Leasing Strategies - Stay focused on the big things
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Leasing Strategies - Stay focused on the big things

Leasing Strategies - Stay focused on the big things

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 two of them told us about staying focused on the main things.

 

Don't sweat the small stuff

Too often franchisees--under pressure and armed with a franchisor's laundry list of requirements--get bogged down in the minutiae, says multi-brand franchisee Mike Philip, whose portfolio includes Tropical Smoothie Cafe and Einstein Bros. Bagels. "To get the deal done, worry about the big things," he recommends. "How much am I going to pay? What are my renewals? Will there be a personal guarantee and does it burn off? And then, what is the turnover condition of the shell? Don't make it harder than what it is."

Make a checklist of brick-and-mortar needs for the space. Look for hidden expenses. Careless lease negotiation mistakes can hurt you down the road.

"I have done that in the past where we have assumed incorrectly about maintenance on AC units, only to find that we didn't budget, thinking the landlord was responsible for the roof unit outside our four walls," says Philip. "We have eaten that cost."

He now considers a clear work/shell condition letter part of every negotiation process that defines the condition of the space down to the size of the water line, utility locations, and dumpster responsibility.

Lease negotiations are also about give and take. It is vital to know your market and what concessions you can--or cannot--make without putting your business in jeopardy.

"Too many times a franchisor will provide a guideline that will chase any landlord away," says Philip. "So compromise, put it in black-and-white, and attach it to the lease as a rider/exhibit."

Sometimes it pays to practice patience. Christopher Severo, who operates 46 Wireless Zones, has walked away from the table when talks have stalled with no middle or common ground, only to have the landlord reach out later to get the deal done. "Those have been incredible learning experiences," he says. "You are going to get the best deal when you are willing to walk away. When you approach it that way, you might lose some deals, but today you are going to get more than you lose, and that piece is huge."

Published: March 3rd, 2020

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