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How to Negotiate a Good Tenant’s Lease & How to Renew a Lease on Favorable Terms for the Tenant

By in 2000 - Volume 2

Here are the things a tenant needs in negotiating a good tenant’s lease:

1. A knowledge of the market rents for comparable restaurant space which can be obtained from a real estate broker.

2. A viable concept that will motivate the landlord to lease to the tenant.

3. A business plan that includes the following: a. operator/tenant’s resume, b. business financial information including financial projections for the new operation, (The landlord wants to make sure that the tenant has enough working capital to get him through his start up period with several months of reserve capital to weather any possible unanticipated negative events.), c. copy of the proposed menu, d. proposed remodeling plans and e. proposed hours of operation.

4. A financial package which should include:

a. a current personal financial statement,

b. two years most current tax returns,

c. a current credit report and

d. a list of at least three business and three personal references.

5. A past history of successful restaurant experience to include:

a. past menus,

b. financial statements,

c. customer testimonials (complimentary letters & comment cards)

d. the names, addresses and phone numbers of past landlords.

Here are the things a tenant needs for a landlord in negotiating a renewal of an existing lease on favorable terms for the tenant:

1. A past history with the landlord for being a good tenant in terms of meeting all of the terms and conditions of the lease including paying the rent and other occupancy expenses on time.

2. A knowledge of the market rents for comparable restaurant space.

3. In negotiating an existing lease the tenant should negotiate the lease as far in advance as possible from the expiration date of the lease. The closer the tenant waits to the expiration date of the lease the more difficult it could be for the tenant to negotiate favorable terms, as time increases usually rents increase. Also the landlord knows that if the tenant wants to continue his business at the same location, the landlord has an advantage over the tenant in the negotiating process. If the tenant waits to the end of the lease to negotiate lease extensions and if he can’t come to an agreement with the landlord, the tenant could be forced to relocate his business which could be economically prohibitive. However, if the tenant is in good standing with the landlord, the tenant will have some leverage with a landlord in renewing his lease. This is because most landlords would rather work with a known quantity than be at risk with a new tenant and with possibly no rental income during the period the old tenant leaves and the new tenant comes in.

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About The Author
Steven Zimmerman, CBI, M&AMI, CBB, FIBBA

Steve is the Founder, Principal Broker and Chief Executive Officer of Restaurant Realty Company. Steve has personally sold/leased over 1,000 restaurant, bar and/or nightclub businesses and many related commercial buildings totaling 2+ million square feet of commercial space, collaborated with over 2,000 clients and completed over 3,000 valuations since 1996.His real estate experience also includes sales, acquisitions, management and ownership of numerous properties throughout California including restaurants, hotels, apartment buildings, single family houses, an office building and a multi-use retail building. Steve is also the author of Restaurant Dealmaker – An Insider’s Trade Secrets for Buying a Restaurant, Bar or Club available on Amazon. Prior to starting Restaurant Realty Company Steve had over 20 years of restaurant experience and was President and Chief Executive officer of Zim’s Restaurants, which was one of the largest privately owned restaurant chains in the San Francisco Bay Area. READ FULL BIO | HIRE EXPERT WITNESS - LEARN MORE