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Before signing new coffee shop lease

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  • 23-07-2012 6:02pm
    #1
    janullrich
    Closed Accounts Posts: 409 ✭✭


    Ok I have found a nice place where the keymoney is very reasonable and rent is low. Done a lot of market research and lease is waiting to be signed. I would like to speak to/have correspondance with somebody who is doing this at the moment just to make sure I am going in the right direction. If I am truthfully honest I have paid €2k in deposit and will be looking to pay €20k in keymoney plus €4 in rent for 3 months end of this or start of next with signing of lease. I have about €35k extra for renovations and 3 months trading (without a cent being made - of course there will but just in case). All the money is my ownThe lease is initially 2 years. Although all has being agreed in principal and I am won't open till September I am worried about general day to day expenses and margins. I am down to the nitty critty of things and am a little worried! Cheers
    Tagged:


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    #2
    TheInquisitor
    Closed Accounts Posts: 1,530 ✭✭✭TheInquisitor


    What rent free period did you get for doing all that for the landlord?


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    #3
    aw
    Registered Users Posts: 786 ✭✭✭aw


    With the way things are, key money has gone by the wayside and I would not pay a cent of it.

    In my experience, you should be agreeing a rent free period with the landlord at the beginning to help your cash flow when you open. In fact, I would look for a contribution towards fit out also. But key money? No way.

    Also, €35k seems a bit low for a full fit out. Was the unit a coffee shop before and there is minimal work to be done? Do you have to buy furniture, fridges, coffee machine, grinder, washer, ice machine, etc? You won't feel yourself burning through that €35k.


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    #4
    janullrich
    Closed Accounts Posts: 409 ✭✭janullrich


    None, as the place is fully fitted out. However I want to improve the place so I am refurbishing it. I will need to close down the shop for 2 weeks at the end of August.


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    #5
    janullrich
    Closed Accounts Posts: 409 ✭✭janullrich


    The place is a coffee shop at the moment with all inside except for a oven. It is just very badly run and is not open long during the day. The owner & staff don't make a effort re promoting it. I mean €35k for improving the place as I want it - repainting, bringing in some new chairs, etc if make it more modern. Also I am invisiging a no of months where I will not be profitable and so will need cash in reserve.


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    #6
    sandin
    Closed Accounts Posts: 1,594 ✭✭✭sandin


    When I saw Key Money being mentioned I had to check that it was not a zombie thread from 2006!!!

    It looks like you are inexperienced in this field - get someone on board immediately to re-negotiate the lease for you. An accountant or a property agent.



    Problem number 1 - Key money of 20k - total waste, DO NOT PAY

    Problem number 2 - short lease. If its working well, the landlord can kick you out after 2 years, you have no rights whatsoever. - He can them rent it at a higher price to someone else. -bye bye key money, bye bye business.

    Problem number 3 - you are THROWING money away and believing a headline low rent. - Over 2 years, rent is 24k, renovations is 35k, key money is 20k - that's theorectically 35k a year in rent. + commercial rates and water rates.

    Problem number 4 - how much are the commercial rates & how much are the water rates. Depending on location, you may find another 5-8k being needed for these fees.


    Walk away - you seem to have a few bob, there are loads of great locations that you will pay 30k rent for, no key money and possibly fully fitted. A lick of paint and a new sign would be all you'd need.

    Low rent = crap location = poor business.

    If the location is good and you think it will do well, get a 10 year lease with break clause in year2 & 5. The ten year lease gives you right of tenure. Do not pay key money. If its fully fitted, possibly you can pay extra rent for use of equipment or you could buy the equipment (not for 20k though).

    Get first 3 months rent free too.


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    #7
    YellowSheep
    Registered Users Posts: 384 ✭✭YellowSheep


    Hi Gavin

    I offered you assistance before....Just ask.

    Regards Oliver


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    #8
    janullrich
    Closed Accounts Posts: 409 ✭✭janullrich


    Thx Sandin for your advise which I have ignored because I have sorted everything out in the last few days including the lease. Btw keymoney is reality. If you are buying out a fully fitted place don't you think you are buying for what is there or do you think it is come all free. Obviously it is you who is living in Zombieworld. Btw rent will remain the same for the 5 year lease so you don't need to worry your little head about it going up. Let me worry about my money.


