30 Steps To Business
Lease Renewal Variables
Rent Reduction Variables
Shopping Center Lists
New Center Variables
New Space Variables
Tenant Rent Formula
Letter of Intent
Proactive vs Reactive Leasing
Experience and Photo
Profiled Shopping Centers
You have decided to become an Entrepreneur. Where do you start? There
are numerous books, magazines and websites willing to help you in your
search. But first you need to evaluate your skills and talents and also
look at the ones you are uncomfortable with. This evaluation will help
in the selection of what franchise is best suited for you.
After selecting some
franchises in industries you are best suited for, contact the Franchisor. Ask to speak to the
Franchise Development Department. Have
them send you a marketing brochure. Check out their web site. These
are just a few ways to find out if the franchise is right for you.
The Franchisor will
send you a letter with their requirements for the purchase of their
franchise along with a credit application for you to complete. The
Franchisor will review your qualifications and run a complete credit
check. This will take some time especially when numerous candidates
apply at once.
If you have meet
their qualifications, the following process will begin:
UFOC – Uniform
Franchise Offering Circular
This document is the
FTC mandated disclosure document that gives you information about the
Franchisor. The form and composition of the document is standard with
any Franchisor and must include information on a variety of topics.
history of the franchise and its officers and directors.
complete description of the business.
costs and fees that you will be subject to under the agreement.
obligations of both parties during the term of the agreement and after
the agreement are signed.
relevant litigation history of the company or its officers.
business failures, ownership transfers, franchise agreement terminations
or other information relating to the success rate of the existing units
in the system.
Audited financial statements for three previous years of the franchise
of the existing Franchisees.
complete copy of the actual franchise agreement.
Territories / Radius Restrictions
territory should be awarded to you. The territory consists of miles or
feet around your business that cannot be developed by any other
Franchisee operating the same type of business as yourself with the same
franchise. It does not stop competitors which is why location is so
A radius restriction, usually measured in miles, is an area of no
development normally surrounding a regional mall location for a
regional mall tenant. This typical Landlord mandated and lease
requirement provision is a condition of becoming part of a mall. This
non-development area is subject to other existing corporate stores and their
pre-existing radius restrictions.
most efficient method is to identify where your customers live and where
they currently shop. Also evaluate the shopping center location within
“X” distance you think your customers are willing to commute. Sometimes
this distance and the customer profile representing your target consumer
will be in conflict. If this happens, you will have to expand your
trade area or select another business. In some cases, relocation will have
to be considered if the business is opened and struggling.
Demographics is a very important factor in the site selection process.
Having demographics prepared on your potential site can give you the
population, household income, race and other information which will
assist in your location decision. If the Franchisor cannot run
demographics for you, retailcriteria.com has the ability to do this
procedure. All we need is the address, city, state and zip code and the
nearest intersections of your location. With this information we can
supply the above-mentioned demographics in a report form. (A
sample demographic form is noted on website).
We recommend picking 4 to 5 different potential sites. This is
suggested because many times your desired space size may not be
available on your desired timeframe. You will also learn that each
Developer or Landlord has his or her own “sense of urgency” in
responding to your request.
needs of your location will appear in the UFOC (Uniform Franchise
Offering Circular), which you receive from the Franchisor when you apply
for the franchise. Along with the square footage needed for the size of
the store, will be other desired components you should consider in
selecting allocation. Listed below are just a few:
minimum number of parking spaces
minimum store frontage
minimum number of cars passing the front of your center
desired income and density surrounding your location
cannot find the Landlord’s name in the phone book, ask an existing
tenant. If you are comfortable sharing a little information,
existing tenants are very receptive to sharing information to add a new
retailer to their center.
As one of our services retailcriteria.com can provide you with a list of the
centers in your perspective area by just giving us the county(ies) you are
interested in. Our list of centers will include the following:
Landlord address, city, state and zip
address, city, state and zip
square footage (GLA)
anchor(s) (if available)
Once the location is
determined the Landlord or Representative of the center will prepare a
written proposal. The number of properties assigned to the
representative will determine the length of time before you will receive
the proposal. If the Landlord or Representative is assigned
numerous properties, he may just quote a number over the phone.
quoted price is much higher than other properties you have contacted,
the reason may be because vacancies in the trade area are few in number.
If this is not the case, counter the price on the proposal.
retailcriteria.com has the ability to research your proposed type of
business and provide you with a summary of the typical occupancy
structure your kind of business can afford. Also provided are the average
sales volume for your chosen kind of business based on the kind of
shopping center location you are targeting. These two variables will
allow you to “back in” to the maximum rent you should pay for the
desired space. For further explanation, go to
Tenant Rent Formula.
After receiving a
verbal or written proposal, return your response within 3 to 5 days.
Do not respond the same day because this will send a signal you are too
anxious. Also do not forget that you are competing with other
current tenants who may pay more than you are offering based on their
profit margins. Keep it realistic.
Letter of Intent
realistic counter proposal is determined by supply and demand. Is there
an overabundance of new centers opening in your prospective area? Has
the community prohibited new growth? There is no blanket answer. But
the more Landlords you talk to, the better “feeling” you will have as to
who is chasing whom.
