Location vs. size - what would you do?

[TreatGarden]

Hello lovely fellow retailers.
I may be in the lucky, lucky position of being able to choose between two shops and would be v grateful for any feedback on which I should go for (if I do indeed have that option). Both are in the final negotatiations with the landlord.

A little bit of background. I opened a children's treat shop (gifts, toys, sweets in jars, craft sessions etc) in the village where I live (SW London) about 18 months ago. It was really popular with constant amazing feedback and we did decent turnover, but I made a few mistakes (first time owning a shop) - spent too much on staffing initially, landlord was a first class [insert expletive] and notorious, rent was way too high for the space, my margins weren't high enough etc. Also, the High Street had just taken a hit as the supermarket / convenience store on the street had just closed. I managed to get out of the lease in late July last year (was just starting to break even but the landlord turned nasty - attempting extortion/protection etc).

So, I've been biding my time, and now two great places have come up for rent. Neither are yet on the open market (I keep my ear to the ground) and both current leaseholders are keen to get someone new in asap and are very open to me going in there.

So - if things do continue to go ahead (fingers crossed!), which do you think I should go for?

1. Amazing location, arguably the best in the village
Pros - double shop front, on the village pond / green, little bit of space out front for a few cafe tables, on the main part of the high street, next to bus stops, Farmers Market etc. Beautiful looking, prominent shop.
Cons - not as big as the other place (65sqm vs. 90sqm)

2. Bigger premise with more scope for doing more activities / birthday parties and extending our range into grown up gifts and, possibly, some children's clothes. The location isn't quite as good - only a few metres away from shop 1, backs onto the pond / common (as opposed to overlooking it), and not on the main part of the high street. Less likely to have as much "passing trade", but then our shop falls more into the "destination" category anyway.


Both are in perfect condition and the same price for rate / rents. Sainsburys are due to open a Local on the high street in the old convenience store's spot in April, so this should increase footfall on the high street again considerably.
Ar*e - this ended up being really long! If you got this far - thanks!
All comments gratefully received....

 

[Banned]

Location every time, you will be surprised at how much you can get in a smaller space when you have to.

 

[Doodle-Noodle]

Have to agree with Banned - Location, Location, Location - every time. I am absolutely convinced that I have the right shop in the wrong location - no passing trade, village location (in a village that doesn't have a high street) etc, etc.
We are also what I would regard as a destination type shop - people will travel to come to us, and once they've been here they generally come back time and again, they are great at recommending us to family & friends, lots of our customers tell us how we are their favourite shop.
However, we need more customers ....... getting them is tricky when people don't know you exist!

 

[John_Orcus]

Definitely location.

One of our customers once moved their shop from one side of a market square to another, and their takings more or less doubled even though the floor space was about the same.

They reckon there were a few reasons for this - being right near the bus stop, getting sunlight on the shop rather than shade, and being in the line of vision from more directions.

 

[captaincloser]

Site 1 without any doubt...location,location,location as all others say.

 

[MOIC]

Site 1

No Brainer.

Don't think too far ahead to the future to what else you might want to do.

Consolidate your business first, then see where it takes you.............you never know, the next door shop might become available as and when you want bigger premises.

Good luck

Ron
MYOFFICEINCHINA

 

[TreatGarden]

Thank you so much for your comments - you really have helped

 

[kulture]

I agree, location is key. If deals on off are comparable then go for the right location every time.

That said, you can use fact that you have two options in negotiation. Try to force a deal that is good for you. Further remember that a s**t landlord is a hindrance, so consider site 2 IF the landlord is more reasonable.

 

[MOIC]

Further remember that a s**t landlord is a hindrance, so consider site 2 IF the landlord is more reasonable.

I don't think that should come into consideration when choosing a location if one site is better for your business.

A landlord generally becomes s**t landlord if you do not pay your rent on time or don't adhere to the terms of the lease.

You have little way of knowing this until such time comes, if it comes.

Ron
MYOFFICEINCHINA

 

[Bumblebuzz]

site 1.

Ron's right. Doesnt matter what the landlord is like. They are happy as Larry if they get rent on time.

Besides, I'd rather grit my teeth with a bad landlord then risk earning less money!

