The Use clause of your lease has as much impact on your potential for success as the financial terms of the contract. It has the ability to constrict your growth or let it soar.
Case study: The Garcias were in escrow to buy a popular independent coffee house in the North County area of San Diego, California, but there was just nine months left on the lease. They engaged PacifiCORE to negotiate a fresh lease term. They wanted to get favorable terms for a new five year term but they also expressed concern about restrictive permitted use language in the existing lease. To protect the exclusive use provisions of a national restaurant chain in the center, the coffee house lease allowed specific breakfast menu items that the coffee house could sell that were safely differentiated from the big chain’s menu items, and capped the use clause with the popular and safe “and for no other purpose.”
This put the tenant on a mine field, risking a default if they ran afoul of these restricted uses. Basically, it severely restricted the tenant from trying new menu items and ideas, the key to long term success for any restaurant. After convincing the landlord to share with us the exclusive use provision of the major chain’s lease, we found it to be vaguely worded; not so iron clad as the broker had represented. Our strategy: change the language in the coffee house lease to affirm the exclusive use provision of the major chain restaurant and allow all breakfast items that were not explicitly protected in the other lease. This strategically shifted the burden of proof from the coffee house to the chain restaurant.
In your Use clause of your lease, it is better to be in a position to ask for forgiveness than for permission.
The Garcia’s coffee house was recently named the best independent coffee house in San Diego by a popular local newspaper after just six months of remodeling the store…and the menu.
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