Having been in commercial real estate leasing for 30 years, you hear, share and repeat stories/nightmares as experiences to learn from. Because, in every case they could have been prevented. At Premier Retail Support we hope this eBook of franchise nightmares prevents you from falling into these traps as you proceed along the leasing highway. These “articles” are expanded upon within the PRS website, but this eBook was designed to introduce you to the information contained on our website to help ensure that you are well-prepared for selecting and leasing commercial real estate sites. We hope you find it valuable.
“The fact that each of these “nightmares” could have been prevented is the value in sharing these experiences.”
This note and these stories are not meant to scare you. They are shared to inform you, so that in any scenario you can acquire protection or walk away from that deal. There will always be another location to pursue and lease.
Demographic ProfileIn Pittsburgh, PA there is a neighborhood called the Strip District. Many people outside Pittsburgh immediately think it is an area filled with adult men’s clubs, but it’s not. In the early 19th century, it was home to many mills and factories.Today it is an historic market district with many ethnic food purveyors, art studios, unique boutiques, specialty shops, restaurants, nightclubs, bars, farmers markets and street vendors. There are NO CHAIN retailers, or restaurants in the Strip District. But the customer traffic is abundant and on the weekends it’s overwhelming. Because of that volume of traffic, two national chains decided to lease space in the Strip District - McDonalds and GNC. Both opened, then failed, and are now closed. Both of these retailers are dependent on traffic but ignored the demographic profile of the customers that come to the Strip District. The Strip District experience is unique, and these retailers tried to duplicate their suburban success in a retail environment that they should never have entered. Once you have established a successful customer profile, then specifically target those trade areas and demographics that will promote additional success, and seek to duplicate it to a viable and sustainable franchise business.
dEMOGRAPHICS Don’t let this happen to you. Know the details found on our website under “Demographics” on the Subject Areas page.www.premierretailsupport.com
Conveyor Belts vs Elevators for basement storage. Every retailer wants their backroom storage area to be on the same level as the sales floor for obvious reasons of conveniently restocking. But in downtown locations, when space is at a premium, frequently the landlord may offer a basement storage space and they may not charge you rent for the space. Access may be a conveyor belt or an elevator. Because this happened at one of my previous national employers, I am sharing the experience. They leased a basement with a conveyor belt and an employee chose to “ride the conveyor belt” back up rather than take the stairs. Sadly, he lost his balance, his arm got caught, and it was severed. Conveyor belts create another level of liability.
SITE SELECTIONDon’t let this happen to you. Know the details found on our website under “Site Selection” on the Subject Areas page.www.premierretailsupport.com
Approved Site Plan in the Lease.There is nothing wrong with committing to a future shopping center site if you have the necessary protection. One example: I negotiated a lease and the site plan had four rows of parking in front of our storefront, which was ideal. When the landlord built the center and attempted to turn over the space, we only had one row of parking, not the original four. The city had required that a retention pond be added and it eliminated the other three rows of parking. Because we had an approved site plan in the lease which described the four rows of parking, we had the right to terminate the lease, which the landlord didn’t want, so they agreed to a huge rent reduction as compensation to induce the tenant to open.
LEASING VARIABLESDon’t let this happen to you. Know the details found on our website under “Leasing Variables” on the Subject Areas page.www.premierretailsupport.com
Commercial Properties also need Surveys and Inspections prior to leasing a site.Franchisees should treat the commercial leasing process with the same care and due diligence as a personal home purchase, but many don’t, which can result in another recurring franchise nightmare.When you are buying a house, don’t you hire a team to perform a home inspection prior to finalizing an offer? Of course, you do. Likewise, with a commercial location, the cost for whatever problem you miss will be paid for by the franchisee tenant once construction begins. One franchisee associate was advised to hire an inspection team before signing a lease for a second-generation restaurant space. It was going to cost them a few thousand dollars, so they declined. Upon leasing the space and sending in contractors to start the renovation, they learned that all the bathroom drain lines and kitchen grease lines (under the floor) were plugged. How did it happen? One possible answer is that this occurred after the business closed because of ill-will about the loss of jobs.A survey inspection would have caught this very expensive repair and maybe the space wouldn’t have been leased, or maybe the landlord would have contributed to help make repairs to get the lease signed. Totally avoidable.
