Things You Should Know Before Signing Your Coffee Shop Lease

Things to Know Before in Your Coffee Shop Lease

Before Signing Your Coffee Shop Lease

Things You Should Know Before Signing Your Coffee Shop Lease

Your coffee shop location matters. 

Finding the perfect coffee shop location is one of the most important decisions you will make as you take steps to open your coffee shop.

But more importantly, the terms and conditions of your property lease matter even more.

In fact, the terms of a property lease can make or break your new coffee business in the first year or two of business.

Your coffee shop lease impacts:

• Operational budget
• Fixed costs (level of insurance, property taxes, security payments)
• Variable cost (utilities, security)
• Coffee shop menu items
• Accessibility to customers (parking and pedestrian access)
• Marketing (exterior sign placements)
• Hours of operation

As a result, signing the “dotted line” on your coffee shop lease can deliver a double shot of anxiety for anybody. Without being familiar with property leases and agreeing to a multi-year property, a lease can be disastrous for a new coffee shop business.

Before Signing Your Coffee Shop Property Lease

Negotiating Your Multi-Year Coffee Shop Property Lease

When it comes to negotiating your property lease, preparation will be the key to success.

A little prep goes a long way.

If you are fortunate to own your own commercial property and are properly zoned for a coffee business, you are way ahead of the game and could start designing your coffee shop.

But for most new coffee business owners, signing a property lease comes with the territory of owning a coffee business.

Property leases for coffee shops are important. In addition to your rental costs, they can determine pretty much everything about your coffee business – including hours of operation, what you can – and can't – serve to customers, your trash and recycling system, car parking availability, window, exterior signage, etc.

Coffee Shop Property Leases Can Determine:

• Hours of operation
• Your menu
• Exterior signs
• Parking
• trash and utilities
• Exterior seating

Unfortunately, many aspiring coffee shop owners don’t consider how important the lease negotiation process is for their business until the ink is already dry.

Property leases can last between one year and a hundred years, though the ranges between one, two, or three to five-year leases are common. Also, many leases provide you with a clause or option to continue or exit your lease after that.

Whether you want to set up a drive-thru coffee stand or own a full coffee shop, it's important to think about your lease elements early in your planning.

Coffee Shop Property Lease Tips

Prepare for Your Coffee Shop Lease Before Signing

The terms of your lease can (and often do) impact your coffee shop business’s ability to turn a profit. While your rent payment amount is an essential part of your lease, other factors can also determine your coffee shop's success.

“Negotiating a lease is absolutely critical for any business,” stated one coffee shop owner, who recently told me that the property owner nearly had a stranglehold on him for three years.

He survived his coffee shop lease but is still recovering from the burden placed on his coffee business early on.

Certainly, if he didn't have the support from his friends and family to come up with enough cash flow and an ability to be creative (to work around restrictions placed from the lease), his coffee shop business would have closed – with all of his investment money with it.

Coffee Shop Lease Recommendation:

Don't go into your “coffee lease signing” alone.

If you can, get help from an experienced professional who understands property leases. This may include a commercial real estate broker, an attorney, or perhaps even another coffee shop owner who has signed a similar lease.

It's worth the one-time cost to understand those specific leasing terms and obligations you might face when confronted with a confusing property lease.

After all, it's not just the thousands of dollars a year you will be obligated to pay; it's also about the feasibility of your coffee business. 

So prepare yourself. Get help wherever you can. Additionally, invest in a book or two on the subject of property leases. Getting information on your lease, specifically when it comes to your coffee shop, is hard to come by, so look for resources early.

It’s highly recommended that you first form a corporation or an LLC to become the tenant if you lease a location. Learn to separate yourself from the business personally. Forming a business entity will help you do this. For example, you personally should not be the tenant; it should be your company.

Fortunately, in our Complete Coffee Shop Startups Kit, we also have two great interviews that focus on property leases. These two interviews offer informative discussions on what you should consider before you sign your lease.

Signing Your Coffee Shop Lease

Coffee Shop Lease Signing Thoughts

When you start your coffee shop business, you will most likely sign a property lease. Before you start looking for space or location for your cafe or coffee shop, there are a couple of things to consider beforehand.

Many people search for a location themselves. It’s highly recommended to go into the territory and select several locations that are worthy of your business and call them. We recommend that you call them on the same day. If possible, arrange to view all of your prospective locations on the same day as well. One location will definitely rise to the top or pale in comparison to others.

As mentioned above, another way to get help with your coffee shop location selection is to use a real estate broker to secure a space. Regardless of your decision, it would be best if you considered a few things before signing off on your coffee shop lease.

