help with negotiating rent and lease terms

[Mister_Tazz]

Hi,

Where should i start the negotiating from. Im looking to put an offer foward for a cafe i have seen. The asking rent on the open market is £26,500. The cafe has been empty for around 3 months. It will cost me around 7 to 8k to bring the place up to standard.

I was thinking of going in with £20,000 rent with 4 months free period to do up the place and bring some business in.
Also thinking of a 5 year lease with a break of contract after 2 years if need to.

They recomended a deposit of 3 months in advance and i am thinking of 1 month rent as a deposit.

The property is owned by the council and the estate agent manages it. Its in the city centre.

Help and advise would be appreciated.

Thanks in advance

 

[Chris Ashdown]

Leases are a minefield and only protect the landlord, so always go and see a solicitor and talk it all over with them.

Whats the reason the cafe stopped trading and why do you feel you have the skills to both start it up again and also make a living

What marketing have you done and have you done a business plan

Dont forget insurance, rates, and probably very few customers for the first six months

 

[Mister_Tazz]

Hi Chris.

I will ofcourse approach a solicitor regarding the details of the lease.

At this minute i need to put an offer in regarding the rent, free periods, deposit and term of lease for them to consider the offer. If the offer is agreed then i will get the full details of the lease and will have a solicitor to look over it.

Need advise on negotiating the rent and so on as mentioned in the post. Am i taking the mick going in with an offer of 20k or should i go lower/higher.

Regarding market research and if my business will be succesfull i am very confident after 3 to 4 months i will be able breaking even and making a small profit.

 

[Chris Ashdown]

Sorry but you need to see a solicitor first before you make any offers, you need to fully understand the lease and the solicitor will be able to advise you on what you can expect

Just ask for a copy of the lease and take it from there , no point in making a offer at this stage and you should have many other problems to solve to see if it can work before you make any offer. remember if you fail you will nearly always be required to pay off the remaining lease, few landlords will accept a ltd company signing a lease without a directors guarantee. Its a massive commitment you are entering into

Have you fully priced all things like third party insurance for a cafe, Window insurance, Staff costs and all the rest

 

[Twinkle Toes]

I'm with Chris on this one. Do not underestimate staff costs. Go into even the smallest Costa Coffee/Starbucks/Nero's and there will be at least five staff working at any time. Great when it's busy, not so great when you have a quiet spell and are paying five staff for doing nothing. That hits your bottom line in a big way.

Check out the rates, another big expense that you'll be committed to even in you cease trading and have to close.

Utilities costs - friers, cookers, fridges, freezers don't run for free.

When you have all the worst cast scenario expenses versus takings then you are in a position to put in a offer.

And don't forget to include your solicitors fees of at least £1,500.

 

[Mister_Tazz]

Thanks chris and richard. I will be contacting the agents tomorrow for a copy of the lease and will have a solicitor look over it and explain what i dont understand.

The reason why i belive my business will run ia the concept of the business. I have worked in the north of englabd in a dessert cafe such as waffle crepes cookie dough and so on. There is only 1 businesz which will be my competition however i belive my concept and location will be better. The profit margins are increible. I think the bonus is the location. Its the hotest newly developed side of the city centre with likes of nandos pizza expresa and many more restraunts and cafes nearby who have a very small variety of desserts. Its a very busy location.

 

[Twinkle Toes]

The profit margins are incredible.

Make sure you are aware of the net profit, forget gross. Then make sure you know how quickly just a few percentage drop below forecast takings can dramatically see you making a loss.

Of course if you have something different, that you know works elsewhere, and can afford to take the punt, then give it a go. Just make sure you can afford it to go queer?