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    #9
    here2surf
    Registered Users Posts: 138 ✭✭here2surf


    Can I jump in here and agree that key money is realstic when the unit is coming fully fitted.
    Jan. Have you any figures on what your ESB and water rates will be per annum? I know it is subject to location and T/O but I need to find out what the likes of O'Briens would pay in a busy location


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    #10
    bigneacy
    Registered Users Posts: 1,222 ✭✭✭bigneacy


    janullrich wrote: »
    Thx Sandin for your advise which I have ignored because I have sorted everything out in the last few days including the lease. Btw keymoney is reality. If you are buying out a fully fitted place don't you think you are buying for what is there or do you think it is come all free. Obviously it is you who is living in Zombieworld. Btw rent will remain the same for the 5 year lease so you don't need to worry your little head about it going up. Let me worry about my money.

    Jesus there's no need to be like that at all, sandin was giving you some sound advice, and you repay him by being a smart arse and giving a bollocky reply? - Key money is not the norm or reality at all in today's market, you seem to have convinced yourself of that to make yourself feel better about your badly advised business decision. I would never pay key money for any unit, ever and there's a majority of people on this forum who would agree. You seem to think you have bought this unit or the contents included, you haven't, you've paid for the use of something that has probably already been paid for twice over and you could have gotten included in any unit anywhere in the country for no keymoney.

    You've come onto this forum to get advice and that's what you got- if you wanted reassurance and a pat on the back your in the wrong place, try PI.


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    #11
    antoinolachtnai
    Registered Users Posts: 9,776 ✭✭✭antoinolachtnai


    It all depends on the location really. How many people walk by every day, and how many people go in? How do these two figures compare to comparable stores? I think the concerns about the shortness of the lease are an issue, especially if you are spending money doing it up. Even if you are massively successful, you could still be out on your ear.


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    #12
    micosoft
    Registered Users Posts: 2,359 ✭✭✭micosoft


    janullrich wrote: »
    Thx Sandin for your advise which I have ignored because I have sorted everything out in the last few days including the lease. Btw keymoney is reality. If you are buying out a fully fitted place don't you think you are buying for what is there or do you think it is come all free. Obviously it is you who is living in Zombieworld. Btw rent will remain the same for the 5 year lease so you don't need to worry your little head about it going up. Let me worry about my money.

    What a bizarre use of a forum. Ask a question. Wait for answers. Attack the answers. If you are so certain why did you even post OP?


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    #13
    The Apprentice
    Registered Users Posts: 1,130 ✭✭✭The Apprentice


    We,ll see him on the forum in 6 months moaning about slow trade and high operating costs .. Adieu my friend


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    #14
    Hanley
    Banned (with Prison Access) Posts: 21,981 ✭✭✭✭Hanley


    ...shoulda gone into the rubber stamp business :D


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    #15
    micromike
    Registered Users Posts: 8 ✭micromike


    I think that Jan was wrong posing the thread. Only one person seems any way helpful in the last few threads. It seems to me that people on this site don't like helping other people and attack people and their ideas for the sake of it ie Sandin or Hanley. If you are going to help then don't bother posting. Annoy other people or waste your time doing other things. . Btw as a experienced coffee shop owner keymoney is the reality unless the rest of you rob the stuff to get the chairs etc!!


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    #16
    The Apprentice
    Registered Users Posts: 1,130 ✭✭✭The Apprentice


    1st pOst Jan or i mean mike...

    I think u need to rethink that "generalized" statement of that NO - ONE on this board helps people i have to disagree vehemently not alone from my own perspective, i often sit here at 2am reading other peoples nonsensical bullcrap just so i can help them in some way.. and thats just me.
    There are hundreds on here that give great answers and spend a vast amount of time in helping others in any way possible but sometimes it just isnt enough.

    The keymoney is not reality..... Despite you bulling ahead like a choo choo train, your ignorance to opening your eyes and researching what people are telling you is shocking. At least research the fact that u may LOSE €20,000 on something that died along with our banks on sep 15th 2008 than just dismissing the facts of what a few people said.

    All you had to say was, i dissagree with you sandin instead of the way you said it .. that wouldnt have been hard now would it ??


    I hope Jan Ulrich now loses 20,000 euros, for 1 simple reason -- Inability to take advice from different people. Its a key business learning and i hope it follows him for the rest of his life.


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    #17
    Bandara
    Registered Users Posts: 3,282 ✭✭✭Bandara


    Key money isnt reality imho

    I cannot recall the last person I know who paid it in either the coffeeshop or restaurant business

    I think you have been very unfair to Sandin who posted advice which regardless of you agreeing with him was posted to assist you, and from my viewpoint, he spoke a hell of a lot of sense and I find it hard to disregard any of his points.

    I'm not going to give my opinion as you don't seem to really want a view that doesnt agree with yours, but for your own good dont pay keymoney, its a dead practice and if they demand it walk away, theres 20 coffee shops out there right now that dont require keymoney.

    For example, I was approached about the unit on the corner of Dawson Street and Stephens Green about 18 month ago, zero keymoney, fully fit out, rent of 45k a year. I didn't go with it in the end and its since been taken by someone else (Rose Cafe afaik).

    So if a location like that has zero keymoney, then unless your is a superb location I cant see how they can justify any. The coffee shop unit beside Heavenly Food Company in Temple Bar Square is currently on the market, starting point is asking 60k rent (you'd get it for 48-50 I'd say, ZERO keymoney and COMPLETELY fit out to a good standard. In the dead center of Temple Bar.

    Anyways, good luck with it, I get the feelign your signing for it regardless.


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    #18
    sandin
    Closed Accounts Posts: 1,594 ✭✭✭sandin


    janullrich wrote: »
    Thx Sandin for your advise which I have ignored because I have sorted everything out in the last few days including the lease. Btw keymoney is reality. If you are buying out a fully fitted place don't you think you are buying for what is there or do you think it is come all free. Obviously it is you who is living in Zombieworld. Btw rent will remain the same for the 5 year lease so you don't need to worry your little head about it going up. Let me worry about my money.

    If you have ignored everything I have said and have gone ahead with what you have stated in your OP, then the landlord has got you by the proverbials.

    However, you now seem to have agreed a 5 year lease where in the OP it was a 2 year lease.

    In a 2 year lease everything I say stands and can be fully verified by anyone with commercial property experience here. However a change to a 5 years lease changes everything as you have now protected yourself with right of tenure (right to a new lease after 5 years if you wish) - Though i do hope it is 5 years and not 4 years 9 months - a 4year 9 month lease gives you no right to tenure and just like a 2 year lease, you can be thrown out and its bye bye to key money and any good will bult up.

    If you have paid key money, then I hope it is written into the lease that you now own the fittings and that the key money wasn't just paid over and the landlord gave you a new lease. (on a new lease, if you leave, you must leave it in the state you received it or better- therefore you cannot take the equipment, if you have taken over a lease, then its different)
    But as you said, you know everything already.

    BTW - I currently have 6 leases and negotiating 2 new leases.(both 5,000+ sq ft premises in prime locations) On one (almost fully fitted) I have 6 months rent free and 40% off the initial asking rent, on the second I am looking for 2.5 years rent free and 30% off the asking rent as I need to fit it out from shell - currently they are at 1.5 years rent free and I know I will get min 2 years and at the rent I want.

    I'm 28 years in the retail business and negotiated my first lease when I was 19 and in mid twenties for a 5 year period negotiated over 20 leases for a company I worked for. (and yes, they are still trading)

    Therefore in my quite experienced opinion I will state that in todays current market conditions Key Money should not be paid except in very very exceptional circumstances.


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    #19
    Axwell
    Moderators, Business & Finance Moderators, Computer Games Moderators Posts: 10,462 Mod ✭✭✭✭Axwell


    Mod Note:

    Micomike banned for one month for being uncivil and giving personal abuse.

    Anyone else found doing the same will get the same treatment.

    Doesnt seem to be the same person but if anyone is found creating a second accounts to get around a ban it results in a permaban..consider yourself warned.


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    #20
    The Apprentice
    Registered Users Posts: 1,130 ✭✭✭The Apprentice


    There are a handful i would follow over a cliff on this business forum after reading it for close to 10 odd years..#

    Hammertime and Sandin are two of those people ..
    Listen perhaps to the advice those guys have given or at least consider it !


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    #21
    johndoe99
    Registered Users Posts: 1,879 ✭✭✭johndoe99


    off-topic:

    i'm curious, when a person receives a month ban, is that just in the Business forum, or all of boards.


