New member
Jan 5, 2007
1,045
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Salt Lake City
Unfortunately, negotioation is both a "game" and an art.

Point is, whoever ends the meeting controls the meeting. If you have to create a reason to end it--fine. But if you let the meeting run its entirety, or you let the other party (landlord or agent) end the meeting, then you have placed yourself in the weaker position from day one. This would not be a smart move.

Proper negotiating involves a lot of psychology. These agents are pros and will feed you one line of bs after another in order to control the meeting, control the direction of the negotiation, etc.

They need to be excited about leasing the space to YOU, not just leasing the space. If you don't learn to read the difference quickly, it will sooner or later, impact your entire business. So, yes, there may be need for gameplaying... or a need to be more agressive in your search from time to time. Negotiate to win at all levels, even if winning means walking away.
 

mtapp

New member
May 7, 2007
7
0
Texas
Attorney and free rent

By all means, have an attorney look at the lease! Almost every lease is pro-landlord. It may cost you as much as $1,000, but you may save much more....learned from experience. Also, it is not unusual to ask and recieve 2 -3 months free rent on the front side, particularly if the space has been vacant for a while.
 

John P

New member
Jan 5, 2007
1,045
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Salt Lake City
Excellent points mtapp!

Also note that "fixturing period/buildout" is not free rent. The build out period is rent free, usually 60-90 days and any free rent would not begin until after that period (your occupancy period). And YOUR fixturing period should not begin until after any landlord work has been done, and space has been delivered to you as (at least) vanilla shell--plus whatever extra you have negotiated (flooring, electrical, plumbing, bathrooms, etc.)
 

Joshudavid

New member
Mar 16, 2007
11
0
I definetely agree with you John. It would be great if negotiating was a simple, straight forward manner, but it really comes down to who is better at it.
 

dant

New member
Feb 13, 2006
25
0
Philadelphia, PA
I agree that negotiating is an art. This is why I would be a little reluctant to present your financials to your potential landlord. You need to be honest and straightforward yet there is no reason to disclose everything.

I guess I'm suggesting that you operate from a mindset in which you are the one in charge; you are the employer interviewing a potential employee (ie a potential landlord) and not the reverse. To me, pretending that you have another meeting actually indicates a mindset of uncertainty.

In the end the negotiation boils down to how much money are you going to pay and what are you going to get. The art of the negotiation is slicing it in such a way that the deal works well for you.
 

Joshudavid

New member
Mar 16, 2007
11
0
Good points all around. Here is one of the first and foremost tactics that I definetely would keep in mind: Do EVERYTHING in your power to get them to throw out the first figure. Then, be ready to talk. Go in knowing what you want, but get them to speak first. They will probably throw out a number that is 20-40% higher than what they are willing to take, but you have to be the judge of that. If you can get them talking about anything but business and keep a conversation going until they are your best friend, they might just admit something to you they were holding out on.
 
supergirl,

John P. is right! Negotiating is an art not just a science.

You are entering into this lease negotiation with two possible weak points: 1) This is your first lease and you are in uncharted territory, and 2) You are female and may not be heavily skilled in the art of negotiation with men.

You sound like you have your ducks in a row and are ready with all the right information, but that is only one half of the presentation. Both of John P.'s ideas will present you and your business as a viable prospect to the prospective lease-holder.

Having your financials for him to look at, professionally prepared, is a good idea. He will not remember much from looking at them, but he will appreciate the fact that you have done the most important part of your business planning! Numbers are a big part of what will matter the most to him. If you were a franchise looking for a lease, he would be able to rely on the reputation of the backing company. But if you are a local company he will be most concerned about your long-term viability (which translates into dollar figures!)

Also, you should be the one to bring the meeting to a close. You do not have to have a specific reason, and actually, not offering one would be better. After you have presented your facts and dicussions are winding down, start gathering your things with a closing statement like "Thank you for your time. I will get back to you as soon as I have had a chance to look over your figures." Something like that! You do not want to appear like you are "man-handling" him, but be professional and end YOUR meeting with him!

And two other points raised are also very important: 1) You really should like the landlord well enough to do business with him as you will have to work with him for a long time, and 2) He MUST make the first offer.

Good luck with all!

Cheryl Ann
 

John P

New member
Jan 5, 2007
1,045
0
Salt Lake City
Showing financials shows that you are viable---able to prepare a proper business plan. If you can't meet that minimum, you're not fit to run a business, let alone lease from said landlord.

Not showing financials is an indication you have no financials, you don't understand the true costs of operating your business, and you haven't done the necessary work to prepare you for success.

It's best to work with realistic projections than industry standard projections as well. Depending on location your costs will change and your numbers should change accordingly as you meet each landlord--this is as much/more for yourself than them. The ability to adjust and understand that location A vs. location B will have different heating/electrical costs, different traffic flow, perhaps different number of employees, etc is what will be the difference in creating something lasting or never being remembered. Excellence has to be in all phases of the business, and neglecting the planning, negotiating stages is just inching you closer towards the path of DOOM!!!! :D
 

dant

New member
Feb 13, 2006
25
0
Philadelphia, PA
I realize that we are kind of splitting hairs here and that we basically agree on most points.

However, I would be very reluctant to share any projected sales numbers as I am negotiating a lease. Obviously this is an important internal consideration as you think about how much rent you can afford to pay. But, unless you completely lowball your sales projections, giving a potential landlord this information during the a negotiation on rent weakens your bargaining position. With this knowledge, if the landlord has any knowledge of the restaurant business, he/she will base the rent on your numbers rather than the local market or what the landlord needs to meet his or her obligations.

DO show your architect's rendition of what the space will look like and what you anticipate to be the startup costs--especially your projected buildout and equipment costs. The buildout costs are a great bargaining chip in the negotiations as this is basically an investment you are making to improve the landlord's space. This kind of presentation will get you taken seriously.
 

Joshudavid

New member
Mar 16, 2007
11
0
also try to get the landlord drunk first and maybe drug them and just use their limp hand to sign whatever contracts youd like
 

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