While many franchisees plan for economic downturns,...
Readers of our book, Negotiating Commercial Leases &
Renewals FOR DUMMIES will learn, in-part, that there is much
more to commercial leasing than meets the eye! Before you even
think of searching for commercial property to lease for your first
franchised business or another location to expand your operations,
consider the following tips to help you get a better lease
Negotiate to Win: Negotiating to win must be
the tenant’s goal. Why? Because that’s the goal of the landlord,
the landlord’s property agents, and the landlord’s real estate
agents. The landlord is not necessarily looking for a “win-win”
leasing deal. Remember, a typical landlord charges the tenants as
much rent as possible and who would expect anything less?
Consider these points when negotiating to win: lowest possible
rental rate, largest tenant allowance, lowest deposit, and most
signage and best parking.
Negotiate all Lease Terms at Once: Don’t look
at your lease as a list of individual points that must be
negotiated separately. All those business terms are connected and
must be negotiated collectively. For example, don’t agree to the
rental rate until you’ve agreed to the length of the lease
Don’t Telegraph Your Intentions or Give Buying
Signals: A good football quarterback can take the snap
from centre, fake the handoff to his running back, and then pass
the ball to an open receiver – all without telegraphing his called
play. As a tenant moving in or looking for another franchised
location, try not to speak in terms such as, “When I move in …” or
“I would like the carpet replaced …”. These are called buying
signals and they always serve to weaken your bargaining position.
Don’t let what you say and the words you choose work against
Assume Nothing and Get It In Writing: Tenants
make all kinds of assumptions regarding their leases – sometimes
blindly or because of poor negotiations with the landlord or their
real estate agent. Unless a point appears in writing on the
accepted lease, don’t assume it’s part of the deal.
Protect Yourself by Incorporating: Regrettably,
franchised businesses can – and do – fail. Incorporating can
protect you. Remember that if you allow the landlord to put your
personal name on the lease as the tenant (or even the letter of
intent or offer to lease), then you will become personally
responsible for rent payments and all other terms of the lease
agreement. If you make the tenant a corporation, then generally the
tenant corporation is on the hook and not you, personally.
Change the Day Your Rent is Due: For many small business owners, the end of the month is not a pleasant time. Staff payroll and rent are due and loan payments may need to be made. Sometimes having even a few days’ grace to make the monthly rent payment can make a world of difference if your business has decent cash flow. By negotiating to change the day your rent is due (perhaps the fifth or tenth day of the month) with your landlord, you can breathe a little easier at month’s end. Approaching your landlord or property manager and explaining this are your first steps. Many landlords will understand your predicament and may grant your request – even if you’re in the middle of a lease term. If the landlord agrees, make sure your get a proper one-page lease-amending agreement which will state this agreement – or an e-mail acceptance, at the very minimum.
For a complimentary copy of our CD, Leasing Do’s & Don’ts for Franchisee Tenants, please e-mail JeffGrandfield@TheLeaseCoach.com.
Dale Willerton and Jeff Grandfield - The Lease Coach are Commercial Lease Consultants who ; while work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com