When I obtained my real estate license 18 years ago, I had no idea that today I’d be spending so much time in a very exciting and rewarding unique segment of commercial real estate: representing business owners’ negotiating new commercial leases in the restaurant and hospitality sectors as well as advising the owners of family and locally owned restaurants when they relocate or expand into new locations.
How did that happen? Back then I was also co-owner of a printing business with my husband, and we printed menu mailers for many local restaurants. We built some wonderful relationships with these owners, and typically when they learned I also had a real estate license they came to me for all kind’s advice – about business strategies, leases, marketing, locations, and so on.
Based on this experience and passion for commercial real estate and the Food and Drink industry, I’m happy to share some real estate advice with my metro-Denver friends in the Asian restaurant community.
When you choose a real estate broker, make sure the person is a commercial real estate broker and has specific knowledge and extensive experience in restaurant and hospitality real estate negotiations.
One quick but important point of information: When you engage a commercial real estate agent as your tenant broker, you don’t pay that person any fees. The agent’s fees are paid by the landlord at the conclusion of the deal, but the agent is working hard on behalf of your interests.
Now I’m sure you know many other brokers who focus on residential real estate. Some may be close friends or even family members. You may be tempted to tap them to find and arrange your next restaurant location. Please think twice about this because the stakes are high.
It’s a pretty safe bet residential brokers won’t have a full appreciation of the very unique negotiating strategies you’ll need to use to get your best deal. In short, maybe a residential real estate agent can help you sign the papers, but they probably won’t be a value-added partner throughout the process and beyond.
Similarly, not every commercial real estate agent knows the hospitality and restaurant world. Arranging for a restaurant location is far different than finding office space. An engineering firm, for example, has many location options across this region. And in those negotiations, tenants can create leverage by actively negotiating with multiple building owners.
But restaurant owners need to go where their customers are, and they must be far more mindful of where their competitors are. One 20-story office building can house several law firms. But a single neighborhood generally can only support one sushi restaurant.
Make sure your real estate agent understands not only your goals, financial situation, and space requirements, but also your kitchen operations, and yes, even your cuisine and menu!
Based on those factors and your unique brand, your broker should provide you with several good site options within your geographic target area and provide neighborhood analyses (income levels, population trends, and other demographic information) for each one. He or she should spend time with you closely inspecting and evaluating each site.
Your broker also should be in tune with hospitality and restaurant activity across the region. Who’s moving in? Who’s closing? Who’s doing well? Who’s struggling? What areas are under development? What areas are underserved? Where could your restaurant ideally complement the stores and other eateries in the area?
Finally, your broker should be well-known within the hospitality developer/landlord community so he or she can learn about premium space availability before the information goes public. Your broker should be a full-service, trustworthy, solid business partner, working not only for you but with you to represent your interests.
Because a restaurant landlord often has the upper hand in negotiations, once you’ve identified your optimal location, you’ll need to have a sense of how motivated the landlord is (and why). What items can be negotiated? How hard you can push on certain financial issues?
There are several key elements within a restaurant lease negotiation – not just the rates and terms, but also other important matters like the length of the build-out period and financial allowances for tenant improvements.
If a landlord resists your offer in one of these areas, be prepared to push back in another so that the overall deal is the best possible arrangement. Your broker should be able to nimbly balance all these variables to your best financial advantage.
A good partnership between a restaurant real estate broker and a restaurant owner is forever.
You should feel comfortable extending the relationship into other areas of running your business – for example, advice and referral on general contractors, attorneys, accountants, branding experts, licensing matters and even tailoring your menu and cuisine to reflect a very localized community. A successful commercial broker will want this lifelong relationship with you and will help in any of these areas they can.
Yes, your restaurant real estate broker partner needs to be well-informed, a skilled negotiator, and a trusted confidante.
But one last thing. Make sure they have a passion for the restaurant real estate world.
Do they check out new or trending restaurants and cuisines? Do they spend time driving through different neighborhoods to monitor foot traffic and make mental notes about possible locations?
As a restaurant owner, you have the right to expect this level of knowledge, service, passion, and attention from your commercial real estate broker adviser.
All they ask in return is for a chance to discuss things over a nice lunch at your establishment every once in a while!
Danchen Astle is Senior Vice President at IMPACT Commercial Real Estate in Denver and has been an active real estate broker for 18 years. A native of Guangzhou, China, Danchen moved to the U.S. in 1992 and is fluent in Chinese Mandarin, Cantonese, and English. Contact her at firstname.lastname@example.org or 303.332.5955.
IMPACT Commercial Real Estate is a commercial real estate firm focused on making an impact on businesses and the community through creative, thoughtful and dynamic real estate services. IMPACT offers a full range of real estate services including, but not limited to, exclusive brokerage representation for Sellers, Buyers, Landlords and Tenants, broker price opinions, real estate consulting services and strategic property dispositions.