Biz-help, Guidance

Small Business Space Rent-how to negotiate terms

Before looking at food-biz operational premises to lease, have an understanding of your space requirement, location and small business space rent expectation. Use the scenarios below to help you establish your size requirement.

Types of food businesses you may be considering

1. Take Away Biz 

  • Kitchen(prep equipment – cooking vessels – prep-area – packing area – dry goods storage – walk-in chiller & freezer or other – packaging materials – cleaning and chemicals storage – waste).
  • Counter – (ordering area & till – waiting area – finished orders – admin area)
  • Facilities – (Rest-rooms – locker room – waste disposal)

2. Restaurant – (All the above plus seating – bar – office – customer restrooms)
3. Manufacturing – (most of the obvious considerations above & blast chilling facility)
4. Catering – (most of the obvious considerations above & heat retention equipment, ie; hot cupboards)


Finding suitable properties

When you have an idea of the required space for your operation and have worked out the small business space rent you want to pay, the next thing is to consider the location. The location is vital for certain types of food businesses that are heavily reliant upon constant footfall but not so important for some other types of food operations. Whichever category you fall into, make sure you are comfortable with any commuting to and from your business. This will be one of the key factors in ensuring the efficient running of your operation. 

Once you know the exact space required for your operation, ask yourself if the lease costs fit within your planned budget. It’s important to ensure the premises can accommodate your needs without putting strain on your finances.

Another important aspect you should be aware of and act upon is to ensure you measure the square footage of the space as this is often different to what’s on the lease. This can be due to alterations made by previous tenants and also because some common areas are included. Either way, this could end up costing you since you are charged by square footage.


Tips for Negotiating lease

Here are some helpful tips for negotiating small business space lease agreements.

  • Before going into negotiation with any landlord, give yourself leverage by having more than one property you could select from as this will put you in greater control when negotiating.
  • When you have found your ideal premises, it’s advisable to use a professional service to comb through the lease to identify potentially unfavourable clauses and to renegotiate workable terms.
  • If you are planning on renting a shared multi-site or complex, ensure you write into the clause that no competitors will be given a lease within the site during your term.
  • When negotiating commercial lease agreements, discuss the option to increase the length of the lease and ask how much the rental would come down in proportion. Once you have an idea on how much rent can reduce for a longer lease, you are now in a stronger position.
    As a guide, negotiate a reduction of around 20% of the asking rent and there is a good chance you will get a deal which will be between 10 & 20% better.
  • Do everything in your power to avoid giving personal guarantees as this is often the biggest issue to overcome should the business face difficulties. Many landlords insist on personal guarantee but you may be able to overcome this by offering a small increase in the rent. Don’t discuss this point till you reached a decision on the discount above.
  • Don’t hold back from asking for rent-free periods as this is now considered the norm and landlords prefer this to offer of lower rent to protect the value of future rent.
  • Ensure subleasing options without penalties are written into the clause which will allow you to move in the eventuality of unforeseen circumstances.
  • Early termination break-clause and notice periods are subjects that should be seriously considered when negotiating.
  • Include extent of penalties for breach of contract on the lease. This should set out an acceptable time to remedy the situation whether it’s rent or maintenance.
  • Don’t get caught out by notice periods stipulated prior to lease expiry. The small prints could tie you into a new term which would then be hard to untie and could prove costly.
  • Ensure temporary internal structural changes from previous tenants are reflected on the lease or you could end up paying to bring it back to shell when the lease expires. This is not a problem if you are leasing the premises as a shell and then returning back as given.
  • Full repairing lease should not be for structural defects. It might be an idea to work out the value of heating equipment’s and air-con and then agree on depreciating costs on a yearly basis to fulfil your part to put things right should things go wrong and any additional to be covered by the landlord.
  • Establish the number of parking spaces allocated for your unit and ensure it’s on the lease.
  • Bring about clarity on Service charges and ground rent. Service charges in particular, can be a worrying surprise which could cost you substantially for little or no benefit.
  • Ask about current insurance costs to help you assess your own insurance needs and research in detail to ensure you put in place the right policy that meets your specific business and premises requirement. Discussing this topic will give confidence to the landlord about you being the right tenant, and hopefully help in securing a favourable lease.

 Summary

Don’t be in a haste to find location and ensure you do some thorough fact-finding. 

Know exactly what you want and ensure you stay within your budget for rent.

Use professional services of agents, surveyors and solicitors to validate lease terms and to ensure future risks are minimal.

Give serious consideration to service charges and ask for copies of previous years bills so that you know what to expect.

Hope all the above is helpful and I look forward to seeing you soon.

www.fooddadi.com

Leave a Comment

Your email address will not be published. Required fields are marked *

*