Once you have negotiated the purchase price of the business that you are interested in buying it’s easy to think that the rest of the deal is downhill, unfortunately, this is often not the case.
Whilst agreeing on the terms and the price are a big step in the right direction that will mean nothing if the landlord does not approve you.
What is the Lease Assignment?
Lease assignment is basically a fancy term for seeking landlord approval for your buyer to take over your lease.
The landlord or property owner must provide their consent for the lease assignment. You, as the buyer will need to submit an application to the landlord, providing relevant information about yourself, your financial standing, and your plans for the café. The landlord will assess your suitability and decide whether to approve the lease assignment.
As with most things in hospitality, the key here is preparation, if you take the time to submit a strong and thorough application to the landlord then your chance of approval in a short time frame is far greater.
In most retail leases the assignment clause will typically state that as the incoming tenant you need to have equal or greater retailing experience and financial capacity as the current tenant.
With this in mind, it is important to prepare documentation to support this. If you can demonstrate this properly then the landlord cannot legally refuse the assignment.
The exact requirements for information that will be requested for the lease application vary from landlord to landlord and with different agents but the list below will give you a good idea of what you should have prepared and be ready to share.
An Assets and Liabilities Statement
An assets and liabilities statement is a financial document that provides a snapshot of your financial position at a specific point in time. It outlines your assets, which are the resources that you own or control, and your liabilities, which are your obligations or debts.
In addition to listing your assets, you should also have supporting documents to hand, this would include things like a mortgage statement and rates notice to demonstrate ownership of a property and the potential equity, bank statements to show the savings that you have listed etc.
A Business Plan
Some agents and landlords will request a business plan, regardless of whether this is a requirement or not it is a good idea to document your plan. Naturally, I am going to suggest that you should have a full exit plan in place before you buy or start anything but even a short business plan is recommended.
Proactively sharing your business plan as part of your lease application will demonstrate that you have given this venture some clear thought and it shows the landlord that you are not just taking a punt and that you are a professional.
Your Resume & Cover Letter
As mentioned above, it will mostly be necessary to demonstrate that you have the skills to operate the business. The landlord will be looking for evidence that you have relevant industry experience so make sure that your resume and cover letter highlight this.
If you do not feel that you have enough experience then work with the seller on an extended training plan as well as external training such as barista courses etc. Even with less experience, showing that you are finding ways to quickly upskill yourself may well be enough to put the landlord’s mind at rest.
Reference Letters and Previous Financials
If you have previously owned a business then references from previous suppliers, landlords or agents can be a great help. You could also supply previous financials to validate your experience in operating a business.
If this is your first business then consider supplying personal or professional references from people in your network.
As mentioned above, each landlord and agent will have their own specific requirements for this process, if you have at least some of the points mentioned here prepared you will be off to a good start.
As always, if you need any help or if you have any questions please reach out to one of the GSE team.
You can find our contact details here: https://www.gsehospitalitybrokers.com.au/about-us/