Lease Agreements

Hello,

I in the process of starting up my first Pizzeria. I would love to be able to study a few actual Pizzeria lease agreements. Can anyone tell me where or how can I do this? Is anyone willing to share theirs?

I am looking to do a smaller, wood-burning brick oven pizzeria with 50-70 seats.

Thanks,

Dave

sorry what do you mean by study the lease agreement ? did you study the location?

All of the lease agreements I have seen are not only onerous, they are also plain sloppy. The leasing agents generally just use some corporate mega-lease and change it up a bit for the location. Consequently, after a few iterations, the dang thing has all kinds of clauses that have nothing to do with the location. I am currently pruning a behemoth that has clauses about promenades that do not exist, references to laws of the wrong city, and lots of other nonsense. They even intentionally or unintentionally changed some things we orally agreed on. Take a chainsaw to what they send you and send it back to them. Then when they come back with the stuff they really insist on, you can run it past your attorney for review.

If I knew of a savvy lease negotiator I could be assured would strike a great lease, I would hire them. But I do not despite asking around.

  1. A lease is a contract to pay a LOT of money. It bears spending time getting it right.

  2. there is no one way to write them. Some of them are pretty fair, most are not.

  3. Don’t listen to leasing agents talking about standard this and normal that. Hire a lawyer that does leasing… not the one that wrote your will (you do have one right?), not the one handled your brothers divorce or the one that does traffic stuff etc. Leasing is a specialty and this is a major commitment.

The comments made above about shoddy documents is on the money. If you have specific questions drop me a line. I did location selection and leasing nationaly for a national retailer and am a licensed broker in Colorado.

There are two important parts of lease negotiation:

The first part is the deal. A lease contains about a half-dozen major areas that are what I would call deal points. These are financial items that can save or cost you money. The do not stop with the basic rent amount. There are another half-dozen or so in addition that are less important because the amounts are smaller. Attorneys can point these out, but in the end, it has been my experience that they do not really negotiate these for you. The secondary items can easily add up to 10s of thousands over the life of the lease.

The second part of negotiations I would call the “what ifs”. Attorneys are very important here. The lease contract defines the rights and obligations of both parties and what happens in certain circumstances. For example, under what circumstances can the LL just throw you out? MANY leases offered (and signed by innexperienced people) allow the LL to toss you with no definable reason.

Spending a couple of thousand with an attorney on the lease can protect you in a big way. DO NOT SIGN A LEASE WITHOUT CONSULTING AN ATTORNEY!

The major money buckets are:

Minimum Rent
Common area expenses (maintanence, tax, insurance, manangement fees etc) Definitions and xclusions such as capital expenses are important.
Rent Escallation
Rent commencement/holiday
Build-out/Tenant Improvements
Lease Options
Deposits/penalties/fees

Great post, bodegahwy. Wanna look over our lease?

Dewar, I would be happy to have a look. I am not an attorney and not a licensed broker in your state so this would be just a favor not a paid service. What I will do is point out any areas I would suggest you make sure an attorney has a look at and explain the possible issues with what I see. Customs and laws differ from state to state.

At least it will be a starting point for you.

I don’t have a location yet. I have a year before I can do anything so I am learning all I can. I have read about leases, but would like to see an actual lease before I get interested in a specific location.

Thanks,

Dave

I think you have it backwards. Look for the right location first. Then see if the lease is something you can live with. In order to do that, you need a pro-forma and cash flow making assumptions about sales and size requirements. You need to be sure that your assumptions have some solid connection to reality when it comes to sales and expenses like rent.

A realtor in your area should be able to tell you what the going rate for rent is. It will be expressed in dollars per square foot. In some regions the number is annual, in others it will be per month. ($2 per month = $24 per year). Most leases will be triple net, meaning that the rent quoted does NOT include the property tax, insurance on the building and common area/maintanance expenses which are added on after the base rent.

Rents vary quote a bit. From street to street and from block to block. They vary by building type and condition and every imaginable factor like ceiling hights, parking, existing finishes etc. There is NO standard.

Right now I am studying restaurant accounting through a book. I am finding it very helpful to see all of the example income statement, balance sheets, etc…
I just thought looking over 5-10 real pizzeria leases would have the same learning benefit that I am getting out of my books.

Dave

There is far less “standard” about leases than there is about financials.

study the location do not wory about the lease

Well I found the perfect location 3 months ago and it has taken 90 days and $4,000 in legal review to get a 70-pg lease done because the landlord brought the wrong lease to the table. There are way easier and shorter forms. Take a look at www.lawdepot.com where you can download a lease for $19.50 and edit it for a year.

Hope to sign this week. Biggest headache of the whole project (except maybe the 1,250 gallon grease interceptor we have to put in). I have an excellent lease lawyer in Boston - 25 yrs experience doing commercial leases. www.leaselaw.com Tell him Pizzeria Rustica sent you.

Shack

Is your recommendation the one that charged $4000?

I wish I had started with a simpler form of lease, but commercial leases tend to be pretty long with allthe contingecies for restaurant, kitchen, etc.

If the landlord issues you a complex commercial lease and you do not have the legal background and you want to rent the premises you have to pay a lease lawyer to go over it to protect yourself. Review runs about 15 mins per page at an hourly rate of $180-$280/hr depending upon lawyer. The lease lawyer is going to be able to do it faster than an ambulance chaser.

$4,000 can be cheap in comparison to get taken to the woodshed by the landlord for 5 years.

shack