 

[kulture]

Its all relative. Most landlords are fine, or at least bearable. As I said, if the deals are comparable then go for the location every time. The only caveat is if the deal on the better location is a poor one. In any negotiation, you have to be able to walk away if the terms on offer are unacceptable. So if for instance the landlord on the better location demanded a full repairing and insuring lease, and seemed likely to demand lots of money for delapidations, and wanted an upwards only rent review with no mediation clause etc etc then having the second option means you an realisticly threaten to walk away in order to bang sense into the deal.

 

[David A]

Ron's right. Doesn't matter what the landlord is like. They are happy as Larry if they get rent on time.

Besides, I'd rather grit my teeth with a bad landlord then risk earning less money!

They are even happier if they can sucker you into a lease that is devoid of break clauses, has insurance clauses allowing them to get 100% or more as a kickback, and so on and so forth.

Before you sign, have a report commissioned that defines the current condition of the premises - that both parties agree to. It will be worth it's weight in gold when you come to leave - some landlords really milk the terms of the lease and will sting you heavily if it has terms like 'keep in good and substantial repair'.

Always remember that consumer law does not apply to businesses, and that the law is normally stacked in the landlords favour.

 

[Thinehost]

Some great advice here; I'd also put in gentle feelers to see if premises 1 might be available to purchase at a later date and see if you can get first refusal written into the lease in some form or another. Sometimes landlords need to get quick cash like the rest of us!

M

 

[MOIC]

They are even happier if they can sucker you into a lease that is devoid of break clauses, has insurance clauses allowing them to get 100% or more as a kickback, and so on and so forth.

Before you sign, have a report commissioned that defines the current condition of the premises - that both parties agree to. It will be worth it's weight in gold when you come to leave - some landlords really milk the terms of the lease and will sting you heavily if it has terms like 'keep in good and substantial repair'.

Always remember that consumer law does not apply to businesses, and that the law is normally stacked in the landlords favour.

Surely, when negotiating the lease, you have not got blinkers on. Only agree to the terms you want, not what is put in front of you in the opening draft contract.

All contracts are open to negotiation and if you are not happy with any of the clauses, don't sign. Someone who understands retail contracts should advise you on negotiating the contract.

Always avoid a Full Repairing Lease, especially with an old property, as the Dilapidation Clause within the contract, can and will come to frightening figures at the end of the lease.

If this cannot be avoided, then do as David A suggests, have a report commissioned that defines the current condition of the premises - that both parties agree to.

 

[TreatGarden]

Thanks again for the advice. Luckily the landlord, delaps, break clause etc are not an issue - both premises have great landlords and we've already sorted out those sides of things, just down to sorting out the deal now I think.

 

[MOIC]

Thanks again for the advice. Luckily the landlord, delaps, break clause etc are not an issue - both premises have great landlords and we've already sorted out those sides of things, just down to sorting out the deal now I think.

When you say "we've already sorted out those sides of things"......What does that mean ?

A break clause should be an issue, as this gives you the option to end the lease if things don't go according to plan.

Who is acting on your behalf ? ( I would not use the estate agent, as his only interest is in closing the deal, and definitely has not got your interests at hand.

All landlords are great in the beginning.

Best of luck

 

[TreatGarden]

So, typically, it looks like the Location site is going to be the waiting game. The current leaseholder is holding out for a £40k premium (that I definitely can't afford!). However, he's now closed the shop, so he's liable for around £3k a month in rent and rates until he finds someone, completes the deal etc etc. I think he'll realise eventually that he's just not going to get what he's looking for in the current climate, and then I'll be in. But he's an artist without much of a business brain, and unfortunately he had a local agent go round and give him the b.s. a couple of weeks ago.

Do I risk losing the Size (well, both!) location by holding out for a few months?? Or do I go for the larger spot that's just a few yards away?

Advice much appreciated!

 

[Banned]

Tricky call, I would probably sit it out and wait.

I presume you made an offer? Do you have a link you could post to the property details so we can have a quick butchers and maybe offer more appropriate advice?

Actually you won't be able to post a link, but either type it in or PM it to me (I presume you can put a link in a pm before 15 posts) and I'l post it for you.

