Expert Tips for Navigating the Real Estate World – Shumacher/GRA Interview

by Steven Josovitz

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Tip Jar: Expert Tips for Navigating the Real Estate World

This article is excerpted from: A Changing Real Estate Landscape
Restaurant Forum, October 2010
By Christy Simo

Make a good impression. “When you approach the landlord, you only have one shot to make an impression,” says Greg Vojnovic, vice president of development for Popeyes. “So your first approach needs to be a professional approach. Gather the paperwork that the landlord is going to be looking for, things like 2 years of PNLs on your business, your personal financial statements, a business plan. So when you go in, you have your act together. Be professional and be prepared.”

Hire a professional
. “We strongly encourage all of our franchisees to have a very good, professional tenant rep broker,” Vojnovic says. “Use somebody that specializes in the restaurant business, who knows what’s going on. Because in the negotiation, the landlord has all the power and all the knowledge. They have leverage, because in their trade area they know exactly how much every other shopping center is charging for rent, and you don’t. Your real estate professional will know, and he’ll know the deal terms of the marketplace. You need to have somebody on your side.”

Crunch the numbers. “Analyze your budget and your needs, and see where your rent needs to be,” says Steve Josovitz, vice president and associate real estate broker for The Shumacher Group. “So that when you negotiate for the space, your negotiating from the start what that rents going to be. That’s the most important thing that small business owners have to really understand. You have to crunch numbers, and if you don’t know how to do that, then you really need to hire a professional CPA that specializes in restaurants or work with a restaurant consultant professional to really understand the rent factor in expenses and what it takes.”

Know your market. “Do the research. Study the demographics, the car counts, really intimately know the market that you want to be in,” Josovitz says. “That’s really important.”

Find sites with visibility and access
. “Always choose visibility over access, but ideally you want both of them,” Vojnovic says. “For access – how hard is it to turn into the parking lot? Can you drive straight into the shopping center, or do you have to make a u-turn or drive down a frontage road? If they can’t see you, how are they going to figure out that you are there? Visibility is critical. You want to make sure you’re not below grade, because if you’re below grade it’s hard for them to see your business. You want to be two or three feet above grade because that increases visibility to people in cars.

Ignore the deal. “Look at the real estate itself, don’t look at the deal,” Vojnovic says. “If you’re looking at a conversion, ignore the conversion first. Look at the real estate on its own.”

Be prepared to grow slowly. “You have to be prepared to pay their rental rate,” Josovitz says. “You could out of the box hit it big, have lines out the door and be very successful. But you might have a period of growth over the first year. So you have to be prepared. What happens for a lot of people is that honeymoon period in the beginning is sometimes not a honeymoon when no one’s walking through the door and you’re paying above market rent and you’re paying out of pocket every month from your personal savings account to pay rent. And that hurts.”

Factor the cost of opening your doors
. “There’s a lot of factors within the restaurant that have to be determined prior to signing a lease. There’s no guarantee that your current grease trap is marginal or that your kitchen floor is acceptable to the health department,” Josovitz says. “You have to take into account a dollar amount of money that you’re going to have to spend to open the doors.”

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