Signing a Smart Lease

LeasesSigning a lease can feel like signing your life away.

However, it doesn’t have to be that way, especially if you ask the right questions.

“How much space do you need? Not how much space do you want,” said Jason Khalipa. “That’s a different conversation.”

As the founder of NorCal CrossFit, Khalipa has dealt with a plethora of leases. While his first NorCal location is now 16,000 square feet, it didn’t begin that way. Instead, Khalipa started with 1,500 square feet. He said it’s about how much of the space is he actually going to fill. Plus, by starting small and then bursting through the seams of his Box, Khalip’s business slowly grew without incurring what he called a “giant nut” of cost.

So, start small was the first tip Khalipa gave when it comes to finding a lease that works.

Second, he said Affiliates need to take into consideration what exactly their space is zoned for. Yes, warehouses are fantastic because of the large spaces, high ceilings and the typical ability to be accommodating to noise. However, more often than not warehouses aren’t zoned for assembly use or retail use. And while retail spaces may be great location wise and are usually zoned properly, you often have neighbors who complain about noise.

How do you avoid these issues? First, Khalipa said go to the city department and check the zoning. Then, do a noise test.

The thing is, while you can negotiate money off your lease, it won’t do you any good if your Box is shut down in the first month due to zoning or noise issues. You will be locked into your lease and as Khalipa bluntly put, “screwed.”

Affiliates must learn and research about leases to understand them, something Khalipa said he has been doing over the years. His goal is to know the worst case scenario when it comes to signing the lease, and how to get out, as well as the best case scenario and how to keep it. “Listening to people is cool, but once you educate yourself, then you can really feel like you’re making the right decisions for this because understanding these things is key,” said Khalipa.

Understanding your extension options to whether the lease is a gross net or triple net lease are just two points Khalipa mentioned. Plus, negotiating parts of your lease like extensions is what Khalipa said he would recommend doing. “It’s not about negotiating necessarily the dollar per square foot; it’s about having a lease that is also something that you could build in to,” he said.

In summary:

1)   Start small and grow from there.

2)   Get the correct zoning

3)   Consider noise issues.

4)   How can you get out of your lease?

5)   How can you stay in your lease?

It all goes back to educating yourself on the matter of leasing and negotiating what’s best for your Box. “It’s OK to have [bad things] happen, as long as you’ve educated yourself to know that it could happen and then hedged the risk or assess the risk,” said Khalipa. “Assess it and make sure you have proper things in place just in case it does happen, so this way it’s not a surprise.”

Heather Hartmann
Heather is the editor for Box Pro Magazine. Contact her at heather@peakemedia.com.