This Episode: Let’s Talk Leases
In this episode of Real Retail TV, I address a question from our WhizBang! Retailers Facebook group on negotiating leases for your business. When it comes to legal advice, you want to make sure you are talking to a professional. Having a lawyer to help you go over the fine print is crucial to your success in negotiations. Protecting your business, yourself, and your family is worth the expense of hiring a professional.
Do you have any stories or advice about negotiating a lease? I’d love to hear about it in the comments below.
Always good info from Bob. If you want to delve into this a little more, look for the book, Negotiating Commercial Leases & Renewals For Dummies, at your favorite independent book retailer. I bought this about a year ahead of my first lease renewal and burned through it in a weekend. What I quickly realized is that leases have a lot of moving parts and possible provisions that can help or hurt you in big ways. If you don’t know about them, you can’t ask for them or use them as negotiating points. As Bob says in the video, always hire a pro to help with negotiations. There’s a lot more to retailing, but everything else being equal, a good lease can be the difference between a profitable or money-losing location.
Matt, thanks for the comment! Do you homework first is always a good answer.
Another point to consider when signing a temporary lease at a mall or other location is if the rent will increase during peak shopping season, also if there are “triple net” and CAM, and if there is percentage rent. These can be killers if you’re not prepared.
Linda, those are great tips! Thanks for sharing.
how much is too much for a lease? is there a rule of thumb?
Hi Steve. Real estate rates vary wildly. You should contact a local, respected commercial real estate agent for accurate information on local rates.
I would also add to know your numbers when determining whether a lease amount is too high. Understanding current and projected sales per square foot, inventory per square foot, and the lease expense benchmark for your retail niche is important. While it may not be possible to always match the perfect amount with the current market lease rate, the closer you can get, the more control of your profit you will have. For example, if the market lease rate is $3K/month, but the lease expense benchmark calculates to only $2K/month, then you know you have to be diligent about promotions and meeting sales goals to avoid cash flow agony and missing profitability targets.