I am seeking to rent a commerical property

[Carol Lee]

Hi all!

          I am now exploring the idea of opening a bakery snack retail store. Currently in the process of looking for the perfect location.  I have no experience in commercial terminology and seeking help from my fellow BPs family. I found a good spot in a shopping strip. The strip is newly built and 80 % finished on the inside. From their website, the stats are listed as this:

Stats:
Min Available:	900 sq. ft.
Max Available:	1800 sq. ft.
Rent Rate:	$20.00
NNN:	$3.50

My interest is the 900 sq. ft. unit.

Can someone explain to me what these terms are? Rent rate , NNN and how I am suppose to calculate them.

Also, when I sit down to talk to agent/owner, what question should I be asking and keywords I should be looking for from them? Hidden charges?  My plan is a 3 year lease with a  Bakery snack retail store that will serve slice cakes, frozen smoothies and snacks.

I don't want to go in sounding like a newbie (eventho I am) and be taking advantage of.

Thank you all for your time and support,

CL

[Joel Owens]

"I am now exploring the idea of opening a bakery snack retail store."

Hi Carol,

Do you have any food experience in an employee or management position??

If not I would STRONGLY encourage you to find another local bakery in the area and work for them or do an internship where you help out the owner for a few weeks in return for learning the trade.

I have decades of restaurant and food experience before getting into commercial real estate. Unlike real estate which can be a somewhat passive investment if you have scale a small business is not. It takes a lot of your life and constantly being there to get it off the ground.

If you have family this is something to consider as your kids or significant other will not get to see you much working those 60 hr weeks. A food business you do not hang a sign outside and all these people start popping in. Even in a great location this isn't the case. You will get a few stragglers now and then but cannot make a profit off the foot traffic alone.

For advertising what usually works best is a FREE FOOD tasting. Owners worry about the food cost but they have it wrong. They spend thousands on fancy pretty ads that people never react to generally. They want to put a coupon in because they figure it covers the food cost. The better way is with the free food. A customer can then say to themselves instead of using a coupon and still not liking something they can try it for free. Nothing lost and everything possible to gain so you take the risk out of it for them. You give away free samples with the event and some will order on the spot giving you immediate sales to possibly break even. This kind of buzz will get you huge attention versus the ME TOO advertising everyone does. 

The strip center you are talking about is triple net and you have the base rent and then CAM re-imbursement to the landlord. You might want to put a cap on CAM percentage you are obligated to pay regardless of the occupancy level of the center. The expenses get heavier as vacancies rise.

The cheapest per sq ft also means nothing. VALUE is finding the best location for your business at a good per sq ft price. If market sq ft is 20 and you find a place in a horrible location for 14 sq ft is that good ?? No it's not and a bad location can make or break certain types of businesses.

As far as (TI) which is tenant improvements in the business getting build out costs from a landlord is doubtful.

You are not a corporate national brand, you are not a subsidiary of a corporate national brand, not a large franchisee, or a small franchisee. You are a startup business with the first location going from scratch with not even a franchisee model to follow. That is the MOST RISKIEST type of tenant a strip center landlord can have. I agree about getting rent to start upon opening because there will be delays that happen. At best I see the landlord giving a possible rent credit for a month etc. because it doesn't cost them anything. I do not see them paying anything for your TI unless they are really desperate. The reason is you could immediately fall out of business and they have wasted those dollars versus a national tenant they can count on for the full primary lease term.

Have you looked within a 2 mile ring radius to see how many other bakeries there are?? Your area could really have a need or be saturated beyond belief where no money can be made. The landlord will want to look at your liquidity and net worth to determine if you have funds to keep throwing money at a start up business or are you giving everything just to open the doors etc. ??

I just want you to have eyes wide open. Another option if you decide to do this is to look for an existing business on www.bizbuysell.com

This is Loopnets sister site for selling businesses. You can find them at great pricing with 50% down that are already making a profit. Even if not there are some spaces that went out and left the strip center owner all the equipment. The landlord strikes a deal with you to go in and everything is ready. Pay special attention to what the lease rate starts at and how it rises over the years.

People have this fantasy sometimes about the food business but it rarely matches up to reality.

Hope it helps. No legal advice.