Converting a retail space into a restaurant/bar!?

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california
Junior Burger
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2013/11/21 15:14:20 (permalink)

Converting a retail space into a restaurant/bar!?

Is it unreasonable to expect a potential landlord to help with converting a retail space into a restaurant, above the money he would put in to make it ready for retail tenants?
[BACKGROUND STORY FOR THIS QUESTION: I'm trying to open a bar/tea house/live music venue in a small college town with few restaurants/bars, no empty lots, and a LOT of restrictions on modifying existing non-restaurant spaces. For instance, for anywhere between 1 and 50 people, we need to expand existing unisex single-stall restroom into a mens room with an ADA stall and urinal, and a ladies room with TWO stalls, one of them ADA, because the city has a "restroom equity" law. Every single space we've looked at, this is going to be a MAJOR expense. All of the buildings here are very old, pre-ADA-codes. Nothing we've looked at has more than 1 bathroom.

     We waited for 5 years for a space to open up that wasn't too close to residences to legally put a bar in, and we found one where the city was going to let us share existing ADA restrooms with another restaurant in the same building (if we didn't open up our music venue until after the other restaurant closed at 10 PM, sigh). And everything was going well, the landlord *said* he was willing to put in $60K towards tenant improvements (the space was just a warehouse with unfinished walls and concrete floors), and then... the landlord changed his mind and backed out. Suddenly he wasn't even interested in the project if we took on more of the costs.

    We waited another year for a space to open up, and this one is a large retail space with a single ADA restroom, where the landlord is excited about the project, really wants us in there, and says the costs will be "minimal" to add more restroom stalls and a floor drain for the bar in a certain spot (not the spot where my business partner ideally wants it), but he is not able to take on any costs other than what he would with regular retail tenants. The space is already usable as is, for a non-food business, so why would he want to put a bunch of money into changing it if he doesn't have to? I think that's reasonable. He's excited about having us as tenants and really loves our idea, but just doesn't have the money for a big project. He's offered to let us use his own contractor, who is way cheaper than everyone else we've talked to, and has made suggestions on how we can arrange things to minimize our costs. From what I've heard, he's a nice, reasonable landlord.

    My business partner is still attached to this other space that didn't work out, and still occasionally tries to contact that landlord, who hasn't returned any of our calls or emails in the last year, and even before that was noncommital and hard to get ahold of. But my partner still think $60K is a reasonable amount for a landlord to put into turning a warehouse/retail space into a bar, even though that clearly didn't work out for us. I can't seem to convince my partner to take this new space. Paying for construction ourselves may mean that we start with just beer and wine and save up for a liquor license after we open (they're a precious commodity here because the county reached its limit years ago, and they trade for $80K currently).

  So, my question is, is my partner being unreasonable expecting the landlord to help with costs above what he would do for other tenants? Or is the landlord being unreasonable? I want this space, there are other people applying for it already, and my partner is dragging his feet. Is my partner right? Should we hold out for a (maybe mythical) perfect spot where the landlord is willing to spend a bunch of money to turn his space into a bar? Is that even a thing that happens, ever?
post edited by california - 2013/11/21 15:20:58
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5 Replies Related Threads

    MetroplexJim
    Filet Mignon
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    Re:Converting a retail space into a restaurant/bar!? 2013/11/21 17:45:02 (permalink)
    I have three restaurant tenants.
     
    "It all depends".  How are your financials?  How solid are your resumes?  How solid and tangible is your business plan?  Personal guaranty or do you have an LLC?  How long a lease are you willing to sign for?  Would your build out have any value for an enterprise other than a restaurant?  How flush is your landlord?  (Not all us have wads of cash!).
     
    The bad news for you is that the landlord appears to have tenant prospects other than restaurants which, as an industry group, have an extraordinarily high failure rate.
     
    With a solid resumes, solid credit, personal guaranties, and a solid plan that leaves you with adequate working capital after the buildout is completed your best hope for acquiring the lease is to negotiate for free (or reduced) rent as the landlord's contribution.
     
    Good luck.
    #2
    russelpert
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    Re:Converting a retail space into a restaurant/bar!? 2013/12/31 00:28:30 (permalink)
    I think if there are no issue with your landlord then why is your partner not dealing with him another thing is why is your partner so adamant with the older property which you say needs more work to convert it into a restaurant than the new one it would be recommended by me to look out for more such location or continue with the property which you have zeroed on.
    post edited by russelpert - 2013/12/31 00:32:03
    #3
    russelpert
    Junior Burger
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    Re:Converting a retail space into a restaurant/bar!? 2013/12/31 00:30:58 (permalink)
    I think if there are no issue with your landlord then why is your partner not dealing with him another thing is why is your partner so adamant with the older property which you say needs more work to convert it into a restaurant than the new one it would be recommended by me to look out for more such location or continue with the property which you have zeroed on.
    #4
    Foodbme
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    Re:Converting a retail space into a restaurant/bar!? 2013/12/31 02:59:08 (permalink)
    As Metro Jim says, Restaurants are HIGH RISK BUSINESSES! VERY FEW MAKE IT.
    If I were the landlord I would be crazy to spend money on renovating a property with the VERY HIGH possibility of your business not being successful and then having to go back in and redo it for the next tenant.
    It's highly unlikely any Landlord will be willing to spend money on you two especially if he has other potential renters who don't require the capital outlay you guys are asking for.
    I'm a business consultant to small businesses with over 50 years of experience in every phase of business from being highly successful in some ventures and going bankrupt in others.
    Sounds like you and your partner have very strong philosophical & Business Decision differences. BIG RED FLAG!
    Partnerships have a high mortality rate even if you're both on the same page and under the best conditions.
    I would not bet a Dime on your partnership making it.
    http://ezinearticles.com/?14-Reasons-Why-80-Percent-Of-New-Business-Partnerships-Would-Fail-Within-Their-First-5-Years-Of-Exis&id=472498
    IMHO your whole scenario is DOOMED TO FAIL. 
    Judging from everything you wrote and the tone of it, my recommendation is to take your money and run as fast as you can away from this whole situation


    post edited by Foodbme - 2013/12/31 03:21:56
    #5
    jman
    Double Chili Cheeseburger
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    Re:Converting a retail space into a restaurant/bar!? 2013/12/31 10:40:44 (permalink)
    Foodbme

    As Metro Jim says, Restaurants are HIGH RISK BUSINESSES! VERY FEW MAKE IT.
    If I were the landlord I would be crazy to spend money on renovating a property with the VERY HIGH possibility of your business not being successful and then having to go back in and redo it for the next tenant.
    It's highly unlikely any Landlord will be willing to spend money on you two especially if he has other potential renters who don't require the capital outlay you guys are asking for.
    I'm a business consultant to small businesses with over 50 years of experience in every phase of business from being highly successful in some ventures and going bankrupt in others.
    Sounds like you and your partner have very strong philosophical & Business Decision differences. BIG RED FLAG!
    Partnerships have a high mortality rate even if you're both on the same page and under the best conditions.
    I would not bet a Dime on your partnership making it.
    http://ezinearticles.com/?14-Reasons-Why-80-Percent-Of-New-Business-Partnerships-Would-Fail-Within-Their-First-5-Years-Of-Exis&id=472498
    IMHO your whole scenario is DOOMED TO FAIL. 
    Judging from everything you wrote and the tone of it, my recommendation is to take your money and run as fast as you can away from this whole situation

    What he said!!
    #6
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