7 Key Points to Consider in a Lease Agreement When Opening a Restaurant from Scratch

Many entrepreneurs dreaming of opening a restaurant make their biggest investment in rent and decoration. However, no matter how good the location, a missed clause in the contract can put your business in a tough spot. Especially for first-time restaurant owners, the lease agreement is as important as the kitchen side of the business. Here are 7 items you must check in a lease agreement when opening a restaurant from scratch.

1. Rent Increase Rate and Period

In the restaurant industry, fluctuations in inflation and exchange rates directly affect the rent amount. Pay attention to how the annual increase rate is determined in the contract. It may be indexed to CPI, fixed rate, or mixed models. If you are signing a long-term contract, a reasonable and predictable increase rate makes it easier to plan your business budget. Additionally, the increase period (e.g., the same month each year) should be clearly stated.

2. Prohibition of Assignment and Sublease

You may want to sell or transfer your restaurant in the future. If there is a prohibition on assignment in the contract, you cannot transfer your tenancy rights to someone else. Similarly, subleasing (renting a part to someone else) may be prohibited. These clauses should be negotiated to allow assignment, at least with the landlord's approval.

3. Renovation and Decoration Permission

When opening a restaurant, you will inevitably need to renovate the space: kitchen layout, electrical installation, ventilation, etc. Check whether you have the right to make renovations and what types of renovations require permission. Also, clarify what happens to the renovations at the end of the lease (e.g., simple tasks like wall paint may remain, but kitchen equipment can be removed).

4. Security of Tenancy (Eviction Commitment)

Some landlords have you sign a separate eviction commitment along with the lease agreement. This document means you agree to move out by a specific date. If you sign such a commitment, you can be evicted without a court decision when the time expires. Therefore, try not to sign an eviction commitment, or at least keep the period long.

5. Common Areas and Parking Usage

If your restaurant is in a shopping mall or under an apartment building, common area usage is important. Issues such as parking for your customers, the right to hang signs, and use of garden or terrace should be included in the contract. Also, find out how much you will contribute to common area expenses (dues) and how these expenses are calculated.

6. Lease Term and Renewal Conditions

In the restaurant industry, lease terms of 5-10 years are common. Whether you have the right to renew when the contract expires and under what conditions (e.g., with the same rent increase rate) should be stated. Additionally, a clause can be added to protect against the landlord potentially raising the rent excessively at the end of the contract.

7. Termination and Penalty Clauses

Read the penalty clauses you will face if you terminate the contract early. For example, there may be clauses such as non-refund of deposit or payment of a certain compensation if you leave before 1 year. Similarly, the conditions under which the landlord can terminate the contract should be fair. It is advisable to consult a lawyer and negotiate these clauses.

The lease agreement forms the foundation of your restaurant. By considering these 7 items, you can make a safer start. Additionally, for the digital transformation of your business, if you want to present your menus with QR codes, you can provide convenience to your guests with commission-free and multilingual systems like qrmenu.link.

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