Top Five Things to Know About Commercial Lease Negotiations

The more you know, the greater potential you have to maximize your leverage and secure the best rate possible

SPONSOREDUpdated 3:15PM • 03/31/16

Knowledge is power, so they say, and it’s just as true in commercial lease negotiation as anywhere else. Landlords deal with leases all day long – they have the knowledge. Many new franchisees are unskilled in what and how to negotiate leases. But that lack of knowledge can come back to haunt you and could be the difference in thousands of dollars a month or more.

Roll up your sleeves and get informed as 1851 digs into the Top Five Things to Consider During Lease Negotiations. And remember – everything is negotiable.

Do your due diligence

Part of the franchising process that can often be overlooked is your homework. According to MOOYAH Burgers Fries & Shakes Director of Development Ardag Tachian, knowing whom you’re working with is one of the most important things. Do as much homework as you can and know as much about your representation as your landlord.

“It’s very important to have competent, experienced representation by a broker who specializes in the specific segment of your business and represents mostly tenants versus landlords.”

Tachian went on to say that ICSC.org is a website for the international council of shopping centers which is designed for real estate professionals but also has resources and information about local educational events. This can be used as a good starting point.

Don’t go at it alone

Commercial lease negotiations can be complex and it’s always easier to go about difficult situations with a partner. A brand that really looks to take care of their franchisees through this step of the process is Palm Beach Vapors.

“Once a franchisee has chosen a new location with Palm Beach Vapors we step in and help them with the process,” said Bonnie Goins, Director of Sales for Palm Beach Vapors.

Understand the total cost

One of the important costs to consider and understand is triple net (NNN) fees. These common commercial lease types state that the lessee is responsible for all of the costs relating to the space in addition to the rent fee applied under the lease. Tenants are generally required to pay net real estate taxes, net building insurance and net common area maintenance.

Tachian advises to “get a breakdown of the NNN charges and ask what portions of those fees go to administrative costs.”

“Everyone charges them and they’re different for different spaces,” said Goins. “Many times they cover maintenance costs you might not initially think of. For example, in colder states, franchisees are likely to have to pay for things like snow removal which can be extremely expensive.”

Education is key

“Educate the landlord about your specific business and how it would benefit the landlord to have your business located in his/her center,” said Tachian.

Landlords want businesses that they know will be successful. When businesses win, they win. So educate them on how beneficial your business is for them and why you’re going to be successful there.

Form a relationship

“Get to know your landlord and let them get to know you as a franchisee/tenant,” said Goins. “You want to make sure it’s a good fit from a relationship standpoint in order to build trust and have a successful partnership.”

Just like education of the business is important, education of the tenant is just as important. Landlords want to know the people behind the business they are letting into their space and franchisees should want to know who they are leasing from.

Top Five Things to Know About Commercial Lease Negotiations

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