Renegotiating your lease
By Tony Ozelis

Part 1 - Should I stay or should I go?

Mention lease renewals to most real estate professionals, and you’ll probably see them cringe.

A renewal is when your present lease term is about to expire and you’ve decided to continue operating in your current location. Most large retailing and restaurant companies have people dedicated to this process and, although as important as a new deal, it is seen a very unenviable task.

Believe it or not, it may not be as daunting of an undertaking as you might first imagine and may actually be a great opportunity for you, providing you follow a few time-proven simple steps.


When is a good time to start thinking about a lease renewal?

That all depends…but hopefully you didn’t wait until the last moment to read this. However the successful people that we know seem to always be assessing every facet of their business, including their location(s) on a regular basis. We’re not saying that you should know your lease expiration date like your mom’s birthday, but it can be almost as important.

You see, depending upon how long it took to build your use the first time, should be considered the absolute minimum of advance time that you should start working on the renewal…plus a little more, just in case.

The biggest problems usually occur when the current business owner wasn’t around when the original deal was first consummated. Often, they bought an existing business, assumed an existing lease and never knew of the efforts it took to build it in the first place.

If this is your situation, you’re going to have some additional homework to do, you'll need to find out (from either the original builder/owner or by asking your local municipality).

Whatever the case, you should estimate the timeframe that it took you to find and build the original location and use that as your absolute minimum timeline.

If it took you eighteen months to locate, negotiate, sign, get permits to build and operate your business, then you should seriously consider going through these steps at least two years before your lease expiration date. That way you’ll have ample time to find, secure and obtain permits for a new location (should that become necessary).

You bought an existing business? Plan on an additional month or two to do your market review, site selection and lease negotiations.

Something to remember is that building and zoning codes rarely ever get less-restrictive and these days, many municipalities are embracing the concept of Green Technology (which is a very good thing, by the way). Identifying how these new requirements may possibly effect your building and business, should be a priority.

Be prepared since the vast majority of green projects have higher upstart costs, but save money (and the environment) over the long-haul. Staying on top of these issues on a local basis should be an on-going endeavor.

Why be so concerned with this? Because if, for one reason or another, you have to pick a new location you’ll be glad you took the time to do the research.

It has taken some members of our staff well over four years to permit a simple fast food restaurant and, naturally, the bigger the project the longer the timeframe involved. The bottom line is, the further in advance that you tackle the renegotiation, the better your negotiating posture is going to be.

 

Next: Part 2 - Reviewing your own location needs

Next>>

 

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