Author: Gary Lazar

Much has changed since the “old days “ of the 1990’s when it comes to securing a location in a Regional mall. Today the majority of properties are controlled by a REIT ( a real estate investment trust) and that in many ways led to the disappearance of independent tenancies or smaller regional retailers in the large regional centers.

Today it’s all about the sales per square foot driven by name Brands, many international. If your concept cannot meet or exceed the mall average then you’re probably not on the right track in trying to secure this type of location. The rent alone, for the top centers in Canada is in the $300.00 per square foot area including additional rent. If that doesn’t scare you and you believe these type of properties would be interested in your concept then you will need to invest in a proper business plan, renderings, and be willing to share your current sales and profitability. You will also need to provide a strong covenant or a large security deposit which may not be refundable. From that point you might be offered a temporary deal and location which can be taken away from you if the space is needed.

The best approach might be no approach at all. The smaller regional tenants or even independents that break through usually do so because they already have a proven track record. They started in smaller centres and worked their way up by building their sales and customer loyalty. These same customers are often the ones that contact the regional malls to tell them about your concept. Going to a street store in a strong area and building your reputation will also get you noticed. You want the malls to come to you .

Build your brand, be patient, offer something that makes you stand out, have great customer service and a strong web site as well. Get reference letters, ask your customers to email the regional malls about you.

Finally, you might be offered a location in a property owned by the same company that has that Regional mall you covet. Take this opportunity and run with it, build your brand, build your brand, build your brand – that is your mantra and might open up those doors for you.

Gerry Lazar

Top Cats Realty Inc.

The relationship between franchisees, franchisors and landlords can sometimes be a complicated one for landlord representatives if the control is not quickly established at the outset of the relationship.

The Landlord should know from the outset who will be their tenant and therefore signing the lease document. It is unfortunately often the case that a franchisor will negotiate on behalf of a franchisee setting the rents, location and lease term often without serious impute from the franchisee. When the franchisee finally sees the lease documents there is usually push back on the actual deal, because the franchisee can be the one responsible for the rent, terms, covenant, etc.

If you are a franchisor offering corporate covenants to the landlord, the deal will go a lot smoother for you. On the other hand if the franchisee is directly responsible for signing the lease, then this should be made clear from the outset. The landlord representative will then know who is responsible for the lease and therefore with whom they should be communicating.

There is nothing worse than negotiating an entire deal with a party that is not responsible and not the actual decision maker. Many franchisees also make the mistake of going on their own, securing a location and then bringing it to their franchisor. In many cases the franchisor may have his own real estate people securing sites and they could have already communicated to the same landlord. Also, the franchisee could be in a territory protected by another franchisee or working in another franchisee’s territory. When this comes to light after the paperwork is done, the deal will stall as the franchisor might have final approval on the site. Another issue occurs when the franchisor negotiates an entire deal “subject to identifying a franchisee” and cannot deliver a franchisee. In a competitive retail real estate environment, many Landlords will refuse to do a deal subject to the franchisor securing a franchisee.

Avoiding these situations is not that difficult. Establish from the outset who is responsible for site selection and lease negotiations. A franchisee should employ their own professional retail real estate representatives working on their behalf. They should know the territory, competitive rents in the area and what competitors are in the trade. Any professional retail real estate site selector would have this information by having relationships and “go to” people with the major landlords. Don’t be afraid to ask real estate professionals for their qualifications and retail experience.

A few simple rules from the outset can make this process easy to follow and can ensure success in securing the best deal for you.

Next time we’ll talk about the relationship between the real estate rep. and his client/customer.

 

 

Q. Have you ever wondered why the best CRU (commercial retail unit) retailers almost always want to be located in a “grocery store anchored” strip mall? It’s a good question, especially if you are looking for the best location for your retail or service business.
A. It’s all about traffic or what professional site selectors call “generators”. Below are 10 good reasons you should strongly consider placing your business in a good grocery-anchored plaza.

1. It is because there is no more powerful motivation than the human need to eat and feed one’s family, therefore we are highly motivated to shop for groceries on a regular basis.

2. Unlike other types of retail, grocery stores/supermarkets generate strong daily “shopping” traffic, not just casual passers by grabbing a coffee on their way to work.

3. This traffic is regular because once shoppers establish their grocery shopping habits they don’t change those habits easily.

4. The convenience and time saving factor allows time tapped shoppers to complete multiple errands at one place.

5. The grocery-anchored plaza generally has a large parking field so there will be lots of free parking for your customers as well.

6. A good quality retail property will have good access and egress points and a signalized intersection so entering and exiting the plaza will not be a problem.

7. A strong retail property will have good visibility, good signage opportunities and a good mix of retail uses. Don’t forget, the more errands a shopper can complete in one stop, the more likely it is that she will come to that plaza.

8. A strong grocery anchor will attract other generators such as a pharmacy and a medical walk-in clinic, banks, postal outlet, service uses etc.

9. A smart supermarket will have done its homework and will generally locate near to its prime target market with an adequate trade area. You should do the same homework for your business.

10. If the success of your is business is dependent upon the grocery store being open and operating, be certain to protect your self in your lease in the event the grocery store goes “dark” or closes.

To learn more about the “Secrets of Strategic Site Selection” contact Kelly Laughton, at Top Cats Realty Inc. Brokerage. Kelly has been successfully working with retailers and retail landlords for more than three decades and can help you avoid making costly mistakes when choosing your new business location.

Call 416 419-7470 or email: kelly@topcats.ca

Before committing to a franchise, here are Five Key Points to consider. This article will deal briefly with the view of a Landlord.

5 Key points to remember:

1. Landlords look at the covenant (financial strength). The stronger the covenant the less their risk. If your franchisor is offering a “corporate covenant” guaranteeing the lease, and payment of rents, the better your ability to secure a good location ahead of others looking at the same spot. If you are not offering a corporate covenant, the Landlord will usually require a security deposit, the amount will vary and your ability to secure a Triple A location, an end unit perhaps, will now be limited.

2. Landlords also look at the strength of the company (and its brand) and how many locations they have. The more recognizable the name is to a Landlord the greater their attraction to that tenant for their center.

3. Start up franchisees – new franchises with exciting new concepts, one you think will work, doesn’t usually translate well to a Landlord. Landlords often look at retail tenants with respect to their ability to satisfy their banker for financing purposes. The stronger the brand, the easier it is for the Landlord to make his case.

4. Your Financial Strength – while you may qualify financially to secure a franchise, the Landlord might have a different opinion, which could result in asking for you to commit personally to a lease. You need to be aware of your financial obligations to the Landlord.

5. The Lease – Many Landlords prefer to use their own lease document. Some franchises insist on their own lease document. Regardless, it is imperative that you retain a good retail real estate lawyer to assist and PROTECT you in the lease negotiation. Landlord leases can be onerous and have many caveats. You could be in over your head before you even open for business. Money spent on a good retail lawyer is a smart investment.

My next article will deal with the relationship between the franchisee, franchisor and their real estate site selection criteria.

By Gerry Lazar, Sales Representative, Top Cats Realty Inc. Brokerage Gerry Lazar has been a retail real estate sales representative since 1989 and has a reputation as a deal maker. Gerry will tell you he’s a Top Cat in this business because he has what it takes to get the deal done.