CONSTRUCTION VARIABLESDon’t let this happen to you. Know the details found on our website under “Construction Variables” on the Subject Areas page.www.premierretailsupport.com
REAL ESTATE STRATEGIESDon’t let this happen to you. Know the details found on our website under “Real Estate Strategies” on the Subject Areas page.www.premierretailsupport.com
TIMING OF THE NEGOTIATIONIn a negotiation you’ll get a lot more by saying no than by saying yes. Example:When I was the Senior Director of Real Estate for GNC Franchising I was assigned a lease renewal negotiation for one of our locations. I was in Las Vegas at the International Council of Shopping Centers (ICSC) Real Estate Convention so, I made an appointment with the Landlord for that particular shopping center. At the end of the negotiation, and having achieved only a very modest increase in rent for another 5-year term, I asked the Landlord’s rep, “Do you think you can get this renewal approved?” His reply was, “No problem, it will be approved.” At that moment I knew I could have done better. I had left money on the table, because the acceptance of that negotiated rent had come easily, without any resistance.My boss, Ben Rifkin, was in the same Landlord’s booth, so I asked the Landlord rep to accompany me to immediately present the deal to him for approval. When Ben saw me, he asked, “Did you get that renewal worked out?” I said “Yes, but you’re not going to like it.” I then shared the negotiated economics. He picked up my cue and replied, “You’re right, I’m not going to approve those figures. Set another appointment to negotiate that renewal properly.” I did, and at the next appointment I improved that deal by another 15%. Always pay attention to the way in which a deal is “accepted”. .
At PRS, every associate we have, supports the Broker industry. WHY? Because having a broker saves you money instead of costing you money. HOW? Did you know that brokers have specialties? There are commercial brokers, retail brokers, restaurant brokers, industrial brokers, residential brokers, and office brokers? Why should you care? Because the broker you team up with will be able to make you aware of “off market opportunities” (OMO). OMO are those spaces that are soon to be available, however only certain brokers are aware of them. Business owners retire, get divorced, pass away, or on the positive side, need more square footage since their business is doing very well. So they communicate that to the landlord, and then specialized brokers are notified to start finding replacement tenants. This occurs before any “for lease” signs are posted in the window. Having access to this inside track of information is invaluable.I share this with you because I have known franchisees that didn’t want to work with a broker, given their belief that the deal would become more expensive by using a broker. This couldn’t be further from the truth. Always use an experienced broker which PRS has in our database to avoid this nightmare and be aware of OMO’s.
Join our PRS subscribers and have access to the growing Industry Support directory found on our website under “Industry Support Professionals ” on the Subject Areas page.www.premierretailsupport.com
We built the PRS website to share what is often common knowledge in the leasing community, but is not available anywhere else. We strive to level the playing field between the large real estate chains with full real estate departments and the small franchisor brands with limited real estate staff. We hope this eBook of FRANCHISE NIGHTMARES was informative and a little entertaining. Every franchise nightmare could have been prevented. If you or an associate are in the middle of your own franchise nightmare, call us! We will use our decades of experience to help you craft a solution and in the process earn another testimonial for our website. If you have learned something of value that would also benefit another franchisee, please refer them to the Premier Retail Supportonline information portal at:www.premierretailsupport.com“Our Business Helping Your Business.”
INTERACTIVE SUPPORTThis eBook covers only a small amount of “Nightmare” situations … all of which could have been avoided if all of the facts were known. Don’t let any of these or other situations happen to you that could turn into your worst nightmare! We are only a phone call or email away. No matter where you are, our goal is to help you avoid nightmare situations and realize your dream of a successful business!
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