How to Choose a Restaurant Space to Rent

Finding That Perfect Restaurant Space to Lease

It's important to find the right restaurant space to rent.
Location is important when choosing a restaurant space to rent. Stock Snap via Pixabay

One of the most important steps in opening a new restaurant is finding the perfect location. The next step in process is decided whether to rent a space for a new restaurant or buy it. Depending on where the commercial space is located, you may not have any options other than renting or leasing. And if this is your first restaurant, renting isn't such a bad option - you won't be saddled with a huge mortgage payment if things don't go well.

But there are several factors to consider when selecting a restaurant space to rent, including the physical location and space, the length of the lease, and your budget. 

Which Comes First, The Restaurant or the Space?

Some restaurant concepts come first, and the space is built around that concept. This is the case with boxy chain restaurants like Red Robbins or Olive Garden. They are built from the ground up, with the same specifications. This provides consistency across multiple locations, strengthening the company's corporate brand. Other restaurants are created out of existing spaces - their concept is tweaked and trimmed to fit a desirable location. Think of your favorite downtown restaurant. The space was probably there long before the restaurant.  The owners of the restaurant had to work with the existing size, building codes, etc... Since most people aren't flush with enough cash to build an entirely new restaurant from the ground up or buy into a Darden's Chain, most end up going with option two - renovating an existing space.

 

How to Lease a Restaurant

So, once you've found the perfect space, it's tempting to sign on the dotted line, to secure it and get started. Don't do that. First find out if the space can be used as restaurant, including if it is allowed to have a liquor license. In some towns, there are still prohibition laws in place that restrict the serving of alcohol altogether or if an establishment is in a certain distance to a school or church.

Once you've established that the space allows restaurants, you need to assess if is capable of housing an actual restaurant. Is it big enough? Go into any old section of any major city and you will see some teeny tiny restaurants crammed into spaces hardly bigger than hallway. So, bigger isn't always better. However, if your business plan calls for a minimum of 100 seats nightly, and the space only allows 25, you are going to have to do some serious turnover, every night, to make your budget work. And then there is the question of who is going to pay for the renovations. Is the landlord going to pay to have a walk-in fridge installed? Or new non-slip flooring in the kitchen? Or are you responsible for the whole bill? Flesh out all of these concerns first, before signing a lease. 

How Much Can You Afford? 

The biggest factor in your search for the perfect restaurant space is your budget. If you find a prime location in a busy downtown, chances are the rent will be higher than in a less desirable location, like a mall parking lot. Just like buying a house, you need to be mindful of your budget. Also consider how long the lease is. A five-year lease is pretty common in the business world.

However, if your restaurant closes after a year or two, you are still going to be responsible for paying rent for the next three years. If a prospective landlord is unwilling to negotiate a shorter lease, err on the side of caution, and move on to the next space.