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Learn from my mistakes--

If buying a restaurant in a small complex- or any other business for that matter-, get an exclusivity clause for your niche. Be careful of of greedy landlords and know what your rights are regarding issues like out parcels, etc. Continued below

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Answers (5)
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Monmouth County, NJ

Great posts. Great insight. John, I hope your business continues to rebound and flourish. This is great information for someone considering buying an established retail business.

Sep 4, 2009
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The BAF Group LLC
MD

Agreed, all around. It used to be that the landlord was someone who felt that his interests were tied to yours, so both worked together to make certain the other succeeded. Now, it is every man for himself, and the landlord frequently holds all the trump cards. That way, no one wins. And you can see that in most of the shopping centers and malls around the Country, as a result.

Sep 2, 2009
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I confronted the landlord about the first one he put in. His response was "Competition is everywhere. If I didn't put him in there then he would have moved in across the street and you still would be competing against them.' I told him that was a lie because there was no spot across the street for him to move into (that is still true two years later.) We lost some business when the first place moved in. especially from the office workers in the complex who now only have to walk 30 feet instead of a couple of hundred yards. We stepped up our advertising and did other things so we rebounded very nicely from that setback.I just feel that running a business is tough enough without having your landlord against you.

Sep 2, 2009
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The BAF Group LLC
MD

As a Commercial Realtor (as well as a Business Broker), and a former restaurateur, I understand and agree with you. Mall or shopping center landlords are the worst, from my perspective. They don't understand food, and frankly, most people that open restaurants are too trusting about these things, until they get hit over the head. I have had to fight with tenants about wanting to ask for exclusivity from the landlord, because they don't want to cause friction!

The thing that the landlord's don't get is that they think Retail is Retail is Retail. They don't get that, if you buy a sweater at Macy's, then go to Eddie Bauer's and see another sweater, you might buy both; but if you go to McDonalds and eat a Big Mac, you ain't necessarily going to go to Burger King in the same mall and eat a Whopper there, as well! All they care about is filling a hole in the storefronts, rather than whether any particular one succeeds.

In the Malls in Baltimore (and I am certain elsewhere), another problem is that tenancy is , so to compensate, the landlords are pumping rents up 40%, 50% or more, with each renewal. That is driving even more stores out of business that were doing quite well, in spite of the economy.

Finally, any of you who is in a shopping center or mall, and not part of a national franchise or brand, be very concerned. The move over the past several years is branding. You could have the most successful independent operation in the mall, and the landlord will frequently find a way to price you out, or find any other way he/she can to get you to leave, if he/she can bring in a national brand. Starbucks, William Sanoma and other have been responsible for supplanting local operators in that way, all over the Country. And restaurants are absolutely the biggest target on the hit list. In a bad economy, the landlords think the big brands can withstand that kind of adversity more than independents; and they look to the brands to bring traffic (people) to the mall or shopping center, that locals or independents can't bring in.

I agree, John. It is a sad scenario.

Sep 2, 2009
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Anyway, we now apparently have two compettitors in our small shopping center. We bought the place three years ago and two years ago the landlord put in a place that specializes in a sit down breakfast ( we own a very successful breakfast and lunch diner.) We didn't think about exclusivity because we were stupid and trusting. Before we bough this place we were looking to start up an Italian restaurant (That is our restaurant background)--- we eventually thought against it because of all the trouble of .homemade Italian food that we were used to making without the support of a large family like my family's Italian restaurant. We NEVER thought about exclusivity because whenever we were looking at spots for an Italian restaurant lanlords and real estate companies wouldn't even talk to us if there was something resembling an italian restaurant/pizza shop. We thought that was the norm.
So now we have one competttor and we lower our prices to compete with them. We are doing great but the wory about having a direct compettitor in the same little plaza is a worry I shouldn't have.
I complained to the landlord but our hands were tied. They didn't care at all.
So now a new deli opened up and they are also open for breakfast. I am pissed but once again my hands are tied.
DO NOT TRUST YOUR LANDLORD !!!! They don't care about you and you should not care about them.
Please take this into consideration when buying your business. It would be like a Subway being next door to a Quiznos in the same small plaza. Now i am in a position where I have to destroy someones business in order to protect my own. They have no chance and i don't feel bad.

Sep 2, 2009

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