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Lease (Re) Negotiation Strategies
This is a re-post from about a year ago, but a recent client of ours recently saved $36,000 this year alone in rent based upon our guidance, so we thought we would share again…
My least favorite phrase over the past several months (other than “in the latest Jon and Kate news…”) is “In these economic conditions…”. Everyone seems to be using this catch phrase to better position themselves whether its buying a house or a cheeseburger, everyone thinks that because of the status of the economy they can get a better deal.
For some consumer expenditures this may be true, but in terms of re-negotiating your lease, you still need to do your homework and don’t just go knocking on your Landlords door for a simply handout. Below are our 5 simple strategies that our clients have used….
- You must paint the complete picture for the Landlord on why you are looking to renegotiate your lease. Print the last 3-4 years Profit and Loss, show declining sales trends, vs increased marketing efforts. If you a Franchise concept, call your corporate support staff and ask what the National Average Occupancy Cost (Annual Rent/Gross Revenue) as see how your store compares. If they don’t, use 12-14%. Prepare a complete case for WHY….
- Utilize comparables. Contact a site selection services company, let them know who you are and what you are doing…some might charge you; some might give you info for free. If you are in Denver or Dallas, at RetailCorridor, we maintain a thorough database on recent lease signings broken out by SIC code and Square Footage that can be accessed on a one time basis.
- Add a few months to the term. If the Landlord is willing to lower your rent substantially for 12-18 months…give a little in the negotiations by agreeing to add on a few months to the original term. Chances are that rent is just replacing a significantly higher option period anyway.
- If you are completely under water (and we hope you are not) because of high rents, your success of renegotiating will increase substantially when you accept the fact you may need to close your doors. I recently had a client who was in 3000 square feet at $30+ per square foot…she was bleeding cash. She became desperate to renegotiate and starting giving away the farm in her negotiations with the Landlord. When she came to us and became at ease with the possible closure, her negotiation position became much more tenant favorable.
- Finally, be honest and open. Don’t just share all of the bad news…share good information with the Landlord. As much as they can be a pain in the &^^, they do understand this is a mutual partnership. Keep the lines open and most landlords will work with you.
Most of these can be done on your own, but should you need help feel free to contact us.
Big Horn River Fly Fishing DBA Denver Fly Fishing has signed a lease fir approximately 1500 square feet in Regency’s Boulevard Center. Todd Phelps represented the tenant on the transaction.
Place August 11th on your calendar for our first Franchisee Networking Event. We will be opening up the two hour event to 30 franchisees across the Denver/Fort Collins market. Use the opportunity to share cross marketing/grass roots efforts, learn best practices. The topic of the first series is Lease Strategies in 2010/2011. Event is limited to 3 Franchisees per concept.