What is the local match? This can be as little as 5% or as much as 50%. My county has just made a 5% match for the Airport for essential air services.
BOB WITHORNCMStPnP, Percentage rent killed our store at 12 Oaks Mall in Novi, mi. The mall owners notified us they would not be renewing the lease because we weren't paying any. We had just finished paying off the Franchisor, it was a factory store, and had sales increasing, figured we could start to recover the investment and got kicked out. In the Saginaw, Mi store we fortunately had a great lawyer. Mall wanted 5 years w/ personal guarantee etc., they got 5 years but only 1 was guaranteed. The rent was paid on time, they never promoted as the said they would. We lasted 16 months and we were at center court. After closing on a sunday we loaded up the rental truck and pulled out. They sued on monday, they lost and we were out $60G investment. Cheap considering we could have been stuck for 5 years. Moved it to Frankenmuth, Mi and did fantastic for a few years then ok until we quit end of 2013. Mall owners in Frankenmuth were very reasonable and realistic, after the first 3 years traffic and sales started to fall. They were willing to adjust the rent enough that we were able to stay open 12 years. They simply would sit down and go over our sasles and we would come to a price with no guarantee just pay on time, we did. BIG difference working with local family owners instead of distant corp. owners.
See in your case my first suspicion would be the mall company acting in conjunction with the Franchisor because they got you to pay their construction costs and fees and sales were increasing. Sounds like they wanted a buy back of the location....that would be my suspicion.
What shocked me initially in my case was the Franchisor immediately took the position of the mall company, that I was being unreasonable and that the franchise location was just badly managed vs in some financial stress. So I suspected that my franchisor was in cohoots with the mall company to an extent even though they stated they were not. They both kept vital facts from me during the sale as well which again pointed to coordination between the two parties.
They wanted me to sign 10 years with personal guarantee, $10,000 a month for just under 2000 sq feet (comparable to New York City Manhattan rent.....for a Dallas suburb). For those readers that are unaware a personal guarantee is that you pledge your personal assets like your house, retirement, etc so they can get around the "limited liability" of your business structure (C Corp in my case). It's whole intent is to force you to Chapter 7 Personal Bankruptcy along with 11 for the Corp so it sticks with you half your life and you cannot bounce back to screw them with another Bankruptcy......thats the reasoning behind it. It's the old Mob adage, "you screw me and I'll screw you".
So I would be resonsible for the lease and finding a new tenant if my business failed within the 10 year term until the 10 year term completed AND would be responsible to pay if the new tenant did not pay. I told them GTFO on that clause and everytime it appeared I would cross it out in the negotiation. They have a mall lease sales team and I'm sorry I am not mananging their mall lease space for them in addition to their taking a cut on my gross sales. Too greedy.
Agree with you that family run malls probably easier to deal with. Franchisors love the big mall firms though because they want as few deals nationwide as possible and want choice locations in each large city. I have a better idea though for my next business attempt..........no commercial leases.
schlimm Retail and restaurant trade are tough. Most fail within a few years.
Retail and restaurant trade are tough. Most fail within a few years.
True.
Restaurants require owner participation at a min of 70-80 hours a week for the first three years if not more depending on the staff you hire. After a few months of those hours and zero pay........came to the conclusion I was better off in IT with my stock market earnings on the side. Even though I felt I could have slogged it out and made it work, it was really ticking me off that the mall and franchisor were profiting more from my work than I would be. The greedy lease was the nail in the coffin for me.
Silver lining is with the restaurant / CEO experience on my resume my next IT job paid 25-30% more than the one I quit to start the business. So it wasn't all bad.
Our community is FREE to join. To participate you must either login or register for an account.