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Restaurant tenants – beware there are no drive-through lease deals

One of the most common delays faced by restaurateurs is choosing between the various types of suitable commercial space. The three most common types of properties considered are inline space, end caps and stand-alone pad sites. Locating, viewing and choosing between these options all takes time.  Inline space refers to a standard commercial retail unit (or CRU), like you see in a strip plaza or shopping mall. This type of space is most common and typically allows for both smaller and larger restaurant concepts. Often the landlord or developer will create inline CRUs that are about 1200 square feet in size which can be combined to accommodate restaurants of different sizes.  

Quick-service restaurants often lease an end cap unit. This will be at the end of the strip plaza often with a front and side set of windows. This is especially desirable to QSR’s if there is a drive-through window opportunity for customers. Note that end caps often lease for a premium or higher rental rate. Although many types of tenants may try to get the end cap, landlords often save them for the highest and best use tenant – who is also willing to pay higher rents and even percentage rent. Stand-alone or pad site space is often closest to the street and has parking on all four sides of the building. This allows for more windows and a greater opportunity for patio space. One unique advantage to the stand-alone property is the ability to create an efficient drive-through business. As previously noted, drive-throughs can be done with end cap units that are inline as well, but not necessarily as effectively as with stand-alone buildings.

You may want to save time (and money) by leasing a commercial spot leased by another restaurateur who has gone out of business or moved. Our advice? Consider your options even more thoroughly. If you are leasing a brand-new space, you are going to do investigative work. If you are looking into a second or third generation restaurant space, then you should look even closer. Building out a restaurant can be very expensive. Think of all the plumbing and electrical work that needs to be done. Grease traps, oven hoods and extra power are usually added to the premises. If a restaurant entrepreneur wants to save money, they may open their restaurant where another restaurant has vacated or failed as the infrastructure is already in place. Note that landlords left with a vacant restaurant space often target or try to attract another restaurant concept (on their ”For Lease” sign) as there is the potential to charge another restaurateur a higher rental rate since the set-up or infrastructure cost for their business will be lower. Trap or opportunity – you decide.

If you are considering joining a restaurant franchise system (or are currently operating as a franchisee) and think you may have an advantage over independent tenants when finding commercial space, think again! While it’s true that many landlords do prefer franchise tenants over independent tenants (for proven brands and name recognition), finding the perfect location for a restaurant franchise concept can still be quite challenging. One pizzeria franchisee told us that there was such fierce competition for good pizzeria sites that, as the tenant, he didn’t negotiate the rental rate and simply agreed to whatever deal that the landlord wanted. This was not an isolated incident but in many marketplaces, restaurant franchise tenants can still get a great lease deal if they know what they get some help from a professional Lease Consultant.

In commercial leasing, speed kills – the faster you try to put your restaurant lease deal together (especially on your own), the more inducements you are apt to leave on the table and the more mistakes you are apt to make.

For a copy of our free CD, Leasing Do’s & Don’ts for Restaurant Tenants, e-mail your request to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .