Ask a Restaurant Owner if you know the lease terms of your restaurant. The common answer will be, “Yes, I signed the lease agreement and have a copy. The Restaurant Business Broker estimates that after selling restaurants for 11 years, only about 25% of restaurant owners actually know the critical dates of the lease agreement when it comes to lease renewal.
When selling a restaurant, the Owner is required to provide a copy of the lease agreement to the buyer. The lease terms can determine the likelihood of a restaurant sales transaction closing. All restaurant owners must deal with the language of assignment in the lease agreement while selling a restaurant.
The Dallas Restaurant Broker Dominique Maddox says, “When selling a restaurant business, I look for three critical dates on the lease: the Commencement date, Possession Date, and Renewal period.”
Restaurant Broker 3 Critical Lease Dates to know:
Lease Commencement Date:
Starts upon execution of the Lease Agreement and the clock starts ticking on your lease terms. It can be confusing to correctly identify the lease commencement date by viewing the lease regularly. The dates on the lease are usually just dates and have language that triggers the critical dates.
Fixturing Period:
This is the time you have to build out the restaurant space. Once this period starts, the lease commencement date starts. During this period, restaurant owners usually get free rent, reduced rent, or only have to pay Common Area Maintenance (CAMS).
Rent Commencement Date:
It starts the earlier of when the Tenant opens for business or after an agreed-upon time after the Lease Commencement Date. The time can range from 1 to 12 months.
Restaurant Broker Tip: Restaurant Owners who do not know the correct Rent Commencement Date can lose the right to extend the initial term. Missing this essential period can affect their ability to turn around and sell a restaurant.
Renewal Period:
This period comes before the anniversary of the rent commencement date and the expiration of the lease terms. Landlords will start communicating with Restaurant Owners about lease renewals 6-12 months before expiration.
The lease language requires the Tenant to exercise the Renewal Period by written notice to the landlord 3-6 months before the expiration of the original Lease Term.
Restaurant Broker Tip: Restaurant Owners should always keep track of the lease expiration and renewal dates. This can differentiate between selling a restaurant and the landlord backfilling the space with a new tenant.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at
404-993-4448 or email at [email protected]. Visit our website at www.EATSbroker.com
