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5 Points to Consider Before Entering into a Restaurant Lease

Its a well-known fact that the restaurant industry is a notoriously difficult industry in which to succeed. The legal implications involved can be especially daunting. But if you know what you are doing, taking on a lease shouldn’t be a scary thing. Keep reading to find out what you need to consider before you take on a lease for your restaurant.

1. Place

The location of you restaurant is critical to if it will thrive or fail. You also have a couple of different options on how to get a lease for your restaurant. You can look for a suitable site, lease it out, and build a restaurant premises up from scratch. Alternatively, you could find a restaurant with a couple of months still left on its lease, and simply transfer the lease to your name, and run the restaurant as is, or change it to suit your needs.

Sourcing and leasing a property that doesn’t have a pre-existing lease will definitely be more of a headache. On top of securing the lease, you’ll also need local authority approval. This will allow you to use the site as a restaurant. Without this permit you could find yourself in legal hot water. Even if you choose the easier route, and take over another restaurants lease, it’s a great idea to get your lawyer to check if this lease is suitable for your business. Maybe the landlord won’t allow it to be renewed. It might only have a month left on it. In that case, you may want to reconsider taking on such a lease.

2. How long is the lease?

You might think that taking on a 6 month, 12 months or 24 month lease all have similar ramifications, but you’d be wrong. Say your business were to go bottoms up. Often, breaking a lease early is extremely difficult. Sometimes your only option is to transfer the lease to another restaurant-owner. In a worst-case scenario, you might find yourself paying rent and keeping your doors open while running your business in the red..

Choosing a shorter-term lease may be the way to go but be sure not to sell yourself short. If you have to move premises after 6 or 12 months, you could lose loyal, local customers. Don’t worry – there are other options. If you are thinking of requesting a shorter lease, make sure that it includes an initial set term as well as the option to extend the lease, which you can take up without any restrictions if you want to.

3. Price

You might think that the cost of your rent is based solely on your chosen location. If you want to open up shop in a pricey location – tough cookies. You’ll be happy to know that there are more factors at play than postcode alone.

You can request that the rent includes your outgoings such as electricity and gas, if you think that this will be more cost-efficient. Your landlord may also pay for a portion of your fit out or even the insurance cost.

Finally, you will need to determine if you are paying rent based on the size of your premises. If so, you need to make sure for yourself exactly how many square metres you are renting. You might need to survey the location yourself to see if you are being asked to pay a fair price or not.

4. Upkeep

Restaurant fit out can be incredibly expensive. Costs for a brand-new kitchen can run well into the six figures, as can costs for seating areas. Don’t be fooled into thinking that a restaurant with a pre-existing kitchen fit out won’t cost you a penny. Kitchen equipment like rangehoods, pipes, dishwashers and more need to be repaired or upgraded regularly due to wear and tear. They might also need to be upgraded or replaced to comply with building, Council, and other regulations. This kind of kitchen can also work out to be very expensive.

5. Renovation

A common condition of many leases is that you will be required to refurbish the premises at regular intervals as necessary, for instance every 2 or 5 years. This can include paint jobs, maintaining to floor, replacing glass and even maintaining your own décor and fit out. Mandatory repairs and maintenance are actually a good thing for your business, as they make sure that your business always appears upmarket and professional.

Summary

Entering into a lease for your restaurant is incredibly exciting. Being a legal agreement, it also carries with it a lot of pitfalls, and that’s why it’s so important for you to know what you are getting into. You don’t have to be a lawyer, but doing your research and understanding your rights could save you from hot water later on.

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