This bar lease article focuses on negotiation and is a sequel to my previous article, Before You Negotiate Your Bar Lease
As I mentioned in my previous article on this topic, negotiating a bar lease is one of the key steps in the process of owning your bar and will have consequences that will ripple throughout your ownership of your bar or nightclub affecting everything from bar design and build-outs to how much money you will have to start your career in the bar business. If you don’t secure a favorable bar or nightclub lease, not only will you be paying much more than you should, but you may also get stuck paying it for a prolonged period of time. In fact, one of the reasons why so many first time bar and nightclub owners fail the First Time they venture into the business is because they mismanage this stage of the process.
So here then are some tips to help you negotiate a bar or nightclub that will give you best chance of success.
Have a Strategy Going into Negotiations
One of the worst things you can do when going into a bar lease negotiation is to not have a plan of action. Just like a football team going into a ball game, if you don’t have a strategy and haven’t done your homework, you are likely to fail. From the pointers I gave you in the previous article, you should have some sense of the owner and the place where you are looking to lease.
You should know:
- What similar bars and nightclubs in the area pay for their leases.
- What you will need to do to remodel the location for your needs.
- How long it will take you to open.
- How your landlord acts towards other tenants or neighbors.
With those you should develop a strategy. Generally speaking, in the beginning you want to be ready to bring up what you would want from the landlord. (Usually the best course is to ask for too much and then negotiate toward a middle ground.)
Typical Tenant Requests for Leasing a Bar
Here are a few things you might consider asking for:
- No more than a one year deal: Try to keep the lease to a limited amount of time at first rather than a longer deal, just in case things don’t work out so that you are not liable for keeping up your pub lease even after owning a bar has become an unpleasant memory.
- Pro-Rating Rent: If you get locked into a longer deal, try to ease yourself into it by having a lower rent the first year, and then increasing your rent as your bar or nightclub lease matures.
- Grace Period Until Opening: This is key. If at all possible try to delay the first lease payment until after you have actually opened. The last thing that you want to have to do is pay rent while your doors are closed and you have no money coming in from the business. This can be nerve racking—especially if there are delays in construction.
- Build-Outs and Bar Redesign: If you need to convert the location so that you can install your kitchen, or if it is an older building and needs to having plumbing or the electrical wiring redone in order to accommodate your facilities, you can often get the landlord to subsidize these building improvements. Typically the break-down of who pays what amounts has to do with nature of what is being redesigned. The landlord will probably not want to pay for your bar having Cool Ceiling Lights or for a LED Dance Floor. If, however you going to change the plumbing, create greater ventilation, or replace the electrical your landlord should be able to cover this since it will be a change that he or she will keep even when your bar is gone.
Hidden Terms of Leasing a Bar
The other reason you need to make sure that you bring your lawyer or financial planner is so that you can make sure that there are not hidden costs or terms that you don’t notice. You should be careful that you note whether the following are or are not included in the lease:
- Requirements that you pay extra for trash pick-up or other services.
- Restrictions on what kind s of bar design or redesign you can engage in. Many landlords will not allow you to do build-outs without permission and will make all kinds of restrictions on what you can do to the space. Some will even try to pre-determine your hours of operation. Be aware of these and make sure that you can still create the place that you want.
- Subleasing. If you have a long lease, try to make sure that you will be able to sublease to another tenant should things not work out. This gives you a way of trying to keep from losing too much money in the process.
And, of course, always be sure to bring a trained financial advisor with you, before you sign anything.
About the Author: