Leasing Strategies - Conduct research before the bargaining table
There are challenges multi-unit franchisees face in site selection and leasing no matter what kind of market exists. Lease negotiations is an important constant for franchise growth and longevity. Identifying specific issues early in the process can provide powerful leverage to help establish and sustain success.
Earlier this year we interviewed several multi-unit franchisees and got their advice and best practices for site selection and lease negotiations. Here's what one of them told us about researching the lease situation.
Do your homework
Before you go to the bargaining table, do your homework. Ask up front what the landlord's objectives are to learn what may drive the economics of the deal, suggests Bryce Bares, who operates 12 Dunkin' stores in Nebraska and Kansas. Are they a long-term holder or a developer?
For example, he says, if a landlord is planning on flipping the building to an investor, you know they are looking for high base rent because their property value is based on the rental stream. In that situation, you may be able to negotiate higher up-front tenant improvement contributions. "Alternatively, if the owner is a long-term holder, they may be willing to accept a lower rent for a longer-term commitment perspective."
It is also helpful to know early on whether the landlord is so one-sided that they aren't willing to negotiate on items critical to the franchisee, says Bares. "I don't like wasting time negotiating with landlords who have unrealistic expectations about the economics."
Negotiations are about building a relationship with the landlord or their representative. The most successful strategy creates a win-win scenario for both parties.
Understanding the landlord's thinking can go a long way toward helping franchisees structure a winning agreement and avoid needless concessions, says franchise development veteran Greg Vojnovic.
"The landlord is not your enemy," says Greg Vojnovic, president and CEO of Vickery Creek. Formerly chief development officer for Inspire Brands, he has opened more than 2,000 restaurants and remodeled thousands more. "Try to get to know them," he says. "Find out their goals and what they are trying to do with the property. This information will enable you to determine your objective. If it's a big winner for you, tie it up for as long as you can. Rich people don't get rich by saying okay."
Finally, never talk proposal terms on the phone, says Vojnovic. Face to face is best for negotiating a deal that works for both parties. "You are never as smart as you think you are," he says. "You have to be authentic and have credibility. You don't want to walk from a deal point."
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