If you’re considering leasing restaurant space, it’s essential to know what to look for in a lease and how to negotiate a good deal.
In today’s restaurant market, competition is fierce, and there are many more restaurants than there were 10 or 20 years ago. That means many people want the same type of space for their businesses. If you’re looking for commercial real estate for your restaurant, you may find yourself in a bidding war with other restaurateurs.
But if you do your homework before going into negotiations and know what questions to ask, you’ll have an advantage over other bidders who don’t know how to negotiate effectively. And that can save you a lot of money on rent, utilities, and other operating expenses.
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How Much Does It Cost to Rent a Restaurant Space?
Most restaurants lease space for their establishment. This can be an excellent option for a new business, especially if you plan on expanding.
The cost of renting a restaurant depends on many factors, including:
Location. The location of your restaurant is key to determining how much it costs to rent a space. If you’re opening up shop in an upscale neighborhood, expect to pay more than if you open up in an industrial area with lower rents.
Size. The size of your restaurant space will also impact its cost. A smaller space will be less expensive than a larger one with more seating capacity. However, if you have more room to grow as your business grows over time, this could be an advantage for you.
The type of restaurant you choose. The kind of foodservice customers expect from your establishment will also impact how much it costs to rent a restaurant space. For example, suppose most people come into your restaurant expecting a sit-down experience that includes full table service. In that case, you’ll need more room than if they come in expecting takeout or delivery service only.
How to Rent a Restaurant Space
Renting a restaurant space is a great way to start up your own restaurant business. You can rent an area that has been established and proven successful, or you can purchase a building for the sole purpose of opening your restaurant.
Renting is usually less expensive than buying because you have no financial responsibilities associated with owning a building, such as paying taxes and maintenance costs. Here are a few tips on how to rent a restaurant space.
Set a Realistic Budget (And Stick To It)
When starting a business, it’s essential to set a realistic budget. If you’re renting a restaurant space, you’ll need to know how much the rent will be and how much money you’ll spend on furniture and other equipment.
You should also know that even if you start small and grow slowly over time, the costs of running a restaurant can quickly add up — especially if you have employees who expect regular raises and benefits packages. So plan accordingly and ensure your budget includes enough funds for future expansion if needed.
Understand What Percentage Rent Should Be
It’s important to understand what your target percentage of rent should be. With the understanding of what your gross sales goal is, how to budget for this and how to ensure the location you are looking at will make you money.
Most restaurants pay between 8% and 12% of their gross receipts as rent. For example, if your restaurant’s gross sales are $1,000 daily, you’d pay $80-$120 per month in rent. If you want to use this method to calculate your rent amount, then include all food and labor costs in your calculations.
The exact amount that restaurants pay in rent varies greatly depending on where they are located and what type of restaurant you’re opening up. For example, some markets get higher rates than others.
It’s not uncommon for landlords to charge a higher rent than what they could get from other tenants. They may do this because they know your business will bring them more traffic, or they envision the property as something different than a restaurant someday. Either way, you need to know what other restaurants pay in your area.
Prepare for a Rainy Day (The Worst)
The first thing you need to do is make sure you’re ready for an emergency fund. Your rent needs to be covered if something goes wrong and your business underperforms for a few days (or even weeks).
You also want to ensure you can afford the rent for the entire lease term. It may seem like a waste of money if you aren’t around for the whole of the three years, but it’s better than finding out halfway through that you can’t pay it anymore.
A lot can happen in the business world — especially when it comes to running a restaurant — and if something unexpected happens, it could put your entire business at risk of failing if you don’t have an emergency fund set aside for situations like these. Even if it’s just enough money to cover one or two months’ rent, this type of fund will help keep your business afloat until you get back to business.
Thoroughly Research the Neighborhood
If you’re looking to start a restaurant, one of the first things to consider is where it should be located. The best location for your restaurant will depend on various factors, including how much space you need, how many people you want to serve, what type of food you’ll be cooking, and if you wish to offer delivery.
You should ask yourself:
Is it close to an interstate? If so, how far away? This will help you determine how easy it will be for potential customers to find you.
What are other restaurants in the area? Are there any competing with yours? If so, how do they compare? This will give you an idea of what kind of competition you’ll face if you choose that location.
Are there any big-box stores nearby? If so, are they located on the same street as your restaurant? This can affect your customer base significantly.
