The annual cost for leased restaurant space is calculated per square foot and is known as the base rate.
So for example we are considering a space of 5000 square feet, at a bargain rate of $20 per square foot.
The annual rent would be:
5000 (size in square feet) x $20 (cost per square foot) = $100,000
The monthly rent would be: $100,000 (annual rent) / 12 (months) = $8333.33
On average, total rent costs should be about 7 percent of yearly gross restaurant sales. In many lease
agreements, a percentage factor also is added to the base rate, usually 6 to 8 percent. This
means that the more profit the restaurant makes, the more money it must pay to remain in
Some restaurateurs shrug this off as the cost of doing business, others see it as a subtle
disincentive to strive for bigger bucks. I personally feel it really none of the landlords business what the tenant does for sales.
Term of Lease. Most foodservice business leases are for a period of five years, with two more fiveyear
options—a total of 15 years. In addition to rent and percentage factors, it is not unusual
to have an escalation clause in the lease, detailing a “reasonable” rent hike after the first fiveyear
term. The increase may be based on the Consumer Price Index or the prevailing market
rate (what similar spaces are being rented for at the time the lease is negotiated). Make
sure the basis for any rent hike is clearly spelled out in the lease agreement.
Financial Responsibility. Early in the lease negotiations, you should cover the touchy topic of who
will be responsible for paying off the lease in case, for any reason, the restaurant must close
its doors. If an individual signs the lease, the individual is responsible for covering these
costs with his or her personal assets. If the lease is signed as a corporation, then the corporation
is legally liable. As you can imagine, it makes more sense to pay the state fees to incorporate
before signing a lease.
It may well be your landlord who goes broke, not you. Your lease should stipulate that,
in case of the landlord’s financial default (or sale to a new owner), your business cannot be
forced out and the new owner must abide by the terms of the existing lease until it expires.
This is sometimes called a recognition clause.
Within your corporation, multiple partners must have specific agreements about their
individual roles in running the business. You should probably also outline how a split would
be handled if any partner decides to leave the company. Having these important contractual
agreements written and reviewed by an attorney and an accountant is well worth the cost.
Maintenance Agreement. Another important part of a lease is the complete rundown of who is
responsible for repairs to the building. Some leases specify the tenant takes full responsibility
for upkeep. Others give the landlord responsibility for structural and exterior repairs,
such as roofing and foundation work, while tenants handle interior maintenance, such as
pest control service or plumbing and electrical repairs. These items are easy to gloss over if
you have your heart set on a particular site. Remember, however, that all buildings need
maintenance, and the costs can really add up. How much are you willing to do—and pay for?
Part One Restaurant Owner in Attleboro,MA to Realtor in Attleboro, Mass
Part Two From Restaurant Owner to Realtor In Attleboro, Mass
Part Three Existing Restaurant or Vanilla Box