If your new location search is moving slower than expected, remember the Landlord may not be
the one that is being unreasonable. This is because in almost
every shopping center in America, regardless of the size, there are
always one or two tenants that are considered the ANCHORS. Maybe it
is as small as a Starbucks or as large as a Wal-Mart, but there is
always at least one anchor. This is the tenant who received
numerous concessions as an inducement to locate where they did.
The signed Letter of
Intent states both parties have reached an agreement and the lease will now
be drafted. The Letter of Intent does not signify the space is
officially yours. Only when a hard copy of a fully executed lease,
signed by both parties, is placed in your hands, is the space considered
the initial negotiations, your Landlord may take up to 2 weeks to draft
and send your lease. Upon receipt of the lease, read it carefully and
we recommend having a Real Estate Attorney review it before execution.
We at retailcriteria.com do not provide legal services at this time, but
we do have attorneys that will negotiate complete legal comments. When
this process is completed the lease will be submitted to you for your
review and signature. This offered service will be billed directly to
you by the Attorney and normally does not exceed $3,000. Contact
retailcriteria.com for more information.
final draft of the lease has been sent to you for your signature, be
responsive. Depending on the number of changes made, the lease
execution by the tenant should normally happen within 1 to 2 weeks.
Remember, another tenant may approach your Landlord while you are
sitting on the lease.
The real estate expression “Time Kills Deals” is a very real statement.
negotiations are completed the lease is tenant executed and returned to
the Landlord. You should receive the fully executed lease in 2 to 3
weeks depending on the size and bureaucracy of the development company.
Accepting or rejecting turnover has numerous ramifications. Accepting
is always the most desirable way to go because now all of the variables
standing between you and your new store opening are within your
control. Sometimes Landlords do not complete the work as they were
required to do and now you must make a choice. Evaluate the complexity
and expense of the unfinished items prior to rejecting the "Notice of
Turnover". If the Landlord neglected to install handrails in the
bathroom which cost less than $50 and takes less than an hour to
install, retailcriteria.com would recommend signing the Notice of
Turnover. On the other hand, if the Landlord did not install the
ceiling with the cost exceeding $1,000, then a more formal rejection
letter is necessary. It is up to you on how “picky” you want to be.
Remember - rejecting turnover will delay your opening
The length of time it will take for the Landlord construction
depends on whether he/she invested any time prior to the lease being
executed. Since some tenants back away at the last moment, some
Landlords wait until the lease is fully executed before starting their
construction responsibilities. Communicate with your Landlord
throughout the lease execution and you will have your answer.
Notice of Turnover
Upon completion of
the Landlord construction, you should receive a certified or registered
letter. This letter is called the “Notice of Turnover.” It
indicates the Landlord has completed his/her part of the construction
and you may begin your construction.
Before you sign the Notice of Turnover, you should inspect the premises
to confirm the Landlord fulfilled his construction obligations according
to the lease. With lease in hand, take a “walk through” your store as if
you were purchasing a home. If you are not knowledgeable in this
area, hire a professional Contractor. Make sure the construction
is completed as stated in the lease.
of Rejection and
Accepting Turnover Letters are available from
Rent Commencement Date
If the space is accepted, a “Notice of Turnover” will be signed and
returned to the Landlord. At this time your rent commencement date will
be established which indicates when you will start paying rent on your
space. Unfortunately, some Landlords will generate a Turnover
while their contractors are still working in your space. In this case,
the Landlord will actually be accelerating your rent start date if you
do not respond.
To ensure you have enough time to complete your construction, begin the
process of construction when the Letter of Intent is signed. The
following list contains some of the items that need to be completed
before you start construction:
Bids for Construction
Preparing of Store Blueprints
Placing Ads for Employees
Identifying where and how you will advertise your grand
To determine tenant construction time, try
to allow 1 to 2 weeks per every $10,000 you expect to spend on
construction. Add 2 to 3 weeks after the contractors finish for
employees to stock the store and complete the displays.
If you are experienced in organization and planning, you may be lucky to
have “Free Rent” for a few days. For example: If Rent
Commencement Date is 60 days after Notice of Turnover, but you complete
your construction, open your store and generate sales in 55 days, you will
receive 5 days of free rent. This free rent “bonus” is based on lease
The Rent Commencement Date will be noted in the lease. Landlords will
frequently try and mandate a specific date in the lease for your rent
commencement. This should be avoided. You should try to tie the rent
commencement date to “X” number of days after turnover. There are two
widely accepted sentences to address this issue. The lease should state
one of the sentences below.
This sentence would indicate no “free rent”:
“The rent commencement date will be “60” days after turnover or when
Tenant opens for business whichever comes first.”
This sentence would indicate “free rent” but only if you open within 60
days of accepting turnover:
“The rent commencement date will be “60” days after turnover
regardless of when the Tenant opens for business.”
The number 60 used above is subject to negotiation. It could be 30
or 120 for example.
The day has arrived. The store is completed, employees
hired, shelves stocked, and ready for business. The long
process is completed and you are your own boss. But what about the
Entrepreneur’s store that isn’t ready by “Rent Commencement Date?”
Unfortunately, this is the worst situation to be in. If you see
that your store is not going to be ready, try to motivate contractors
with overtime incentives, etc. There is nothing worse than having
to pay rent while not generating sales.
We hope you have found this overview valuable. We welcome your feedback
and look forward to expanding this website to provide additional
services in the future.
Good Luck to You and
Your New Adventure!