CHICAGO — From day one, open communication and a clear understanding of responsibilities under a commercial lease are vital for keeping both parties happy.
And in the self-service laundry business where many store owners rent their real estate, the quality and length of a lease can make or break an operation. At its core, everything hinges on developing a positive landford-tenant relationship.
“It’s vitally important to read between the lines in any legal document,” recommends Dave Menz, who owns four Queen City Laundry stores in Cincinnati, Ohio, and is building a fifth. “It’s also important to spend a little time with a landlord and try to figure out what makes them tick. If you can find a landlord that sees your relationship as mutually beneficial and values your relationship, then you really have found something.”
“Hopefully, before reading a new lease, you have met the landlord or at least spoken to them enough to feel comfortable moving forward with them,” says Tim Kerstetter, who owns and operates five Laundromats in central New York, including Super Clean Laundry in Auburn. “They will in a sense become one of your business partners through the life of the business and as such, all parties should be comfortable with each other.”
John Giambrone owns LaundryTime, a Colorado Springs, Colorado, business located in a strip mall. He offers laundry and drycleaning services.
“It took about six months for us to come to an agreement on my current lease, and it is almost 65 pages long,” he says. “My landlord’s specialty is building and renting skyscrapers. This means that my contacts with the company are often not familiar with common practices in strip mall rentals. … I think it is just as important to learn about the landlord’s business as it is to carefully review the lease.”
“(The lease) can tell you how they view the balance of responsibilities between the tenant and landlord,” says Elizabeth Wilson, owner of Suds Laundry in Memphis, Tennessee. “If they try or want to push more of the common area on the tenant, they will want to collect the money of a landlord but force the tenant to do all the work of the owner. Is it in favor of the landlord regarding common areas? How much responsibility do they want to put on the lessee for items that usually a landlord deals with such as roofing, plumbing, HVAC, etc.?”
“If the first draft of the lease comes across as a win-win for both you and the owner, then they could be a good future partner,” says newcomer Steve Andrews, who’ll celebrate the first anniversary of his store called The Wash House in Nashville, Tennessee, in December. “If every facet of the first draft is in the owner’s favor and they refuse to negotiate on any of the key points, then that indicates it may be a rough relationship down the road.”
When one reviews a lease for a commercial property they’re interested in, what should they be looking for in hopes of establishing a solid relationship with the prospective landlord?
“Flexibility is key,” Andrews says. “Are they willing to negotiate with you in order to get to a win-win scenario? Are they willing to commit to a long term—10-plus years with future options? Are they flexible in any remodeling efforts? A Laundromat is a very specific build-out that requires certain elements be in place.”
“Most importantly, how reasonable the landlord is to lease considerations,” says Kerstetter. “Will they contribute financially to any of the premise build-out? Will they provide any non-monetary concessions? Even the amount of the security deposit, if required, can say a lot about the landlord’s expectations and business model.”
“First of all, start with reviewing the building and then look at (the) lease,” Wilson says. “Evaluate the space and see if there are deferred common-area maintenance issues. Is the roof, parking lot and structure in good condition? Do not expect them to improve if they are not. If possible, talk with other current tenants and see what their option is.”
“We always read our leases over several times,” says Menz. “We watch for little things that are unusual. Once we find these little treasures, then we try to drill down to see what their intentions might be. We don’t claim to be experts but we’ve had some pretty intense negotiations over the years and we’ve learned a lot.”
Of course, being familiar with leases commonly granted to Laundromats is extremely important so that you know what to reject in a proposed lease and what to ask for, says Giambrone.
Check back Tuesday for the conclusion!