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Trying to sell a restauant, landlord is not willing to renew/extend lease

My parents are the owners/operators of a restaurant that has been open for over 50 years, originally started by my grandparents. My parents are looking to retire this year and basically have two options: 1) close up shop or 2) try to sell. Option 2 is very tricky since they don't own the land/building and I believe the landlord isn't interested in entering into a lease with a new party. In fact, the landlord has expressed that he wants to demolish the building and sell the lot. I would love for my parents to try and make some money off a sale but is that even possible given the circumstances?

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Aug 17, 2017
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Signal Hill Holdings, LLC
General Partner

Like so many businesses where the principals are integral to the operation and nobody wants to let them go. The first thing is will the landlord honor the lease and/or extend it for the current owners? Or does he just want to get rid of the business altogether? The landlord may, for good reason, not want a new party on the contract but he may be perfectly agreeable to have the business continue. In such a case there are many workarounds as long as the landlord isn't trying to shut things down. For example the principals can stay on the lease but take on a new owner over time and ultimately pass it on. Lots of options but they depend on the motives and cooperation of the landlord.

Jan 26, 2014
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The BAF Group LLC

If the landlord is looking to demolish the place, you have limited options. On the other hand, there is some real opportunity, none-the-less. One option is that, if your folks are financially capable and the property owner is willing, they can buy the real estate, "as is". If the property owner is looking to demolish the building and sell the lot, as you suggest, he may be open to that. By buying the property as is, the property owner does not incur the cost of the planned demolition, which could be a plus for your parents, in terms of getting the price at a discounted level. For example - and obviously, I am making up numbers for the sake of an example - if the property is worth $500,000 as an empty lot, but it is going to cost the landlord $200,000 for demolition, his Net is $300,000. Perhaps your parents can offer him $300,000 for the building, as it currently stands. If the profitability of the Restaurant will permit it, it is frequently more advantageous to sell with property, than without.

A second option depends upon the nature of the business, itself. With 50 years of history, is the Restaurant popular enough and have a sufficiently resilient brand to withstand moving it? Frankly, sometimes moving it is the kiss of death, for a Restaurant. But if the move can be made closely enough to the current address, offering the same traffic and parking patterns that would allow the current patrons to continue to frequent the new place, it can be successfully relocated. If your parents can "sell the brand" and allow the new owner to move it, the price would be less than if they move to the new location and prove that the brand transferred successfully.

If you want to chat about it, give me a call: Don Barrick at 410-715-0700.

Jan 15, 2014

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