What Restaurateurs Need to Know Before Signing a Lease
An LA consultant specializing in restaurant and hospitality permits and licenses advises ICE students on real estate.
Making deals is in Eddie Navarrette’s DNA. His father was a car salesman and he’s since earned the nickname “Fast Eddie” for his ability to efficiently navigate the murky waters of city and state permitting and ABC licensing, an acronym for the Department of Alcohol and Beverage Control. His firm FE Design & Consulting works with restaurant and hospitality clients in Los Angeles.
“My life is about helping restaurateurs,” Eddie said. “They have become my friends, who I represent and who I advocate for.” Over the last 16 years, he has helped more than 500 clients successfully launch their businesses by securing proper planning variances, building, health, industrial waste, special event, alcohol, police and revocable permits — which can be a daunting task for restaurant owners to execute on their own. “I’m trying to make it easier for people to open up restaurants in California,” he said. According to Eddie, Los Angeles is one of the most difficult cities in America to open a restaurant in. “It’s a very litigious state that we’re in,” he said. “We have handicap requirements and we have environmental standards that are much higher than anywhere else.”
Eddie told ICE students that there are a lot of opportunities for missteps when securing a building for a food business. Here are his five key items to keep top of mind when looking for that home for your restaurant or concept.
Structure and Infrastructure
In cities like Los Angeles, the available space to lease is going to be preexisting. Unless you are a massive chain, you are not going to be building a structure. “Focus on the structure itself: How difficult is it going to be to build a restaurant here?” he said. “Is it an existing restaurant or are you putting a restaurant in what was a retail space in a location you love? Is it next to Google’s headquarters? Is there already a huge lunch crowd or a demographic that you’re really thirsty for?”
Regardless, restaurant owners have to do their due diligence on the structure. Ask yourself these pertinent questions: What is the building made of: concrete, masonry, wood frame? What is the height of the building and the height of ceilings? Height will have a direct impact on the kitchen’s hoods. What about accessibility? Handicapped parking? Are there existing restrooms and how far away are they from the space? As Eddie explained, the landlord may say restrooms down the hall are fine to use, but the reality is that the health department has set guidelines on distance between the space and the bathrooms. “The landlord is trying to get something in the space and you, as a potential tenant, are attractive for their retail flow and pedestrian traffic,” he emphasized. “They have a special interest, so you need to do your own due diligence on the structure.”
Find out about your certificate of occupancy or the current legal use of the building. For example, is the space classified as a take-out restaurant or a dine-in establishment? “There is a clear distinction between the two and you need to know what that is,” Eddie said. ”Otherwise you are going to get yourself in a lot of trouble, even for the simplest things.”
Even trying to get a permit for an ice machine can turn into a mess. “You could be going to get an ice machine permit only to find out you have to get an electrical permit, then you find out that Building and Safety wants to get a change of use for your classification. Now you need to have 20 more parking spaces, and now you have a six-year lease for a location that you can’t open because you don’t have the parking.” Heed his advice: Find out your permit classification before the lease is signed.
“We have to think about the logistics of the ducting system,” Eddie said. Whether you’ll be running a duct to a one-story building or a high rise (and both are possible), knowing how it is going to be completed is in your best interest.
“Oftentimes kitchens get really hot and landlords may think the return air is enough to cool the staff that’s in the kitchen, but they aren’t in the kitchen and they have no idea,” he said. (Note: Eddie’s rule of thumb for HVAC systems is one ton for every 250 square feet of space.)
Another item to keep in mind on the mechanical front is the exhaust system, which is heavily regulated in California. Another thing to consider is the equipment you’re employing, such as an imported pizza oven from Italy. “Though the manufacturer may say it doesn’t need a hood system, it might be that the city you’re in requires something different than what the manufacturer states,” Eddie explained. Other questions he poses about equipment include: How is it fueled and what is the output? Is it wood-burning, charcoal or gas? Each of those will impact the exhaust system's functioning and you need to consider logistics and ensure that your landlord is on board with that plan.
“Restaurants are running espresso machines, refrigeration, walk-ins, ice machines … we have to be sure we have enough electrical to power the exhaust and HVAC,” Eddie warned. To make sure you have what is needed, verify the electrical system first. Identify panels and meters and investigate feasibility, cost and timeliness for a potentially new electrical system.
Do you know the difference between a grease trap and a grease interceptor? A grease interceptor essentially filters out the grease before it goes into the public sewage system. “People are terrified of the idea of putting in a grease interceptor,” Eddie said. That is because the difference between the two is huge: a grease trap is a nominal expense, while an interceptor will not only cost $40,000-50,000, it will require a crane and concrete work for installation. As Eddie advised, discover the existing plumbing, identify all of the components and locate incoming water, gas and drain line sizes before signing a lease. “Opening up the floor, running new lines and doing new work is a lot,” Eddie said. “Make sure if a landlord is promising a grease interceptor, that it’s in writing. It’s not something you want to be liable for.”
Eddie’s final words of caution for finding a location and signing a lease:
- Manage your expectations: Restaurants take six months to a year to execute.
- Be clear with your intentions: “Have a clear picture of what you are selling,” he said.
- Know the customer and employee experience: “A happy employee is a sustainable business model,” Eddie said.
Learn more about the operations aspects of food business in ICE’s Restaurant & Culinary Management program.