How to Negotiate a Commercial Lease
As with any business, a good location is key to its success. Especially in the early phases of opening your business, there are bound to be busier days than others, both highs and lows. If your rent is too high, what does that mean for your stress levels when you’ve hit your third slow day in a row?
One thing that many new coffee business owners don’t understand is the great leverage you have in negotiating the terms of your lease with your landlords. It is key to understand that opening a coffee shop is a GREAT boost to a community or a neighborhood – it acts as a gathering space, a space for business to be conducting, meetings to be held, and is oftentimes the focal point of a community.
Throughout the years, we’ve seen hundreds of coffee shops successfully negotiate FREE RENT for the first two, three, or even four years of their existence. That way they can take their time to slowly grow and develop a following, not stress about hitting a home run from the first day they open their business.
Convince your landlord that having a thriving, successful community space like yours will undoubtedly raise the value of all of the units around it. If you’re in the bottom of a condo, hotel, especially…they need you as much as you need them.
It’s just up to you to convince them. They won’t offer it right off the bat.
Here are four essentials we found to negotiating your commercial lease for your retail space:
When searching for the perfect location how you present your business is essential. Having a comprehensive business plan is an essential part of that process, but your business plan won’t sell itself. You are also selling your ability to execute your business plan. Like it or not, perception is extremely important. Remember that you are representing your future coffee shop and brand, so dress the way you want your brand to be perceived.
Business contacts are more likely to invest in your future business when they can see that you, yourself are invested in it as well. Pay close attention to your dress attire and appearance when meeting with people like property managers, investors, and other crucial personnel involved with the startup of your coffee business. There is a fine line: Walking into an important meeting dressed casually may not convey the needed sense of professionalism and seriousness with the business contacts you are trying to “sell” your brand, but dressing too formally may seem unnatural if that style is unusual for you. If you’re unsure, it’s usually better to dress more formally than more casually, but try to get an idea of the people you’ll be talking with before you ever meet. Do they respect a clean presentation, or do they value some authenticity? Marketing your coffee shops goes much beyond your typical idea of advertisements; it starts with the way you appear to the people who matter in the start of your brand new entrepreneurial venture.
Do Your Homework
To even begin to qualify for the perfect location, you need to know your business plan from the inside out. The business plan in a stack of paper may, again, be amazing, but it needs YOU to help sell it. The papers can’t speak and you can, so make it sound amazing. Like selling yourself in an interview, sell your business plan to those who matter.
We recommend rehearsing your presentation in the mirror or with a friend many times so that you can become as comfortable as possible with speaking about your future company in the most genuine and knowledgeable way. It’s important to be honest with yourself and with the people who are helping you practice this, to be critical of your presentation. While it may seem nit-picky or discouraging, it’s better to work out the kinks by yourself or with someone you know rather than while negotiating your lease.
These great locations don’t go to just anyone who is looking around; they go to people who have dedicated the time and energy to do their homework on the industry, target market, and product you’re trying to sell. Not only do you need a firm grasp on all things about your business and industry, but you need to know how to properly communicate that understanding you have gained.
Whether you’re new to the coffee industry or a seasoned pro, you can never stop learning about it. Keep up with reading the latest news, books, and documentaries that are involved with the coffee industry. Stay in the know so that you have a recent, well-rounded knowledge base for your presentation of your business plan. The more you know, the more questions you’ll be able to answer when the time comes for you to meet with property managers who have the final say about allowing you to rent space from them. Have the confidence and information at the ready to assure any doubts or confusion they have regarding the coffee industry or your specific business. The more confident you appear in these meetings, the better they will feel about allowing you to rent from them, knowing you have done your research and aren’t doing this on a whim.
Consider Your Needs
The location for your business needs to also be the location that feels best for you personally. It should fit with your business, lifestyle, and interests as an owner, to bring all of those together to provide the very best experience for your customers. It’s important to evaluate each location you are considering and ask yourself a few personal questions for each:
- What is my immediate reaction or response to this location?
- Will be able to enjoy spending 40-60 hours each week here?
- What do I like most and least about the location?
- How important is each pro and con to the decision you make?
- How do I feel about the others who live and work near this location?
- Are there enough people around here that would frequent my coffee business?
- Are these the kinds of people I want to be doing business with on a day-to-day basis?
- Will this location help me capitalize on my strengths as a business and owner?
- Does this location have potential for growth and development for my business?
It’s important to think deeper than just your bottom line when deciding on a location for your coffee business. This is where you will be spending a large part of your daily life and where, hopefully, your business will succeed. If you as an owner are unhappy and doing business somewhere that does not fit your lifestyle, your business will end up suffering just as much as you. Your coffee shop will only be as happy and successful as you allow it to be. The location you choose should be the best of both worlds for both you and the business you are creating.
Appealing to the Property Management
Putting yourself in the shoes of the property manager and landlord can make a world of a difference. If you can see the leasing process through their eyes, it’ll help you better convince them why your business is good for not just you, but them too. Pay attention in conversations with these property managers or landlords to what is important or catches their attention. This will allow you to cater your pitch to show them what they can gain from this business deal. Also consider these questions when attempting to negotiate your lease and relate to these landlords or property managers:
- What can your business bring to their space that they did not have before?
- What benefits (profits, additional foot traffic, etc.) will that bring them?
- How does your business interact with others in the vicinity or same building?
- How can your business cater to the property management’s interests?
Say you wanted to set up an espresso cart in the lobby of an office building. Here are some things you could say to the landlord:
This space is currently going unused and is generating no income for you right now. Without our operation, it’ll continue to be a dead space. Our cart will add some sophistication and class to this office building compared to the others around you that don’t have a full service espresso bar in its lobby. It’ll also help provide you with competitive leasing advantages seeing that these other office buildings don’t have anything of this kind it their lobbies. Our services will help keep your current tenants happy and to draw new ones as well.
If you are in a different situation and wanting to lease a sit-down coffee shop or a drive-thru operation, a conversation with the property management could be something like this:
Beyond simply receiving rental income from us, our speciality coffee business will provide so much more. It’s proven that once a speciality coffee shop opens in an area, the businesses in that vicinity experience an increase in their sales due to more people on the property on a daily basis. Your surrounding properties will see an influx in customer traffic, giving them exposure to more potential customers. This stimulation of business within your shopping center coming from my coffee shop may help keep some of your other tenants in business. I personally feel that a fully-leased, busy shopping center is a great thing for everyone!
By having these types of conversations with the landlord or property management company, you can show them that your business can cater to their needs too. A successful coffee shop can be a huge asset to a property. Taking this approach shows that you are willing to provide a shared benefit to the community and surrounding businesses.
What you should do after signing a lease
These four essentials are a great place to start when you are thinking about how to negotiate your commercial lease. With these tips in mind, you should be able to score the perfect location to ensure that both you and your coffee business have a long, successful future in the coffee industry. Don’t be afraid to walk away if you are not sure about a location. If you’re not 100% sure about a location, it’s better not to invest a huge amount of time and money there. Plus, it’s a great negotiating tactic. Once you’ve got your lease, it’s time to think about coffee shop design.