Advice on Cafe/Restaurant lease

Cafe Chick

Hello All

I would like some feedback/experience on signing a lease on a brand new premises. The unit has full planning for restaurant and has been fitted out with fixed furnishings such as tiling, sanitary ware, counter and a kitchen area with stainless steel counter tops and extraction unit (no equipment). I was willing to pay the full quoted lease price as, even though it was above the going rate for the area, I believed that the unit warranted a premium due to the existing fit out. I still need to fully kit out and decorate the unit myself.

Upon taking the business further I was then informed that the owner is looking for a fee for works already completed as well as the quoted rent. This fee as far as I am concerned takes the unit back to an essential shell and core fit out from a lease offer point of view. What are other peoples experiences with restaurants and these types of transactions? Note: this is not a high footfall location and will require extensive marketing on my part to get it off the ground

Am I correct in taking this stand and potentially reviewing my offer on the lease to take this fee into consideration?

The lease is for 10 years (with a break option and rent review at 5 years). I am also required to sign renunciation as well as give a personal guarantee of three months rent. That is another sticking point for me as I feel if I am paying this large fee why should I have to sign renunciation?? I should also add a note that there is a lot of interest in the unit.

Anyway I am new to all of this so any opinions are welcome.

Thanks in advance

jimmii

If there is a lot of interest in the unit then no doubt someone will be willing to give into their demands. It seems as if they are asking for a lot but that does seem to be how the market is things look to be favouring the landlords again. If this unit is a must then I guess you have to do what you have to, to get it if not then just put in what you think it is worth and if they aren't happy with it then so be it.

Spark Plug

Cafe Chick wrote: »

Hello All

I would like some feedback/experience on signing a lease on a brand new premises. The unit has full planning for restaurant and has been fitted out with fixed furnishings such as tiling, sanitary ware, counter and a kitchen area with stainless steel counter tops and extraction unit (no equipment). I was willing to pay the full quoted lease price as, even though it was above the going rate for the area, I believed that the unit warranted a premium due to the existing fit out. I still need to fully kit out and decorate the unit myself.

Upon taking the business further I was then informed that the owner is looking for a fee for works already completed as well as the quoted rent. This fee as far as I am concerned takes the unit back to an essential shell and core fit out from a lease offer point of view. What are other peoples experiences with restaurants and these types of transactions? Note: this is not a high footfall location and will require extensive marketing on my part to get it off the ground

Am I correct in taking this stand and potentially reviewing my offer on the lease to take this fee into consideration?

The lease is for 10 years (with a break option and rent review at 5 years). I am also required to sign renunciation as well as give a personal guarantee of three months rent. That is another sticking point for me as I feel if I am paying this large fee why should I have to sign renunciation?? I should also add a note that there is a lot of interest in the unit.

Anyway I am new to all of this so any opinions are welcome.

Thanks in advance

How much has the landlord spent at a % of the annual rent. You don't mention any rent free. If the amount sought is significant and you still realy want the unit perhaps consider taking out the 5 yr break. 10yrs term certain is worth more to a landlord both in terms of valuation impact and to a potential funder.

Cafe Chick

Thanks for taking the time to post jimmii and Spark Plug. They are looking for €20k upfront for works to date as well as €20k per annum rent. As part of my offer I will look to get 6 months rent free but would settle for opening of business if needs be. I was thinking of offering €10k of flat fee upfront with the balance one month after opening of business and €18k per annum rent on a 10 year lease would be a fair offer given having to sign the renunciation?

jimmii

I think you'd be doing well to get a rent free period that long most aren't willing to give any these days especially if the unit is in such demand some will be willing to allow rent free until you open but not after. Do you know if they have had other offers at all? If you're going to be first I would maybe shave a little more off you never know the LL might need it let quickly.

Cafe Chick

I figured if I started at 6 months it would look like more of a compromise if I wound back to opening. There have been no offers as of yet mine will be the first (the unit is only on the market a short time). I also know that the LL prefers my plans for the space and is excited about my USP.

delahuntv

Sorry - but I'd run away from it


20k for basic works that you won't own? And your are giving renunciation and 3 months personal guarantee. And you'll still have to fit it out. RUN AWAY.


Always plenty of other premises and plenty with good fitout



Location location location - boring phrase but terribly true. Secondary location will require constant marketing, and you'll have high wastage costs if it doesn't attract immediate custom.

Cafe Chick

Thanks for your input delahuntv much appreciated its exactly why I am on here. I am probably too close to the project and vested in seeing it happen after 18 months of looking for a premises. To give more info on location its on a main road in a well populated suburban area and although there isn't city centre type footfall it is high profile with a lot of passing vehicular traffic.

delahuntv

Cafe Chick wrote: »

Thanks for your input delahuntv much appreciated its exactly why I am on here. I am probably too close to the project and vested in seeing it happen after 18 months of looking for a premises. To give more info on location its on a main road in a well populated suburban area and although there isn't city centre type footfall it is high profile with a lot of passing vehicular traffic.

But a cafe would need footfall rather than vehicle traffic - may I suggest you look into partnering with a garden centre. Loads of examples such as jam in horkans in Cork or vdc in the elms etc.

brianblaze

Cafe owner here.

Sit outside the premises and count the footfall yourself for a day. Boring but necessary. Spending a lot on a rented premises is a big risk if you can't take the final product of the spend with you.