 

[MOIC]

So, typically, it looks like the Location site is going to be the waiting game. The current leaseholder is holding out for a £40k premium (that I definitely can't afford!). However, he's now closed the shop, so he's liable for around £3k a month in rent and rates until he finds someone, completes the deal etc etc. I think he'll realise eventually that he's just not going to get what he's looking for in the current climate, and then I'll be in. But he's an artist without much of a business brain, and unfortunately he had a local agent go round and give him the b.s. a couple of weeks ago.

Do I risk losing the Size (well, both!) location by holding out for a few months?? Or do I go for the larger spot that's just a few yards away?

Advice much appreciated!

Shouldn't you have mentioned the asking premium of 40k as part of the Cons on site 1??

Makes a big difference to which to choose.

Is there a premium required for site 2?

Negotiate on both fronts (on your terms), without incurring any expense, until
such time as one site becomes a viable business proposition that you can afford and are happy with.

Maybe a 3rd site will come along.............

 

[TreatGarden]

The £40k premium looked like it was going to be off the table. Basically he paid a £45k premium for the site 5 yrs ago and wants to get some of that back, but of course the High Street looked very different 5 yrs ago. He's got his head in the clouds if he thinks he's going to get that now, especially with only 18 mths left to go on this lease.
No premium on shop 2.

Someone just suggested that I offer to go in shop 1 as a "pop up" so that his rent and rates are being paid, and put a caveat on the agreement that if he hasn't found someone to give him a premium by, say, July, then I take over the lease without a premium. Of course, that's risky though as someone MIGHT come along, but I think it's unlikely.

Thoughts? Really do appreciate everyone's input on this....

 

[kulture]

It is dangerous going into a property which you can be asked to leave at a moments notice. What happens if you build a profitable business there and get loyal customers, and the landlord says "I want that". He asks you to leave and then promptly re-opens doing the same thing. He would benefit form all your work.

 

[MOIC]

Someone just suggested that I offer to go in shop 1 as a "pop up" so that his rent and rates are being paid, and put a caveat on the agreement that if he hasn't found someone to give him a premium by, say, July, then I take over the lease without a premium. Of course, that's risky though as someone MIGHT come along, but I think it's unlikely.

You and the existing tenant will be going down a very tricky legal road if you take that route............

 

[TreatGarden]

Yeah - I agree, could be tricky, but might be the only way of me getting in there.

Kulture - no danger of landlord copying - he's not interested in having a shop and neither is the current leaseholder - landlord is an architect with his own offices and the other is an artist (this shop used to be a gallery but he's just concentrating on being an artist now).

 

[MOIC]

Yeah - I agree, could be tricky, but might be the only way of me getting in there.
).

Don't go down that route......however good it seems in the beginning.

It's not only the tenant you may have problems with, but also the landlord.................and landlords can be very nasty..............as some poster have pointed out!

 

[kulture]

Yeah - I agree, could be tricky, but might be the only way of me getting in there.

Kulture - no danger of landlord copying - he's not interested in having a shop and neither is the current leaseholder - landlord is an architect with his own offices and the other is an artist (this shop used to be a gallery but he's just concentrating on being an artist now).

So his brother/sister/friend in the pub, slips him some money and kicks you out, to take over your profitable business. Pop up shops are there to pick up one off or seasonal business, NOT long term customer building businesses.

 

[TreatGarden]

Well - the landlord isn't interested in me going in as a pop up anyway, so that solves that one.

So - now I'm stuck with the decision of:
- progress with shop 2
- wait it out for shop 1 and hope that he DOESN'T get an offer from someone else over the next few months, so that he eventually caves and I can get in there, but risk losing out on this other place if that doesn't happen....

 

[kulture]

It is difficult to comment of the likelihood of the premium being paid by someone else. Since the lease (as you say) only has 18 months left to run it does seem unlikely.

£3,000 per month (unless that is a typeo) does seem to be very expensive. You have to sell a LOT to cover that kind of overhead.

 

[MOIC]

Well - the landlord isn't interested in me going in as a pop up anyway, so that solves that one.

So - now I'm stuck with the decision of:
- progress with shop 2
- wait it out for shop 1 and hope that he DOESN'T get an offer from someone else over the next few months, so that he eventually caves and I can get in there, but risk losing out on this other place if that doesn't happen....

Start negotiating on shop 2, without incurring any expenses.

