OK. You have sent landlord LOI. The next thing is lease negotiations. Get ready. You are going to receive a document that looks like a book. I will try to cover each section in different post. Lets start with Terms. The original lease term landlord is going to want is at least five years and probably ten is preferred. You want to also have some options for renewal with predetermined values. The other important term is when rent starts verses when term starts. You are going to need some development time prior to paying rent . You need to consider the amount of time required for Architecture, Design, Permitting, Bidding and Construction prior to rent starting. Your consultants can give you a time line to follow. Stay Tuned !!
Money,Money,Money
All the wheels are in motion. Time to figure out a budget. It is hard to build a budget without a design. Talk with your Architects and Designers and target a square footage charge. In the meantime while they are working on plans research cost associated with Permits, Plans, POS Systems, Audio/Video, Security/Cameras, Kitchen Equipment, Small wares, Tableware, Glassware , Advertising/Public Relations, Employee training, opening inventories . There are many other areas of cost. This is really a great time to start comparing and pricing all of theses services. There are good companies that specialize in the Hospitality business and understand your needs clearly. I suggest you work with them.
THE FUN STARTS
So you have an LOI in on a space. Now you need to have a plan. You need to hire an Architect/Designer/Foodservice planner. You can hire many great companies that do all three functions or you can source individually. Look at restaurants you like and ask them who did there design work. Depending on the concept you need to determine your foodservice needs. I always recommend working with a foodservice designer first and getting the basic floorplan in place then start on the complete package. So what you will need is a copy of Landlords construction guidelines. The cities Health Code requirements. Your menu and anything special equipment you feel you would need like a certain type of smoker or ovens. The more you share with your designers the better the project will be. Remember: Do your research, communicate with your team and think about it over and over. Stay Tuned!
THE FUN STARTS
So you have an LOI in on a space. Now you need to have a plan. You need to hire an Architect/Designer/Foodservice planner. You can hire many great companies that do all three functions or you can source individually. Look at restaurants you like and ask them who did there design work. Depending on the concept you need to determine your foodservice needs. I always recommend working with a foodservice designer first and getting the basic floorplan in place then start on the complete package. So what you will need is a copy of Landlords construction guidelines. The cities Health Code requirements. Your menu and anything special equipment you feel you would need like a certain type of smoker or ovens. The more you share with your designers the better the project will be. Remember: Do your research, communicate with your team and think about it over and over. Stay Tuned!
Lets get planning!
I met with a restauranteur last week who was extremely excited about a lease he had signed in a new high profile development. He started telling me about the space and his plans. We then discussed his budget. I asked a few lease questions he could not answer. Is landlord supplying grease trap? Is landlord bringing the proper amount of electricity to the space? How far is it to gas and water meters? Where is the mechanical room? Are you required to use landlords roofing contractor and if so is there a ceiling on amount of your total out of pocket expense. Are you required to use landlords fire and sprinkler contractor? If you are required to use there contractors there needs to be a ceiling on your cost since you are unable to bid out theses services. You may be thinking why is this such a big deal? If it is 100 + feet of gas, water and electricity you have to run that cost adds up quickly. Go ahead and have your LOI ( Letter of Intent to lease) prepared but before you sign your lease these are important questions to address. Stay Tuned !!
YOU DECIDED ON A LOCATION!
OK You have gone through preliminary site selection and are pretty sure this is it? Wait, There is a restaurant across the street that just closed. Should I look at it? A second generation space has a lot of advantages. The space will typically have grease trap, restrooms, kitchen, heat and air, electrical panels/service and vent a hoods in some cases in place. There are many questions that come with second generation spaces. First question, Why did in close? What kind of shape is building in? Can it be converted to your concept with less expense? Is there ample parking? Is the road in front preparing to be widened or closed for an extended amount of time ?What is the landlords responsibilities. Is the lease an assignment or a sub lease? Most cases a second generation space can only require a remodel permit verses a full set of plan drawings. the most important question is how many restaurants have been in location previously. Restaurant spaces that have had multiple tenants eventually become: Oh another restaurant is opening there. Stay tuned!!
Location! Location! Location!
I always hear when I look at locations that certain business are the number one stores in that company. I am pretty sure they put roller skates on it and move it overnight because every center the number one units are there. Use common sense in your location selection. Is this the area you want to be in? Visit every restaurant in the area at all hours of operations. Talk with operators about their clients. What is your competition. Is the sight easily visible? If you are on the back of a building or hidden in a corner you should consider this in your rent factor. Are there any business restrictions i.e.; churches or schools that could make it difficult to get proper licenses. Remember if the property is owned by a church or a school district and within a certain distance that could prevent you from receiving proper liquor licenses in some cases. Most importantly ask a lot of questions. Drive the areas and neighborhoods. Visit with existing business owners. Set up a meeting with the city economic development department. Understand all of the ordinances for your location. Ask if there are any Associations that need to approve your project and if so meet with them prior to signing your lease. Understand the parking available and make sure it isn’t just what meets code requirements but that it is going to be sufficient to fit your business plan. You will have much more success out of the gate if you do a little research. Your real estate broker should be able to supply you with a lot of information but you need to do your due diligence. It will make things easier.
I WANT TO OPEN A RESTAURANT!!!
In my 45 plus years of being in the restaurant business in Dallas I cannot tell you how many people have said to me: I Want to Open My Own Restaurant. I have had quite a few of my Chefs and operators help me recently decide to share my years of business related issues involved in opening and being successful. I don’t claim to know it all but hopefully I can help prevent issues I have seen over and over. I plan to discuss everything from concept to completion. I am not a food critic. I hope you will enjoy my post as we discuss everything from location to lease negotiations, design, development, as well as just common sense issues that pop up every day in the restaurant business. I hope you will check back regularly as we discuss these and many other topics.