7 Tips for Negotiating a Restaurant Lease

By Rachel Argyle

When looking at leasing a restaurant space, it's important to know your rights and not rush into any decisions. Here are some tips when negotiating a lease:

1.) If a premises has been vacant for a while and in this slow economic current climate, it may be possible to negotiate a lower monthly rent payment. Examples include

  • getting the first couple of months' start-up for free
  • not paying until the restaurant opens for business
  • or pro-rating rent so that it is very low rent for the first year of the lease but it increases thereafter (though be careful not to entrap yourself in an expensive lease because you back loaded the payments.)

2.) During the negotiation stages, ensure that the space is checked thoroughly and passes various inspections (fire safety, health inspector checks, etc.) and detail any items of disrepair before you move in. If any alterations or repairs are necessary, discuss with the landlord which repairs he is willing to foot the bill for. As a general rule, if any repairs will 'stay with the building' after you have left, such as plumbing work, it should be the landlord's responsibility to pay for these or to deduct the costs from your rent.

3.) Ensure that any agreements made with your landlord about paying for repairs are put into writing.

4.) Consider building in the following clauses to your lease agreement to protect your business. Possible add-on clauses include:

  • sublease (to allow you to sublet the space to another business if necessary).
  • a break clause. (allows you to end a lease early if necessary).
  • co-tenancy (if the landlord has an anchor tenant, this clause allows you to break the lease if this tenant is not replaced by a certain time).
  • exclusivity (to prevent your landlord leasing any other of his premises in the same location or complex to your direct competitors).

5.) Ask that the lease be put in the name of your corporation and not your name personally.

6.) It is not standard practice to pay for the landlords legal costs, so make sure you do not offer to do this during the negotiation phase.

7.) It is important to investigate the consequences of defaulting on lease payments. Find out how the landlord would react (e.g. will they lock the premises immediately or begin eviction proceedings?)

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