Make an offer to the leaseholder of shop 1, on the lines of what you think is reasonable ( take a further 25% off of this sum as a starting point), and tell him you are negotiating on another 'brilliant' shop, so its up to him to make the decision.

Nobody in their right mind is going to pay 40k for a shop which has only 18 months left on the lease.

You are talking big numbers, and with experience you have with the previous years trading, it's not something I would suggest you get involved with.

Retail is in a difficult cycle at the moment, and best wait until things improve before paying a premium (of that size) for a shop.

Take into account, that there is no goodwill in the shop as you will be selling something completely different to what the current tenant has been selling.

Have you spoken to your accountant?

I wish you luck with your decision...............don't take it lightly.

Ron
MYOFFICEINCHINA

 

[TreatGarden]

Thanks Ron. I've already negotiated on shop 2, decided heads of terms and they're just waiting for me to instruct my lawyer etc. We had pretty much got to this point when the other one came up.

I've spoken to the current leaseholder of shop 1, and everything is fine except for this silly premium, which I couldn't afford to pay even if I wanted to. He's asking for it as it really is a plum spot in the area, but will anyone pay it with only 18 mths left on the lease?? Doubt it.
Just such a risk giving up this other place in the hope that he DOESN'T find anyone over the next 6 months or so who can offer him something better than I can.

 

[MOIC]

Thanks Ron. I've already negotiated on shop 2, decided heads of terms and they're just waiting for me to instruct my lawyer etc. We had pretty much got to this point when the other one came up.

I've spoken to the current leaseholder of shop 1, and everything is fine except for this silly premium, which I couldn't afford to pay even if I wanted to. He's asking for it as it really is a plum spot in the area, but will anyone pay it with only 18 mths left on the lease?? Doubt it.
Just such a risk giving up this other place in the hope that he DOESN'T find anyone over the next 6 months or so who can offer him something better than I can.

Whichever shop you decide to go for in the end, remember that it's a buyers market, and you should use this to your advantage when negotiating.

My advice would be to start at 20% below what you expect to settle on.

There are many areas within the lease that can be negotiated.

Best of luck

 

[Doodle-Noodle]

Give shop 1 24 hours to take your reasonable offer, if they don't then forget it and go for shop 2. Like you say, you don't want to hang around waiting for something that may never be offered at what you are prepared to accept and then miss out on the other property, you'll kick yourself.
Kick the landlord instead. If he's being that silly and greedy he'll probably be a nightmare to deal with anyway.

 

[Banned]

Kick the landlord instead.

Love it, wise words from someone no longer wet behind the ears

 

[TreatGarden]

Thanks Doddles - that's what I think too. It's not the landlord who's the problem with shop 1, but the current tenant who would be assigning the lease over to me. He's the one that wants this silly £40k premium (he's the artist who doesn't have a business brain!). He's so flaky, pinning him down is like pinning down a cloud.

I think I should go for shop 2 and who knows, I might even be able to take on shop 1 in 6 months when he comes to his senses and REALLY take over the world
Mwah ha ha....

 

[Doodle-Noodle]

That's the spirit .... fighting talk is good for the soul (not necessarily the wallet though) ... good luck, I'm sure you will make the right decision; sounds like the tenant is a bit of a t**t if he thinks he's going to get £40k premium in this climate, not even worth considering!

 

[kelvin1950]

I would follow Doodle's advice with a little modification. Tell shop 1 that there's no way you'll pay a premium, make your rent offer and tell him to take it or leave it. I'd then slowly negotiate shop 2 for the next 2 weeks hoping that shop 1 comes to his senses. If he doesn't then go full steam ahead with 2.

 

[Doodle-Noodle]

I would follow Doodle's advice with a little modification. Tell shop 1 that there's no way you'll pay a premium, make your rent offer and tell him to take it or leave it. I'd then slowly negotiate shop 2 for the next 2 weeks hoping that shop 1 comes to his senses. If he doesn't then go full steam ahead with 2.

That's a much better idea!

 

[kelvin1950]

That's a much better idea!

Just before christmas we rang our landlord and told him we were pulling out unless someone managed to recall what we had all agreed in the heads of terms. Never seen so much movement from people in 24 hours in my life!! We were in by Jan 13th!