I've enjoyed the recent list discussions concerning city zoning requirements and a commercial landlords rights/responsibilities, etc. I'd like to expand the discussion a bit and add some blatant promotional information for those interested in new business development issues.
Dave Held posted: "Landlords exploiting renters is commonplace. They try to get their renters to pay for improvements that he should make. The City site plan ordinance supports this "slumlord" behavior by laying the responsibility on the business owner- renter not the landlord". He then referenced someone interested in opening a new restaurant in particular, the need for a site plan, and went on to mention ordinances and the various regulatory agencies; concluding that, as far as site plan costs, building/ site improvements, etc., a "responsible landlord will do the work and pass the cost on to the renter." Bob Gustafson responds, in part, on behalf of the landlord: "Now if the potential business owner that you are concerned about is a food service business, it appears you are asking the bad irresponsible landlord to front for the site plan, and I suppose the restrooms, probably the mechanical costs, the SAC charges and while he's at it perhaps he should give an allowance for walls, ceiling, floor finishes etc. All of this for a restaurant where most likely the owner is under funded, has no existing operation, but his friends have said he is a good cook. ...Sounds to me like the landlord has made a business decision that the tenant is not worth the risk. ...As to you question of how you can help this tenant open his business. Easy. Lend him the money he needs. That is what you are asking the landlord to do." Simply stated, the landlord owns the property which is suited to serving several potential business options. Minimal renovation/improvement allowances are easily negotiated in a lease agreement and a new business owner hangs her shutter in no time flat. Little added cost, little risk and negotiations are smooth. The landlord is collecting lease payments and the business owner is at risk for developing, operating and maintaining a successful new business venture-- no small feat to be sure. In the case where extensive buildout/renovation expenses are required (i.e. a new restaurant in a building where no restaurant previously existed), the new business owner is justly the party at risk for the new business enterprise, not the landlord, as Bob Gustafson aptly suggested. It is the new business owner making the investment and expecting to reap the rewards. The landlord is simply providing one of the components needed by the new business owner in order for her to be successful. The landlord is not looking to take on additional risk without due compensation. And, restaurants are very prone to failure. One of the first things such a prospective new restaurant owner should be looking for is a building that is already set up to operate as a restaurant, thus avoiding the tremendous conversion costs otherwise required. Many other zoning issues would likely already have been addressed as well, when the new business operation is consistent with past business operations at the same site. If such an existing facility isn't available, all required renovation costs must be considered and included as a cost of doing business according to code. What these prospective new business owners need is a comprehensive business plan that assesses competitive conditions and identifies all fixed and variable costs associated with operating the business-- including all buildout/renovation, new fixtures, deposits, and lease expenses (what type of lease is involved?), casualty and liability insurance, permits and licenses, utilities, parking, maintenance; labor expenses including wages and benefits, withholding and workers comp., accounting and legal fees, all the equipment (loan or lease payments) and materials needed to run the business. Suppliers and their costs should be identified in detail, marketing and sales plans/strategies as well. After all these capital and operating expenses are itemized, plans and strategies defined, then revenues must be estimated, and all cash flows planned on at least a monthly basis for the first couple of years, quarterly for a couple years after that. Operational variances are examined (i.e. high, low and expected sales volumes; increases in supplier costs, etc.) and break-even conditions are identified. Working capital needs are identified and financing requirements established. Alternate sources of financing are identified and evaluated. Bank loans and investor/owner equity capital is examined, pooled, and a line of credit established to meet unexpected fluctuations in cash flow. While oversimplified, with this type of planning document in hand, a prospective new business owner will find herself in a much stronger position to negotiate a favorable lease with a landlord, including negotiating more favorable improvement allowances, help with a site plan, etc. The business plan, with proforma financials, will make it easier to negotiate contracts with suppliers, raise capital and obtain adequate bank financing. One of the principal causes of business failure is inadequate financing and poor cash flow planning. Do your homework upfront, make the mistakes on paper! A good business plan reduces business uncertainty and increases the likelihood of success. It's too easy to just blame the landlord! Michael Hohmann Linden Hills www.mahohmannbizplans.com _______________________________________ Minneapolis Issues Forum - A Civil City Civic Discussion - Mn E-Democracy Post messages to: [EMAIL PROTECTED] Subscribe, Unsubscribe, Digest option, and more: http://e-democracy.org/mpls
