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What to Look For Before Signing a Restaurant Lease

By in 2016 - Volume 18


What to Look For Before Signing a Restaurant Lease

By Tessa Love

Apr 18, 2016

When scouting real estate to open a new restaurant, there’s a lot more to think about than the price of rent. Hidden costs and bad deals abound. At the recent Golden Gate Restaurant Association conference, Zach Georgopoulos, attorney at Georgopoulos & Economidis, restauranteur Joe Hargrave of Tacolicious Management Inc, Realtor Steve Zimmerman of Restaurant Realty Co. and Gi Paoletti of G. Paoletti Design Lab shared tips on how to navigate restaurant leases.

According to these experts, here are the top five things to look out for when signing a lease.

1. Hire a Lawyer.

Joe Hargrave pointed to his own lawyer, Zach Georgopoulos, and said he wouldn’t sign anything without talking to him. Georgopoulos, who has dealt with numerous restaurant leases, said that while you may get a conscientious broker who will dive deep into the fine print, a lawyer has a defined interest in doing their due diligence. A broker may not understand some of the consequences of the language of a lease. That’s a lawyer’s forte.

2. Find an existing restaurant space.

Zimmerman, whose Restaurant Realty Co. has sold or leased over 1,000 restaurants, bars and clubs, said moving into an existing restaurant space is easiest because the zoning is already in place. Also, the space may already have infrastructure that you won’t have to spend a lot of money building out, such as a hood or ventilation system.

3. Look closely at the options to renew.

This is where a lawyer really comes in handy. What you’re looking for here is a real and fair methodology for determining the rent for the options to renew. But whatever the method, just make sure you have

4. Think about your exit strategy.

If you’re looking to sell your restaurant, you want to make sure that your lease is transferable without too much interference from the landlord. To take care of this, look closely at the assignment provisions. If it states that options are personal to the lessee and are not assignable, “that’s a really big red flag,” Georgopoulos said.

5. Take into account your expense responsibilities.

If you are responsible for a percentage of the property taxes, you could be priced out if the property sells or is inherited, according to Zimmerman. This is especially of concern in the Bay Area, where real estate prices keep skyrocketing.

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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