A Complete Flop [or more on leases]

Fellows wanna be restaurateurs listen to this one, it’s a good one.

I opened the Bicycle Shop Cafe in West Los Angeles in the fall of 1975.  In my possession I had only $25,000 cash to build a restaurant, even at the time it was not even enough to take care of the plumbing without including the rest.

When the restaurant opened at a cost of $180,000 I realized the mess I was in. Where did all the missing $ came from?

I borrowed from three different Banks, 2 Lenders, one Leasing Company and the guy who installed the air-conditioning.

With all those loans, my monthly payments was a mere $12,000. This was before I could pay the rent, the payroll and food, wine& beer purchases. My accountant gave me 2 months of life.

I could not go bankrupt, I had no alternative but succeed. I did it, through Marketing the restaurant by unusual ways, with the help of GORILLA MARKETING. Which I will explain in details in up coming posts.

First thing first, lemme tell you of the biggest mistake I did.

The lease, as mentioned in earlier posts is the most important document you will ever sign.

I took an owner permit to build the restaurant. This did not give me much time to negotiate the lease––BIG MISTAKE. I let my lawyer do the negotiations, NEVER give a lawyer free reigns to abuse you. Lawyers have no clue about leases and are the worst for negotiations.

Let me repeat: LAWYERS HAVE NO CLUE HOW TO NEGOTIATE LEASES. 

Lawyers have no clue about business either, the only thing they know how to do well is translate in plain English the gibberish they love to write on official documents. Save yourself thousands by staying away from lawyers as much as possible. [Good examples, Congress, Senate and State Capital Governments are 92% lawyers, and look at the mess we are in.]

The end results to have a lawyer take care of my lease was: 

My rent was $1,100 a months for 5 years, it was a triple net, a killer. I had the option to buy the building for $125,000 for one year only. By the end of the first year I could not find anyone to lend me the $20,000 for the down payment to purchase the building, although I was doing well.

I ended up to purchase the building 5 years later for a mere $650,000. A simple calculation shows a loss of $525,000.

What would have been the right way to negotiate the lease?

The right way would have been to have a 3 years option to buy the land, to soften the landlord negotiations, an offer to increase the rent to $1,400 per month instead of the $1,100 might have done the job. This way I will have been in the 3 option years able to buy the property for the original price of $125,000.

Negotiations with the landlord are a take and give game until both parties come to an agreement for a signature.

This example can’t be ignored, your lease might prevent you to sell to a prospective buyer if you do not have enough time left on your lease.  Even if you do not sell, but want to stay at your location, since you are doing well. If you have a short lease, the landlord is waiting for more blood from you––You are trapped. Remember landlords are greedy.

Your lease is: the most important document you will ever sign.

Post any comments of your specifics, we will look at it, we might be able to help.

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