Restaurants have a notoriously high failure rate and, for many restaurants, their fate is sealed at the time they sign their lease. If a restaurateur is not careful, she can be saddled with lease terms that make the restaurant’s success even harder than it need be. It is absolutely critical to identify those lease terms before signatures are affixed and keys handed over. Moreover, with the assistance of experienced counsel, many of these lease terms are negotiable and can be adjusted to ensure that they do not present unnecessary hardships in running your business.
Over the next couple of days and weeks this blog will be highlighting some of the most important questions a tenant should ask before signing a lease. These are not, however, intended to be an exhaustive list nor to replace the legal advice you should obtain prior to signing any lease. But, with that said, I hope it is helpful to think about these things.
What will it take to get a liquor license?
Many restaurant concepts require alcohol sales to have any chance at succeeding. In particular, many fast casual franchises may require that their franchisees obtain a license to sell beer and wine because such sales are inherent to the franchise concept itself. It therefore never ceases to amaze me when a would-be operator of such a concept signs a lease committing them to paying thousands of dollars a month in rent without considering whether they can obtain a liquor license for the location, or what efforts or expenditures will be necessary to do so.
In many counties in Maryland, for example, there is a restriction on the number of licenses the local authorities will issue. In Washington, DC, moreover, there are areas of the city where there is a wholesale moratorium on the issuance of new licenses. In addition, there could be something about the tenant operator himself — either where the operator lives, something in his background, or other business affiliations — that will make it difficult for him to obtain a license.
Before signing a lease, therefore, it is absolutely imperative the tenant investigate whether it can obtain a liquor license for the site. And if there is any doubt whatsoever on the matter, the tenant should be sure the lease contains a contingency that allows it to void the lease if it cannot obtain such a license.