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    #22
    Axwell
    Moderators, Business & Finance Moderators, Computer Games Moderators Posts: 10,462 Mod ✭✭✭✭Axwell


    Its forum specific


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    #23
    godtabh
    Moderators, Science, Health & Environment Moderators Posts: 23,208 Mod ✭✭✭✭godtabh


    Just wondering. I've been following this thread from the start.

    What is key money and what do you get for it? I'm assuming it's paying for getting the keys?


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    #24
    sandin
    Closed Accounts Posts: 1,594 ✭✭✭sandin


    godtabh wrote: »
    Just wondering. I've been following this thread from the start.

    What is key money and what do you get for it? I'm assuming it's paying for getting the keys?

    It was prevalent in the boom - I got over €300,000 key money for a lease in a major shopping centre. (went into the company, not my back pocket unfortunately) The UK company wanted the shop and were willing to pay way over the odds just purely for the location. For this, i simply handed them over the lease and they then paid the rent and obviously changed name and started selling their products in it. At the time there were about 30 retailers wanting to get into the centre, so it was a way of jumping the queue.

    Similar if there was a huge shortage of a certain car - some people would pay an amount over the retail price to secure it ahead of others.

    Crazy, but some people are crazy.

    In certain circumstances, key money is well spent if it means you don't have to do any shopfitting and you are buying a location with good business history and the rent is below market.


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    #25
    JD Dublin
    Registered Users Posts: 398 ✭✭JD Dublin


    janullrich wrote: »
    Ok I have found a nice place where the keymoney is very reasonable and rent is low. Done a lot of market research and lease is waiting to be signed. I would like to speak to/have correspondance with somebody who is doing this at the moment just to make sure I am going in the right direction. If I am truthfully honest I have paid €2k in deposit and will be looking to pay €20k in keymoney plus €4 in rent for 3 months end of this or start of next with signing of lease. I have about €35k extra for renovations and 3 months trading (without a cent being made - of course there will but just in case). All the money is my ownThe lease is initially 2 years. Although all has being agreed in principal and I am won't open till September I am worried about general day to day expenses and margins. I am down to the nitty critty of things and am a little worried! Cheers
    I hope you have not gone ahead with this. However if you read Sandin's posts very carefully there are words of wisdom there in relation to contents of the coffee shop and who owns them at the end of the lease period.

    Also words of wisdom from Sandin in relation to the 5 year / 4 year 9 month issue and whether you are entitled to a new lease. Bear in mind that you are better to step away from this deal and lose your 2,000 deposit than make a total hames of things by signing up to a lease such as the one you have outlined.

    This last point is moot as you have spoken about a 2-year and 5-year lease in this thread.

    We both posted to Borads before on probably the same topic / lease here:

    http://www.boards.ie/vbulletin/showthread.php?t=2056658522&page=2


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    #26
    odear
    Registered Users Posts: 12 ✭odear


    Hammertime wrote: »
    Key money isnt reality imho

    I cannot recall the last person I know who paid it in either the coffeeshop or restaurant business

    I think you have been very unfair to Sandin who posted advice which regardless of you agreeing with him was posted to assist you, and from my viewpoint, he spoke a hell of a lot of sense and I find it hard to disregard any of his points.

    I'm not going to give my opinion as you don't seem to really want a view that doesnt agree with yours, but for your own good dont pay keymoney, its a dead practice and if they demand it walk away, theres 20 coffee shops out there right now that dont require keymoney.

    For example, I was approached about the unit on the corner of Dawson Street and Stephens Green about 18 month ago, zero keymoney, fully fit out, rent of 45k a year. I didn't go with it in the end and its since been taken by someone else (Rose Cafe afaik).

    So if a location like that has zero keymoney, then unless your is a superb location I cant see how they can justify any. The coffee shop unit beside Heavenly Food Company in Temple Bar Square is currently on the market, starting point is asking 60k rent (you'd get it for 48-50 I'd say, ZERO keymoney and COMPLETELY fit out to a good standard. In the dead center of Temple Bar.

    Anyways, good luck with it, I get the feelign your signing for it regardless.


    Out of interest what is the turnover (estimated) of the unit in Temple Bar?
    Say a grand a week in rent...what would you need to turn to make a buck?

    Just interested, have seen so many locally (Galway) get into coffee shops only to be out in a year. Key money is definitely dead (always exceptional circumstances) but lets take a case in point for the Temple Bar opening...What are the numbers....Whats the risk??

    Great thread by the way, fantastic to listen to people who know what they are talking about


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