Does this area have enough parking spaces for my customers? Parking is one of the most important things when choosing a location for a restaurant. You must make sure that there are enough parking spaces available for potential customers before selecting a place for your restaurant.
The Exact Steps to Rent a Restaurant Space
If you’re looking to rent a restaurant space, there are several essential things to consider.
Get Your Business Plan Together, Including Your Budget
The first thing you’ll need to do is get your business plan together, including your budget. Knowing how much money you’ll need for rent and other expenses before you start looking for a location is essential.
Your business plan is your roadmap to success. You must take time getting this document together because it will help guide your future business decisions. Make sure that all the information is in there, including how much money you’ll need to get started and how much it will cost to run each day. This will help you figure out how much rent you can afford for your chosen space and whether or not it’s worth pursuing.
You may also want to consider how long you think it will take to pay off the debt on the space and when you think you’ll be able to start turning a profit. If other factors could affect your ability to pay rent on time, such as getting financing or receiving funding from investors, make sure they’re included in your business plan too.
Once you have all this information written down, it will be easier for you and others involved in your project to understand what needs to happen next.
When you’re ready to start looking for a restaurant space, another thing you need to do is educate yourself. The more you know about what you want, the better your chances of finding it.
You will also have to go through some of the following steps:
Get educated about the restaurant business. Learn about the different types of restaurants and what they require from their locations.
Research the local market. Find out what is currently available in terms of restaurant spaces and what will soon be available. The more information you have in this area, the easier it will be for you to find a suitable space for your restaurant business.
Inform yourself about how much it will cost to open up your own restaurant space and how much money it will take each month until your business becomes profitable again after opening up its doors.
Contact real estate agents or property managers who specialize in finding commercial properties such as restaurants or any other type of business that needs a commercial property to operate successfully in an area where there is a high demand for such establishments or restaurants because they may have all the answers to your questions regarding restaurant rentals.
Ensure You Have the Start-up Funds
Before you can begin leasing rental space, make any renovations or set up your kitchen, you’ll need money — lots of it. You’ll need enough capital to buy equipment and supplies, pay for permits and licenses, cover rent and utilities until they are paid off (if applicable), hire staff, provide insurance and pay yourself a salary while getting started. If this sounds like too much money for one person or family, look into loans or investors who can help get things up and running quickly so that customers can start coming through the door immediately.
Find a Restaurant Space
You’ll eventually need to find a restaurant space if you’re a chef or an aspiring restaurateur. This can be tricky because there are many different types of areas available.
The most common types of restaurant spaces are:
Commercial restaurants. These restaurants have been built from scratch and have seating areas and kitchens. They can range from small cafes to large chains.
Restaurants in existing buildings. Many restaurants open up in buildings with kitchens and seating areas. For example, if you want to open a restaurant near your home, you may look for an empty building with a kitchen and tables so that you don’t have to pay for them yourself.
Restaurants inside hotels or airports. Some hotels and airports have restaurants inside them where people can eat when they stay at the hotel or arrive at the airport. These places usually only serve food during specific times of day, such as breakfast or lunchtime meals while staying at the hotel or eating before catching a flight at the airport.
If you want to open a restaurant, choosing a location with high visibility, easy access for customers, and enough parking for people who wish to dine at your establishment is best.
It would help if you also considered whether there are any nearby businesses or establishments that might attract customers to your restaurant. For example, if you’re planning on opening a fine dining establishment, you may want to consider opening up a shop near other upscale restaurants and hotels so that they’ll bring in more clientele for you.
Once you’ve chosen the perfect location for your business, make sure you can afford the rent and other expenses before signing any contracts with landlords.
See the Space and Measure It
If you’ve never been to a restaurant, it’s easy to think that any space will work. But once you see what is available, it’s clear that most areas aren’t designed for restaurants.
You need to know exactly how many square feet are available and how much space can be used for seating. Restaurants require quite a bit of space if they are successful.
Look online for rental spaces in your area. If you’re starting, check out Craigslist and other local classifieds. If you already have a location in mind, try searching for it on Loopnet —both websites offer maps of properties in your area.
Once you’ve found a property that looks promising, make sure to visit in person to measure and inspect it thoroughly before signing any paperwork. Pay attention to things like parking availability, accessibility by foot or public transit, and nearby amenities (e.g., grocery stores, gas stations).
