What restaurant owners should know about real estate brokers is a two-part article.
This is part one and provides an overview of real estate brokers and the second part discusses “How to Hire a Restaurant Broker”.
Real Estate Brokers
The term “real estate brokers” or “agent” is very broad.
It’s important to understand the different roles of real estate brokers and how they are involved with different aspects of commercial real estate.
A real estate broker is required to meet more stringent educational requirements; an agent works under a Broker’s license.
Commercial Real Estate Brokers
Most commercial real estate agents or brokers specialize in a specific type of property or geographical area.
For example, office agents/brokers specialize in office buildings, and retail agents/brokers typically lease or sell retail properties and shopping centers.
WARNING!! It’s not a good idea to work with a broker that sells homes or works on a property type such as office buildings or apartments if you are opening a restaurant.
This can be just as dangerous as hiring a dentist for heart surgery.
Who Do Real Estate Brokers Work For?
Most brokers work for the property owner or landlord. Some brokers called Tenant Representatives or “Tenant Reps” work primarily for tenants.
Who Pays the Commission?
When a property owner hires a broker they agree to pay a commission to the broker.
Typically, the commission is a percentage of the lease.
For example, if the total rent paid over 3 years is $30,000 a 6% commission will equal $1,800.00.
The commission does not change the amount of rent the landlord is prepared to accept.
It has been agreed to and factored into the rent prior to marketing the property.
The Landlords broker, “Listing Agent”, agrees to share the commission with “outside agents” if the agent/broker represents a tenant willing to sign a lease.
Most transactions include both a Landlord and Tenant broker.
Tenant Broker
If a tenant wishes to use their own broker to help them find and negotiate a lease, the tenant typically gets the services for free from the tenant’s broker.
Should You Use a Real Estate Broker
In most cases using a broker will save you time, provide access to properties that are not public knowledge, and help negotiate a better lease than you would on your own.
The biggest mistake first time restaurateurs make is to think they will get a better deal “cutting out the middle man” or working directly with the landlord’s broker.
They mistakenly believe the landlord’s broker will reduce their commission so that the restaurateur can get a better deal.
This rarely happens. If you would like to prove this to yourself, call on any property and ask the broker if they will share their commission with you.
A few reasons to consider hiring (the right) real estate broker:
- Access to the information you don’t have
- This is their profession, and they know more about governmental regulations, rents, and lease agreements
- No cost to you for their service
- Save time
How Do You Chose the Right Broker if you are a restaurateur ( part two)
Are you thinking about opening a new restaurant?
Do you have questions about opening a new restaurant? I’m here to help and happy to answer your questions.
Just click here to submit your questions.
Cheers!
Mark Chase
Restaurant Real Estate Advisors
Hello Mark,
I just saw you on Twitter… you retweeted us so I decided to check you out. Because of that, I came across your blog and am very impressed with your content. I don’t have the time to really look into all your content at the moment, but I’m going to keep an eye on this and watch for more blog posts from you in the future.
Thanks for the retweet on Twitter, and I look forward to following you. Now, time for me to find the subscribe button for your blog.
Have a great day,
Josh Lyons
Sperry Van Ness | SouthLand Commercial
Thanks Josh. Sorry for the slow reply I was not receiving updates about comments.
I have a 120 seat restaurant located in Deland Fl. It has been serving local seafood, steaks, and Prime Rib for over 35 yrs. I would like to list it for sale or lease. Please feel free to contact me at Captsam581@gmail.com or 386 307 0047… Thanks Samuel W. Weir
I like information
That’s interesting that a real estate broker can provide access to properties that are not public knowledge. This would benefit restaurant owners since this would give them more options of where to put a restaurant. Using a broker would also give them quicker access to those properties and the owner could get a better deal.
Mark, I own a Pizzeria restaurant in Randolph VT. It is difficult finding a good restaurant broker in this remote area. I am looking to sell as I would like to retire somewhere that is warmer and it doesn’t snow. Any suggestions would be highly appreciated.
Sincerely,
AL Daubenschmidt
802-431-0240
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I like that you mentioned that working with a restaurant broker will help a lot in gaining access to information that I don’t have. I’m interested in looking for a place that’s fairly populated in order to make sure that there will always be traffic to the restaurant. That way, it wouldn’t be too difficult to work on marketing and advertisements in order to generate customers.
I like that you mentioned that real estate brokers help clients gain access to relevant information that can help in finding the best properties. I have a friend who is thinking about taking a real estate broker online course because she want to steer her career that way later on. Since she has lived in the city for more than 20 years already, I think it will be easy for her to have intimate knowledge of a lot of the neighborhoods in the local area.