7 SIMPLE LEASING TRAPS AND HOW TO AVOID THEM
In the lease disclosure statement apart from the key essential items such as term, rent, annual reviews, etc. you need to be across the following important items.
1. LICENSED AREAS
Areas such as seating and storage need to be clearly acknowledged and identified. Find out if the licensed seating is on a footpath controlled by council.
If it is, you need to ensure you have the relevant license, the annual license fees and the term of the license in comparison to the lease.
CAUTION! These seating areas may form a large part of generating the sales of the business, so imagine the effect if the council did not renew the license and the seating was removed?
2. PERMITTED USE
Does the current range of products clearly fall under the permitted use? Are there charges to the permitted use you are seeking to make?
CAUTION! One of the biggest causes of disputes and food business failures is the duplication of product offering in the future, so find out what the intentions are if you don’t have exclusive rights.
3. APPROVAL
Now this is an area that gets overlooked, particularly outside of shopping centres. Is the premises zoned for this type of business, and does the premises meet all the statutory approvals for health, fire and food services?
CAUTION! If the zoning is incorrect the business is at risk of being shut down.
4. FUTURE REDEVELOPMENT
The landlord disclosure statement should advise if there are any current development applications and you should make further enquiries here. Look for relocation and demolition clauses in the lease and understand how these may affect you in the future.
CAUTION! A redevelopment you’re not expecting can be disastrous – foot traffic is diverted and trade disrupted.
5. REFURBISHMENT
Does the lease require the tenant to refurbish the premises during the lease? What are the make good requirements at the end of the lease?
CAUTION! Franchisees can be caught out by refurbishment or make good costs.
6. TRADING HOURS
If the business model includes afterhours trading, are you permitted to do so and are there any additional costs to consider?
CAUTION! A great location can turn out to be disastrous if the opening hours limit key trading times.
7. CODES OF CONDUCT
Find out if the landlord adheres to the Casual Mall Licensing and Sales Reporting Codes of Conduct. You need to know whether you have any rights if a pop-up is located next to you by a competitor. Will you be required to report sales figures to the landlord and do the figures they have match the data provided by the vendor or franchisor?
CAUTION! Pop-up stores and kiosks are part of mainstream retailing now but can damage a store’s trading capacity.