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What to check before you sign a restaurant lease

Questions to settle before you commit

A lease can make a good location bad or a hard one workable. These are the questions to settle first. This guide is general information, so read your own lease closely and ask for anything you do not understand to be explained in plain words.

The money

• Base rent and how it rises each year.
• Extra charges. Common area upkeep, property taxes and insurance are often added on top of rent. Ask for last year's actual amounts.
• Deposit and what you would owe if you leave early.
• Personal guarantee. Does the lease make you personally responsible, and for how long?

The space

• Kitchen readiness. Is there a grease trap, a hood, gas and enough power, or will you have to build them?
• Who pays for the build-out and whether the landlord gives an allowance.
• Time before rent starts. Many leases give a period to build before rent begins. Ask for it in writing.
• Signs and parking. What are you allowed to put up, and how many spots come with the space?

The rules

• Permits and zoning. Confirm with the city that a restaurant, and alcohol if you plan it, is allowed at that address before you sign.
• Exclusive use. Can the landlord rent next door to a competitor?
• Hours and noise. Are there limits on when you can be open?

If it does not work

• Length and renewal. How long is the term, and can you renew at a fixed price?
• Selling the business. Can you transfer the lease to a buyer?
• Getting out. What does it cost to leave early, and what would you still owe?

Before you get this far, check the location itself. See how to pick a restaurant location.

More guides

• How to pick a restaurant location
• What is a trade area?
• How many restaurants is too many?

Sources

• SBA: Market research and competitive analysis

This guide is general information, not legal or financial advice. Every location is different, so check the details yourself before you sign anything.