So you’ve finally got the funds together and are ready to open your restaurant. The first thing that you’re going to have to figure out is your location which will play a big role in how successful your business will be. However, there are lots of things to consider. Buying into a more expensive location may mean that you have to cut costs elsewhere, whereas choosing an inexpensive location in what may be considered a rougher part of town may detract future customers. Should you buy your restaurant or should you lease it? Luckily, we have the answers.
Buying a Restaurant vs Leasing a Restaurant
Most business owners may think that buying their space vs leasing their space is the ideal choice as it’s already paid for, but studies have proven that buying your space really only pays off if your business stays in that same location for over 7 years. As a new business owner, you have no idea how business is going to go; if you’re going to have to close up shop or move somewhere else because the location is undesirable. Therefore, leasing a restaurant space as a start-up business owner is recommended because you can make the change if necessary and lose little to no profit in doing so.
Alternatives to Buying or Leasing Restaurant Space
There are other options to consider if neither leasing or buying a restaurant space seems like a good option for you.
- Food Trucks: For restaurants that don’t need fancy equipment or large spaces, a food truck is a great option and a far less expensive one at that. For this option, it’s better to buy the truck itself rather than renting or leasing one.
- Building a New Restaurant: For those with extra cash to spare, you can build your own restaurant. That way, it’s made exactly to your specifications and wherever you choose.
- Your Existing Space: Perhaps you already have a space that you’ve been using for something else. Rather than searching for somewhere new, consider converting your existing commercial space into your dream restaurant.
- Commissary Kitchens: Especially for those just starting out, renting out a commissary kitchen can be an inexpensive way to dip your toes into the restaurant business to see how things progress.
Leasing a Restaurant
If you decide to lease your restaurant, you’ll have to put in some time to research the different types of lease agreements that are available to you. There are two main ones that are used in these situations: gross and net leases.
A gross lease operates something like an apartment rental. It is a flat monthly fee that covers everything from maintenance to operational costs. This type of lease is good for someone who is on a strict budget as this prevents any unforeseen costs from showing up at the end of the month.
Net leases are typically less expensive than gross leases, but for a reason, and that is because the lessee is responsible for some of the other costs such as utilities, insurance, property taxes, etc. These leases will vary in what they cover so be sure to go over the exact costs outlined in the contract before signing on and getting slammed with unexpected expenses.
3 Types of Net Leases
Within the group of net leases, comes three main types:
- Single: The lessee pays rent and any property taxes associated with it.
- Double: The lessee pays rent, property taxes, and covers the insurance.
- Triple: The lessee pays rent, property taxes, insurance, and maintenance.
And there you have it: all the information you need in order to decide whether buying or leasing is better for you. Once you have these things in order, it’s time for the fun stuff that comes with setting up your restaurant. Good luck, and don’t forget to contact Babak Food Equipment for everything and anything your restaurant needs.