Coffee Shop Rent (and other payments):

Your business lease will ultimately impact your financial obligations. Your monthly payments and any additional fees, such as property taxes, utility payments, security payments, association dues, etc., can be piled onto your property lease, so pay particular attention to your full financial obligations before signing.

Ask yourself, can I really afford to pay this monthly rent? Does my coffee shop business plan determine that I will be able to cover this payment? Remember, you will be obligated to pay anything that you sign, whether or not you are closed. 

Your Coffee Shop Lease

Selecting Your Coffee Shop Location

You may decide to use a real estate broker or lease professional.  First, don’t simply trust your broker to handle everything. Be active and engaged throughout the entire process of finding and securing a coffee shop location.

Your “engagement” will not only benefit the outcome of your lease, but it will also push your broker to be as involved as he or she possibly can as well.

Finding a place to open your coffee shop should not be delegated. After all, the location of your coffee shop business will be intimately connected to your success and can't be trusted by anyone other than you. 

If you are starting up a new coffee business, you’re going to be busy – but don’t let that prevent you from doing the smart thing: stay involved in the entire process!

Avoid being distracted by the glitzy things when starting a coffee shop. Your lease and its contents can either drag you down with many unnecessary obligations (financial and/or otherwise) or remove some potential burdens for you and your coffee business. 

Some Useful Tips On Your Coffee Shop Lease:

When looking for space, you can judge a property by the types of tenants it already has. If it has good, solid name-brand tenants, that’s probably going to be a reasonably good home for your coffee shop.

Before starting your lease negotiation with a property owner, call or meet with other tenants who are in the same property and find out what they think of the landlord and how they think about the potential of your business arriving in the same building.

Have a list of questions you want to ask a property owner before heading out to meet with him or her. Always be aware of your coffee shop budget going into any negotiations. Having a coffee shop business plan already written will pay off in great dividends. 

Have a coffee shop business plan prepared and written. Many property owners want to see a business plan ready and well-thought-out.

Find out who they are and what really matters to them. What do they worry about? What kind of problems had they previously experienced with past property tenants? Find out and have an answer ready before you meet with them.

Coffee Shop Property Lease Considerations

Your Coffee Shop Menu:

Your business plan should also include a menu. Some landlords might restrict your menu, which will impact your desire to go into that location. Additionally, your menu drives your coffee equipment choices, your coffee equipment drives your cafe design… and your cafe design and layout establish the parameters needed for space.

Does your lease have a transfer clause?

What if you run out of cash, get sick, or suffer from an inability to work – how can you get out of the situation smoothly? It would help if you had some transfer clause to ensure a proper exit strategy.

When does the clock start?

(For this question, you will want to check out our Interview #16 located in  our Complete Coffee Shop Startup Kit.) Agreeing to start the clock when it comes to your lease payment will potentially save you thousands of dollars.

The little things:

Who takes care of what? Does the building owner take care of the trash, recycling, security, and pest control? This all needs to be spelled out for you and in your lease.

Don’t rush:

Finding the right space for your coffee business is tough, but finding the right space that will smother your business is even worse.

Starting a coffee shop business takes time. We recommend planning early. Do “above and beyond” research. And take your investment in time and money seriously. 

Mistakes You Want to Avoid When Signing Your Lease

Sometimes, landlords leave information out because they didn’t ask the right questions or didn’t do their due diligence. So, for example, if the parking is a problem, the landlord or the property manager won’t mention it unless you ask.

It would help if you had the confidence to ask the property manager to make upgrades because when you move out, you can’t make the upgrades with you.

That is why before you sign your lease, approach the landlord and ask everything about the property measurements, electric current and voltage, air conditioning tonnage, the parking situation, and whether there are some issues with signage or grease traps.

Be aware of red flags:

Understand that what you see is what you get. For example, if the property is maintained poorly or there are long-term vacancies in the mall or plaza, the situation will probably not improve. Signing a lease often does not improve the condition of the property.

We all have limited amounts of money to invest in a coffee shop. Planning wisely can help you keep your investment funds longer.

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Based in Seattle, Washington, USA, Coffee Shop Startups is dedicated to providing you with the most relevant information on how to start a coffee shop business successfully. Over the last 11 years, we've helped thousands of aspiring coffee business owners worldwide. We harness the experience, wisdom, and knowledge of many successful coffee shop owners to help you increase your chances of success and profits. We support business owners who want to start a coffee business by providing them with valuable information on starting their coffee business successfully.