Six steps to opening your doors - a primer on the lease process
A franchisee of a well-known moving company is looking to establish a site in the North Bay. I am excited to be a part of his new venture by assisting and providing guidance in leasing a location.
Corporate headquarters has a business model for new franchisees that includes specific parameters of a site. This model has proven to be successful for the hundreds of other franchisees throughout the nation.
It is important to follow the lease process in securing a site, which starts with a needs analysis and ends with opening your doors for business.
Step 1 - Qualify
Qualifying to lease a property can be an in-depth process. Each landlord has their own criteria; for a new business without a proven track record it can be daunting.
A lease application, financial statements, tax returns, summary business plan, proforma budget, personal resume and credit report are usually the first things requested by a landlord.
It is important to have this information completed and ready to go when requested, or in some cases submit with the offer.
Step 2 - Needs
In our case corporate provided a list of requirements for a site. This information is essential in pinpointing the best location and therefore an important part of an applicant’s pre-planning.
Step 3 - Search
The initial list of potential sites could be long so we need to weed through the list to a handful of sites to tour. The sites toured can then be further reduced to a short list of one to three viable locations.
Step 4 - Offer
The offer, usually in the form of a letter-of-intent (LOI) is a non-binding offer detailing the major terms for a subsequent lease agreement. Negotiations take the form of counter-proposals to the LOI. Once the terms are agreeable and the landlord has reviewed the financial documents and supporting documentation a lease agreement can be drafted by the landlord’s broker.
Step 5 - Execution
When the lease agreement is received it should be thoroughly reviewed. Oftentimes the lease agreement is a boilerplate document that is used extensively in the industry. In this case many brokers are familiar with the terms it contains. But, it is always good for an applicant to have their attorney review.
If the lease agreement is satisfactory and contains the terms outlined in the LOI then all parties sign and deliver the document. At this point money is also exchanged for rent and deposit.
Step 6 - Occupancy
This step could have two phases if the new tenant requires improvements to the space. The tenant improvements (TI) could be performed by the landlord or the tenant--it depends on how it was negotiated.
In either case, before a tenant can take occupancy and commence operations, the TIs will need to occur.
We hope to have the doors open to my client’s moving company September 1 so we have a lot of work ahead of us.