Taking the plunge on a 4th location

[TexasHusker]

Wholly smokes, I'm doing it. There is new construction here at a major intersection and I'm putting in a new location -signed the papers today.

I can't believe I'm paying this much in rent, and a 10 year initial lease, but I think it's going to work fine.

High traffic counts, high incomes.

Opens October 1.

[disneysteve]

That’s great. Good luck!

[Fishindude77]

Best of luck !

[TexasHusker]

The scariest thing about these deals is the financial commitment. Super high rent and 10 years of commitment. You can be really sure of your deal and still be taken aback by such.

[disneysteve]

10 years of commitment

How does that work exactly? Most new businesses won't last 10 years. What happens when someone rents a storefront to start a business and the place fails in 2 years?

On the flip side, what if someone opens a shop and the business really takes off and they need to move to a bigger place in 3 or 4 years?

Are there terms for getting out of the 10-year lease?

[MooseBucks]

How does that work exactly? Most new businesses won't last 10 years. What happens when someone rents a storefront to start a business and the place fails in 2 years?

On the flip side, what if someone opens a shop and the business really takes off and they need to move to a bigger place in 3 or 4 years?

Are there terms for getting out of the 10-year lease?

My questions exactly. I'd think the lease isn't personally guaranteed and that there is a different corporate structure for each location so when one goes under they can't come after the others. Makes it easier to walk away.

[TexasHusker]

There are strategies to exit a lease. But if you go that route, you'll never be able to lease another space. You're done.

[disneysteve]

There are strategies to exit a lease. But if you go that route, you'll never be able to lease another space. You're done.

So what do you do? Do you have to keep paying the lease for the 10 years even if your business closed or moved years earlier?

[TexasHusker]

So what do you do? Do you have to keep paying the lease for the 10 years even if your business closed or moved years earlier?

Essentially, you negotiate with the landlord on some terms. It is not in the landlord's interest to have a space "dark" for 10 years. It's not good for his shopping center. So the landlord is going to be looking for a tenant.

So it might be that you pay the landlord for X amount of months of rent as a negotiated settlement.

You can stiff the landlord and he's not apt to pursue you legally because of all the time and expense, but your name is mud and you can't ever lease a space again. News travels.

Landlords love franchises because they are so much more stable. My particular franchise, the failure rate is extremely low.

[disneysteve]

Landlords love franchises because they are so much more stable. My particular franchise, the failure rate is extremely low.

This is true, but it also makes start ups really challenging. A restaurant recently opened in the center next to my office. It is a fast casual Mexican/Latino place. They have a great story and use a lot of the proceeds from the restaurant to equip and supply an old school bus converted into a restaurant that they take to impoverished areas and provide free meals to the poor.

They had one location across the river in Philly that has done well and they were searching for ages for a 2nd location and couldn't find anyone willing to rent to them since they weren't a known brand or big company like Chipotle or Moe's. Finally, the developer who owns their existing space bought this center and was willing to give them a spot knowing their history and reputation. They opened a few months ago and are doing great here.

This is part of why we see so much homogenization in retail and dining. Every strip center has an assortment of the same stores and national chains that you see everywhere whether you're in New Jersey or Pennsylvania or Florida or Colorado or California. It's harder and harder to find those local gems.

[rennigade]

This is part of why we see so much homogenization in retail and dining. Every strip center has an assortment of the same stores and national chains that you see everywhere whether you're in New Jersey or Pennsylvania or Florida or Colorado or California. It's harder and harder to find those local gems.

Yep...dicks sporting goods, kohls and target come to mind. Theres usually a bed bath and beyond with them too I believe.

[TexasHusker]

This is true, but it also makes start ups really challenging. A restaurant recently opened in the center next to my office. It is a fast casual Mexican/Latino place. They have a great story and use a lot of the proceeds from the restaurant to equip and supply an old school bus converted into a restaurant that they take to impoverished areas and provide free meals to the poor.

They had one location across the river in Philly that has done well and they were searching for ages for a 2nd location and couldn't find anyone willing to rent to them since they weren't a known brand or big company like Chipotle or Moe's. Finally, the developer who owns their existing space bought this center and was willing to give them a spot knowing their history and reputation. They opened a few months ago and are doing great here.

This is part of why we see so much homogenization in retail and dining. Every strip center has an assortment of the same stores and national chains that you see everywhere whether you're in New Jersey or Pennsylvania or Florida or Colorado or California. It's harder and harder to find those local gems.

The local gems are there, but they are normally not in Prime Retail. That's what makes them gems.

We had a local pizza place here years ago that was fabulous and packed with patrons. It was in the back of an old warehouse. They then decided they needed to move to prime retail and did so, and was out of business within a year. They failed to realize that a big part of their success was the atmosphere and ambiance of the warehouse location. When they moved to prime, they were competing against Pizza Hut at twice the price and couldn't hang.

Bad move. Prime Retail is mostly for your national brands.

[bjl584]

Good luck!

[disneysteve]

The local gems are there, but they are normally not in Prime Retail. That's what makes them gems.

But even in "not prime" space, the big chains and brands have moved in. The Main Street area of the town next to ours used to be all small businesses, mom and pop places. Then Starbucks opened on the corner. And Cold Stone Creamery. And a couple of other chains. I guess the landlords would rather rent to those known entities that have a much lower failure rate, but it's turning what used to be a novel, quaint shopping and dining area into yet another homogeneous strip.

[TexasHusker]

But even in "not prime" space, the big chains and brands have moved in. The Main Street area of the town next to ours used to be all small businesses, mom and pop places. Then Starbucks opened on the corner. And Cold Stone Creamery. And a couple of other chains. I guess the landlords would rather rent to those known entities that have a much lower failure rate, but it's turning what used to be a novel, quaint shopping and dining area into yet another homogeneous strip.

If a business wants to be in Prime, there are willing landlords.