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Updated almost 5 years ago on . Most recent reply

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Elisa Rafol
  • Rental Property Investor
  • Columbus, OH
5
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11
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I was supposed to open a franchise -- commercial lease risk

Elisa Rafol
  • Rental Property Investor
  • Columbus, OH
Posted

I bought a poorly managed franchise - Style Encore - a sister brand to Plato's Closet.   It pays on the spot (not consignment) for great condition, previously owned clothing+handbags and resells for a 60% markup.   In 2008, the company set records as demand skyrocketed as women sought value while still desiring great styles.   Supply of items customers were selling was also high (result: biz could be choosy with buys and turn items faster; also biz needed more cash on hand to make purchases).   I'm concerned about 'stay at home' culture's demand on clothing, even the most-value driven option, which is Style Encore.

(some of) my numbers:  I've already paid 25k for the franchise fee.  I paid 7.5k for 150k worth of assets/buildouts.   The site has been closed since Dec 2019 and they have kept my assets in tact in the meantime. 

My breakeven will require me to sell 120 units per day. E-Commerce is available, but requires advertising to my customer base. I would see a 35% ROI and net 120k annually without working in the day to day biz if I'm successful at improving the biz 50% over previous owners (again, it was not well managed...)

** My biggest risk is this - if the business is not successful, I am personally liable for the lease payments of $4800; lease duration is 5 years.  1400 sq feet in Columbus Ohio.    Rent of $4800 was about 20% under value in Q1 2019 (now we're living in a different world however...)

I can open the biz May 12, according the Ohio's re-opening plan.  I expect sales to come from 60% online, 40% in store.  May 12-August I'll be open just to buy inventory.  Aug 1- I'll open for in store sales.

QUESTION:  What approach/tips are out there for convincing the landlord to waive the personal liability requirement?

Any other insight or opinions are welcomed.

Thank you!

Most Popular Reply

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Joel Owens
Agent
Pro Member
  • Real Estate Broker
  • Canton, GA
11,257
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15,174
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Joel Owens
Agent
Pro Member
  • Real Estate Broker
  • Canton, GA
ModeratorReplied

The chances of the landlord waiving your personal liability requirement ESPECIALLY if you have decent net worth and liquidity is almost ZERO.

There is no benefit to them to do so. It only helps you shift liability onto them and away from yourself potentially.

If you do not want to have a storefront anymore and online only then you might want a commercial attorney to review your lease and any amendments to see what your options are for trying to cancel the lease early.

Rocket Lawyer website and others have pay for sites where you can ask attorneys.

No legal advice given.

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