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Leasing a premise with little experience

Discussion in 'Small Business' started by Emma Andrews, 21st Jan, 2016.

  1. Emma Andrews

    Emma Andrews Member

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    I believe I have found a great location for a business but the problem is I have no experience in that line of business. I'm in the process of getting some training currently. My question is, would a landlord accept a lease application from someone that has limited experience or is that too risky for them?
     
  2. geoffw

    geoffw Moderator Staff Member

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    The landlord would look at your financial situation.

    It depends on the popularity of the premises how thoroughly they would investigate and how likely they would be likely to approve.

    If you have not previously rented a commercial premises that would go against you more than the lack of experience in that line of business.
     
  3. geoffw

    geoffw Moderator Staff Member

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    BTW you (or somebody else) would need to be a guarantor. That's not something to be taken lightly- it means that that person is liable for any shortfalls in rent, and the consequences of a guarantor not making up payments is severe.

    Also check out the lease terms. Obviously rent, but also annual increases, lease term, options at the end of the term etc. You will probably have to leave the premises in the same way you found them- remove all fittings.
     
  4. Emma Andrews

    Emma Andrews Member

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    Thank you!

    I've never rented a commercial premises before so it looks like I might struggle. It has been vacant for a while but I'm not sure of the landlords situation.
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  6. Emma Andrews

    Emma Andrews Member

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    It's a fast food business
     
  7. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Is it in a CBD/Industrial area or a main street?

    My in-laws have run take away shops for a very long time.
     
  8. Emma Andrews

    Emma Andrews Member

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    It's on a main street (High exposure) Thousands drive past daily..
     
    Last edited by a moderator: 4th Nov, 2016
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  9. Xenia

    Xenia Adelaide Property Manager Business Member

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    Emma
    they will likely take the lease in your own name and verify your income against the lease expenses, instead of the business name. If the business is a new one and has no financials then they would do it in a personal name.
     
  10. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Okay so will you open 7 days?

    Take away shops in places like Parramatta CBD (NSW) will generally open 6 - 4 and similar hours for industrial areas so you can have your life back on weekends!

    My in-laws most recent take away was on a main street, they opened 7 days per week from 7 to 6 and there was at least an hour of prep work/cleaning/cashing up either side of opening and closing times.

    I don't want to put you off doing it for a second however people (including me previously) tend to romanticize having a take away. In reality it's long, hard hours and a lot of them don't really see a big pay day until they sell.
     
  11. geoffw

    geoffw Moderator Staff Member

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    @Tim & Chrissy I agree completely with your last sentence.

    My franchise shop was open 98 hours pw 362 days per year. On the few days it did close there was still work to be done in preparation for the next day.
     
    Last edited by a moderator: 4th Nov, 2016
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  12. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    I went into the shop one day to repair the ceiling in the store room. For whatever reason there was a line 20 strong out the door waiting for coffee and the tables were full (it's a pretty sleepy little main street in the western suburbs and the line had never even been close to the door, little own outside)

    I jumped on the espresso machine and started making coffees - 1 hour non-stop. That was the end of any desire I had to own a take away. The days takings were fantastic but it's hard yaka. I take my hat off to anyone who sticks at a take away shop for years on end.
     
    Last edited by a moderator: 4th Nov, 2016
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  13. pinkboy

    pinkboy Well-Known Member Premium Member

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    Is there parking where these 'thousands' can pull straight over and get back onto the main street with little inconvenience?

    What will you do differently to draw them in that other takeaways are not doing in the area?

    As for the lease, do you know the circumstances of the owners? They might be desperate to get someone in and give you a short 12mths lease and 30 day either party termination to start with (with probably an absurd rent), just to get a feel for you - or you could suggest it so they give you a shot.

    One thing going into this type of lease, you want to have deep pockets to start with. You will be up for rental bond, monthly in advance etc.

    Personally, I think it's pretty high risk not being in the line of work, and not knowledgeable about leases in the first place.

    pinkboy
     
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  14. The Y-man

    The Y-man Moderator Staff Member

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    @Emma Andrews

    This is very important - unlike a residential lease, the contract will often not let you just "break the lease". In such a situation you will need to pay out the rest of the lease (could be 5 years rent!) even if you decide to close the business (and they will come after your personal assets if the business assets can not pay - or your guarantor's assets).

    The Y-man
     
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  15. Emma Andrews

    Emma Andrews Member

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    Thank you.

    In the case of selling the business - will the new buyer take over the lease? Most of the established businesses that I've seen for sale still have time remaining on their lease.
     
  16. Emma Andrews

    Emma Andrews Member

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    Thanks everyone - a lot to learn and I'm not going into it without lots of research
     
  17. The Y-man

    The Y-man Moderator Staff Member

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    Depends on the sale - but in general unless the location was genuinely desirable (eg unique in some way), or fit out was going to cost heaps (for example if you were a fully kitted infectious diseases lab or something) as a buyer you'd probably see the lease as a liability and discount your offer in some way.

    Conversely, if you are buying the commercial property, you see the lease a good thing!

    The Y-man
     
  18. sanj

    sanj Well-Known Member

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    Not necessarily. I've been involved in 4 commercial leases over the last 2 years and in all of them we refused to give personal guarantees.
     
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  19. sanj

    sanj Well-Known Member

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    Again, I disagree. They might push for personal guarantees but you'd be able to get the lease in the company name.

    Many agents atm themselves are moving away from personal guarantees and are happy with Bank guarantees.

    We got a 5+5+5+3 lease signed recently and only gave 4/5 months bank guarantee.
     
  20. sanj

    sanj Well-Known Member

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    For a food business yes the buyer would. If it's a successful business they will likely want to keep it going, if it's unsuccessful and they're buying it that's likely because they want the location and are buying the lease effectively (assuming you've got a good lease). Either way most buyers would want it.