Special concerns with restaurant leases

On Behalf of | Aug 31, 2018 | Blog

Restaurants are a unique type of business — and you can’t afford to make mistakes when you negotiate your commercial lease. Otherwise, you could be stuck with terms that make it impossible for you to do good business.

The most important rule for any lease negotiation is to have your objectives in mind before you start. Here are some of the most important considerations for any restaurant lease:

A liquor license contingency

You may have more trouble than you think obtaining a liquor license — and you usually can’t start the process until the lease is in place. Make sure that there’s a contingency that allows you to back out if the license doesn’t come through in a set period of time.

A gross sale termination clause

This allows you — and the landlord — an escape plan if the restaurant doesn’t turn out to be a success. It’s usually mutually beneficial if an under-performing restaurant is allowed to close if the gross sales don’t meet a negotiated amount.

A sublease agreement

You want to make certain that if you need to sublease the property to someone else that the landlord can’t put unreasonable conditions on the process or limit you in an undue way.

The right of exclusive use

Exclusive use limits the landlord’s ability to rent to another tenant that would be in direct competition with you. For example, you wouldn’t want a pizza place to go into business right next to your Italian restaurant. This clause should also spell out what remedy you have if the landlord violates the agreement.

A premises delivery date

You can’t afford to lose your market position or sit around with a “coming soon” sign up while a landlord takes his or her time evicting a former tenant. A clause that ensures a date of delivery can help you back out of a lease that isn’t coming through in a timely fashion.

Because commercial tenants aren’t afforded the same protections as residential tenants, it’s important to exercise an abundance of caution when you negotiate a commercial lease.