Five things to know before leasing to a restaurant

You’re the proud owner of a super commercial space, and you’ve just learned that a restaurant is interested in doing business out of your property. This is great news, and you believe that the type of eatery would be a good fit for the location. Leasing to restaurants can be sticky business, however. Here are five things you should be aware of before agreeing to lease to a food service.

1 You might need to make structural renovations. Most likely any restaurant will require renovations to the space. If the property wasn’t already set up as a restaurant, the space alterations could be extensive. Be prepared to pay for items which they cannot take with them and aren’t aesthetic, such as outside ventilation, possibly bathroom remodels, stair safety alterations and the like.

2 You might need to offer a year lease first, with long-term options after. Many restaurants fail in the first year. It might be in both yours and the tenants’ best interest to agree to a one year lease at the beginning, with options for longer-term use.

3 You might need to keep a detailed list for exclusivity. Tenants like to have the exclusivity of being the only type of restaurant in a complex or mall. They will want the exclusivity to be as broad as possible, but make sure you can also lease to another food-serving party if the opportunity arises in a neighboring property. Be sure to keep detailed documentation regarding exclusivity rights and prohibited uses for the space.

4 You might want to watch your clauses. Make sure that you’ve thought through details such as hours that the tenant is allowed to operate their business in the space, trash removal, grease trap installation and maintenance, delivery schedule which won’t block surrounding driveways. All these particulars must be addressed as clearly as possible in the lease to avoid disputes during operation.

5 You might want to specify transfers. It’s every landlord’s nightmare: they lease to a reputable eatery, which fails, and a nightclub moves into the location. Tenants will want some sort of exit strategy written out in the lease, so be sure to outline exactly what type of transfer is allowed. It is a good idea to ensure that the transfer goes to a business with the same intent of use as the original tenant.

Leasing your commercial space to restaurants can be a delicious situation, but negotiating the agreement and ensuring correct usage can be overwhelming. This is one area where you’ll want a real estate expert on your side, and Blue Mountain Realty and Property Management is happy to help. Call us to discuss property management for your space.