Written by Jillian Kelley & Dala Al-Fuwaires
Involving the right key players before signing a lease allows you to get instant feedback on the big decisions you have to make. Get these professionals engaged early on for their advice—doing so will help complications down the line.
Each one of these professionals can lean on each other, too, and answer certain questions when evaluating a potential commercial space. It is sort of like a domino effect; the designer designs the space, a contractor gives you an estimate based on design and then you negotiate a contract with the landlord based on that determined budget.
Here are the five people you need to know before signing any commercial lease.
One: A Banker or Lender
Very few people can finance a restaurant out-of-pocket. So, where does the money come from? You could seek-out investment partners or use personal funds, but most aspiring restaurateurs obtain funding through bank-backed loans.
Bankers can help you with a starting budget by giving you an estimated loan approval amount. They can share their experience and knowledge on navigating the world of commercial loans. Having a solid all-in budget is helpful in many different respects, but the main advantage is knowing how much money you have to spend on what will likely be your biggest expense: The build out.
In addition to the build out, there are other expenses to account for, including interest, rent, restaurant insurance and license fees, beginning stock and inventory, working capital and marketing capital. An initial loan qualifier from the bank is a good starting point, but engaging the remaining experts on this list will give you a better idea of just how much money you’ll need in order to start your business.
Two: An Insurance Agent
Restaurants are exposed to a wide range of risks that make them vulnerable to lawsuits. Rather than waiting to be sued, stay ahead of the curve and get the right type of coverage to protect you against potential hazards.
The cost of insurance varies from business to business, and each restaurant and bar has its own set of unique qualities that expose them to different types of risk. But, common factors that impact your rate include the type of food or drink you’re selling, cooking methods being used in your kitchen, the building itself and employee-specific concerns.
Three: An Inspector
Have a commercial real estate inspector walk the prospective building before you sign a lease. These professionals have a keen eye and look out for what could potentially need to be done in the next five years. Is the roof in good condition, or will it need replacing in the near future?
Can the heating system get by with normal maintenance? Does the electrical work need to be upgraded due to the change in use of the structure?
Parts of a common inspection include the structure (foundation and roof), internal systems (HVAC, electrical and plumbing), exterior (parking lot, sprinklers and drainage), interior (light fixtures, ceiling and windows) and accessibility (exits and wheelchair user-friendliness).
A quality inspector should be able to detect any hidden issues that could be a potential hit to your budget or timeline, and should offer insight on whether to follow through with leasing that commercial space. Ultimately, a professional inspection can rule out potential problems and ensure that the property you’re looking at is worth the investment.
Four: An Interior Designer
As interior designers, our number-one priority is to create functional spaces. Walking prospective units for lease with a designer in-tow is a smart and efficient way to evaluate whether the space can successfully accommodate your requirements.
In addition to a spatial evaluation, a professional interior designer can help you assess and determine the maximum occupancy load, which is an early estimation of how many people you’ll be able to serve at any given time.
Other logistical questions a designer can help answer include, “What’s the natural light like and how much artificial lighting is needed?” “Are the existing materials salvageable?” “What general flow and path of travel can be achieved?” All of these factors need to be considered when evaluating the pros and cons of each potential commercial space.
Five: A Contractor
Assembling your team of trades early on is invaluable! This includes an architect and contractor. Because they know much more about building costs, your contractor will be able to work side-by-side with your designer and architect to help determine estimated costs.
Similar to the inspector, a contractor will be able to catch issues that may result in a high cost for repair or build out. Their insight and immediate feedback can help the designer make sound and strategic decisions throughout the design process.
And, if the contractor you worked with on a preliminary bid was selected to build out your space, chances are they will feel more connected to the project since they’ve been around from the get-go.
What kind of questions do you have about building a team of professionals before signing your commercial lease? Leave them in the comments below!
Written by Jillian Kelley & Dala Al-Fuwaires