If multiple units are available at the property, see them all and ensure they have what you need. For example, if you need an outdoor patio or deck and there are units with these features on the property, it’s essential to know which one has what you need before you sign a lease.
Measure out each unit and take note of the square footage and layout of each space. You’ll also want to take measurements on any appliances or equipment included in the deal so you can decide which unit is best for your business.
If possible, go during peak hours to see how busy the neighborhood gets at different times of the day.
Keep Your Poker Face (Don’t Show Excitement)
The poker face is all about being able to hide your emotions and feelings when dealing with the landlord and other agents involved in the negotiation process. Like in poker, you have to learn how to bluff (or bluff better) to win the game.
Stay calm and cool-headed at all times during negotiations. Don’t let them see any emotion on your face or body language that may give away what you’re thinking or feeling.
Learn how to read people’s facial expressions so that you’ll know whether they’re lying or not when negotiating with them about renting the restaurant space. If they appear hesitant about something, you should follow up with questions until they finally tell you what’s going on in their minds at that time.
Talk to Other Tenants
Talking to other tenants at a given location is essential before signing a lease. You want to ensure that your business will fit into this space and that it won’t negatively affect other tenants’ businesses or their ability to do business.
Talk to your friends who own restaurants or work in them. They may know someone who has recently moved into a new location and might have some advice on where you should look.
If they don’t know anyone directly, they may be able to get their hands on a list of available restaurant spaces in your area.
You can also call local businesses in your area and ask if they know anyone who owns or manages restaurants. They may be able to refer you to someone who has just opened a new eatery or is about to close one down but still wants someone else to take over their lease agreement.
Determine Your Bargaining Strength
If you’re a strong negotiator and know what you’re doing when renting a space, then this shouldn’t be an issue for you. If not, then it might be best for you to work with someone who knows what they’re doing when negotiating leases and such. Otherwise, there’s a chance that your landlord will take advantage of your inexperience and make more than he should out of the deal.
Now it’s time to apply! If the property is available, an agent will call you and discuss the property with you. If you’re interested in renting the space, they’ll introduce you to their management team and guide you through the application process.
Before applying, make sure your business plan is ready to go.
Here are some things that landlords look for when screening applicants:
Have a business plan ready to go. Landlords want to see that you have thought out all aspects of your business and have a solid plan. Be prepared to explain how each element of your business will work and why it will be successful.
Show proof of financial stability. Landlords may request a copy of your credit report or bank statements as part of their screening process. This shows them that you are financially stable enough to cover rent payments and other expenses associated with running a restaurant or bar.
Don’t Always Accept the First Offer.
If you want to open a restaurant, you must ensure it will be successful. One of the first things you should do is look at your options. Please don’t take the first offer; do some research and make sure it’s in a good location with plenty of foot traffic or parking nearby.
Before entering into any agreement with a landlord, read over all documents carefully and ask questions if something is unclear. Never sign anything without knowing what it says or means because there could be hidden fees or other clauses that could affect your business negatively later on down the road if you don’t know what they are right off the bat.
Negotiate to Win and Be Prepared to Walk Away
Next, you’ll want to negotiate with the landlord on matters like rent and utilities. If possible, try negotiating these issues while they’re still flexible — before they’ve made an offer on another tenant.
Finally, be prepared to walk away if it seems like you can’t reach an agreement. The good news is that there will always be more spaces available!
Hire a Real Estate Lawyer
When you are renting a restaurant space, there are going to be legal issues that need to be addressed. You want a real estate lawyer who understands the ins and outs of the industry and can help negotiate contracts with landlords. A lawyer will also be able to advise you on other matters like zoning laws, building codes, and lease agreements so that your business operates smoothly from day one.
You also want to ensure that your lease has no hidden clauses or other problems. If it does, your attorney should be able to fix it for you before you sign it.
Takeaways for Leasing the Perfect Commercial Restaurant Space
The first step in leasing a commercial restaurant space is determining if it’s the right fit for your business. Please take a close look at the area around the restaurant and its proximity to other companies and residential areas.
Another thing you’ll want to consider is whether or not the space has enough parking for customers. You could face severe problems with local authorities if there isn’t enough parking.
Once you’ve determined that the location is suitable for your business, it’s time to start looking for available commercial restaurant spaces in your area.
You can search online for available options or contact a real estate agent specializing in this type of property.