Your Restaurant Search Simplified

Searching for a Restaurant Location? Here's some advice:

1.    Location, Location, Location: A boring old adage, perhaps, but when you're talking restaurants, nothing is more important. In fact, a poor location is the #1 reason restaurants fail. Walk-in traffic is crucial for eateries, so locating your new venture off the beaten track might save you a few bucks in rent, but could hurt when it comes to attracting diners.

2.    Restaurant Improvements: Some say that searching for a restaurant with the necessary kitchen equipment and is worse than searching for a needle in a haystack. Look for restaurants that are currently for sale. Otherwise, begin building in the kitchen improvements into your construction budget. Have a contractor in mind so you can get quick estimates.

3.    Permitting: As you tour potential locations, make sure to ask about permitting and current zoning. Venting and stove equipment may be prohibited in certain buildings. Discuss potential restrictions with the owners, brokers, and city employees as soon as possible.

4.    Neighborhood: As you walk the neighborhood, take note of competitors and the level of foot traffic. If your past space was occupied by a restaurant, find out why it moved. Ask neighboring restaurant owners for advice and referrals to potential suppliers.

5.    Building Expenses: Most retail buildings add in NNN expenses. These include property taxes, insurance, and common area maintenance. Ask the owner for the last few years of building expenses at each potential location. Keep a spreadsheet of all relevant building- related expenses so you can get a true comparison since buildings can have drastically different expenses.

6.    Lease Negotiation: Many commercial building owners will attempt to get a percentage of your revenue or even a percentage of the sales price when you sell the business. Have a qualified attorney help you review the lease language and customary terms. A lease is a legally binding document, so know what you're signing!

7.    Free Rent: Building out your restaurant can take six months or more. You don’t want to be paying rent for this entire period. It is reasonable and customary for some if not all of this construction process to be rent free.

8.    Common Improvement Problems: Bathrooms, venting, and American with Disabilities Act (ADA) are the most common issues with restaurant spaces. Restaurants often need to address one or more of these issues. Monitor the costs closely.

9.    Personal Guarantees: If this is your first restaurant, many building owners will ask you to personally guarantee the entire lease value. This is a risky proposition but can't always be avoided. Try to phase the lease guarantee out over the course of the lease. For example, you guarantee the first year or 18 months of the lease but nothing beyond that period.

10.    Brokers: Hiring a local real estate expert to help with the search and negotiation process is advisable. Make sure to ask them about their experience working with restaurant clients and in knowing the specific neighborhoods you're interested in.

For more information on leasing restaurant space see the Advice section on www.rofo.com

Last updated: 04.29.2009 02:47 PM

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