Commercial Appeal: Nine Negotiating Strategies to Lower Your Commercial Rent
Among the many costs associated with running a successful franchise are staff wages, marketing campaigns, and product costs (with regard to ordering and maintaining an inventory). One of the biggest expenses, without question, has to be your commercial rent. Higher income from rent-paying tenants, like you, will make a landlord happier. However, this remains as money out of your pocket. By decreasing your monthly rent, your profits will increase. Doing this is not impossible. Know that the amount of rent that you agreed to pay at the beginning of your lease term is not necessarily the amount of rent you will pay on your renewal. I have been quite successful in negotiating midterm rent breaks and lease renewal rent reductions for many clients - both independent business owners and franchisees.
Here are some negotiating strategies to lower your commercial rent:
- Start Early. Lease renewal negotiations should begin nine to 12 months before the term expires. If you can't get a decent renewal rate and decide to move, would you rather know this with six months or six weeks left on your lease term?
- Create Competition for Your Tenancy. Even if you don't want to move, shop around and collect written offers from other landlords. These can be used as leverage when renegotiating with your current landlord.
- Take Your Time. Remember the leasing process is a process and not an event. Multi-unit franchisees often rush a lease deal and leave valuable inducements on the table. Often, we get tenants more free rent, more tenant allowance, and even more discounted rent just by refusing to sign on the dotted line too quickly. By remaining patient and taking your time, you stand a better chance of negotiating a better lease deal.
- Let the Landlord Approach You. For a new lease or a renewal, resist making the first offer. By doing this prior to your renewal, it implies that you will stay - thereby undermining your negotiating strength.
- Ask Questions of Your Landlord. This applies to both a long-term and a new landlord (who may have just purchased the building). What are their future plans for the building? Does they plan to renovate or sell the property? Are the anchor tenants staying?
- Talk to Other Tenants. Some of the best inside information is from tenants already in a building. Approach your neighbors within the property (specifically those who have just renewed their leases) and ask how things went. What, if anything, did the landlord offer to them to stay? What terms did they agree to? Was the landlord compatible to their requests? What you learn here may surprise you; use this wisely in your negotiations/renegotiations.
- Ascertain if New Tenants are Receiving Tenant Inducements. If new tenants are being presented "perks" to move in, then you, as an established tenant, should also be offered incentives to stay. You have proved yourself as an established tenant.
- Ask for More Than You Need. When negotiating for free rent, tenant allowance money, or any other term, always ask (negotiate) for more than what you need. If you need six months of free rent, ask for nine months. Resist beginning negotiations/renegotiations at the level that you are prepared to accept. Also, by asking for more than what you expect to receive, you position yourself to strategically give and take depending on the importance of certain items to you.
- Negotiate Non-Rent Issues. These include parking, signage, and any deposit or personal guarantee which you may have previously agreed to. Do you need more spaces for customers and/or staff? Would you like parking stalls closer to the property doors? Would you like to see more/better signage with your business name outside of the property? Is the landlord holding a deposit of yours? As a seasoned multi-unit franchisee with numerous locations, you do not remain a security risk.
My best advice for negotiating a lower rental rate is to work with a professional commercial lease consultant who can do this for you. I have successfully advocated for many tenants and negotiated, often substantial, rent reductions. Doing this effectively takes both patience and experience. Remember that without any help whatsoever, you are going to possibly remain paying excessive rent. Also remember that franchise tenants don't get what they deserve; they get what they negotiate!
For a complimentary copy of Dale's CD, Leasing Do's & Don't's for Franchise Tenants, please e-mail DaleWillerton@TheLeaseCoach.com.
Dale Willerton is The Lease Coach and a senior commercial lease consultant who works exclusively for tenants. Dale is a professional speaker and author of Negotiate Your Franchise Lease or Renewal. Got a leasing question? Need help with your new lease or renewal? Call Dale at 800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com, or visit www.TheLeaseCoach.com / www.HelpULeaseFranchise.com.