Lease of Retail Premises

O

oddwire

Guest
My parents own a small independent retail outlet (newagents / deli etc, very 'local') and are looking to retire. They have the business up for sale but are willing to lease it to my husband and I, which we are considering at the moment.

We would take over the business as it is but make some changes - modernise it, increase the food section etc. The business is quite profitable at the moment but we would foresee increasing the trade greatly.

I have a couple of questions about this that I hope people can help me with:

1. How do we calculate what rent to pay them? Is there a standard formula for working this out based on turnover, square footage etc?

2. What would be a good company to price things like till systems, deli counters etc as we need to factor in these costs to our own figures.

We are also hoping that after an initial period of me working there full time we would have the staff / systems in place that wouldn't require either of us to be involved in working there day to day, just doing the background stuff (accounts, ordering, wages etc) which I could do a few hours a week. Do another other similar retailers have such a system in place - is it workable or are we kidding ourselves?

Thanks in advance for any help!
 
A lease would typical sell for around ~12 times t/o.
Rent would be based on the local market, and would be the going rating for your area.
Of course since it is full fitted out, this would increase the rent.

If your going to modernise your retail outlet, why not talk to some of the symbol groups.
(Centra,Spar, Londis) but generally need min of 2k sq ft.
They will do costing for you, and tell you if the t/o your aiming for is realistic!

I think the fact that you have to go here to find out information, means you don't know this business well, and need to think hard about what your getting into.

If you plan on putting a manager into your shop you would need a large t/o,
or be a muti operator, to have a good wage yourself as well as pay a manger.
Since you net profit is only a small percentage of t/o watching and controling costs in a must.
Also you need to be very costomer focus hard to do both if your not there.

For tills try Retail solutions
for hot/cold deli try Purcells in tipp.
 
lease sells for 12 times t/o ....Dont think so ! so if there turnover is 1 m euro the lease would sell for 12 m ? there is no rule to cost of lease ! its all to doing your figures and making an offer .disect the accounts ,double check the profitability(in your case im sure its all the truth)
 
Sorry thats weekly t/o
(any one in this business know that)
So a lease for a TSN or a c-shop with t/o 1million per year is worth ~200k - 250k

There is no fixed rule, i agree but there is a rule of thumb and thats to buy a lease 10-15 times t/o and to buy out right 25 - 30 times t/o

Rules like this can exist because they are lots of TSN and convience shops around, and you will find they all operate on more or less the same gross margin, and believe it or not there cost break down as percentage of t/o also over lots of shops works out to be fixed also!!!
There is some variation I know, but that why one shop sells for 10times the other 15times.
 
Thanks for the help and advice!

The shop trades very profitably at the moment and there is a very large 'symbol' shop directly across the road - our shop thrives on the fact that it is independent and more personal and so we will be keeping it that way. That's what I meant by it being very 'local'.

"I think the fact that you have to go here to find out information, means you don't know this business well, and need to think hard about what your getting into"

We both know the business quite well, have both worked
there on ocassion and will also have the added benefit of my parents still being around to call on for any questions etc, as well as them initially training me up in all areas. We just don't know how to go about the changeover too well, none of us ever having done that before, and need to figure out the costs to us. Being here looking for advice is all part of us thinking long and hard, as well as us dissecting the books etc. No firm decisions have been made yet.

Will price up equipment from the people you mentioned, thanks for that.

Any other advice gratefully received!
 
A couple of important things you need to look at before taking over the business. Firstly what are your expectations re income. Is this to be the sole source of income for both of you and if so can the existing business afford to pay you your expected salaries. Secondly do an operational audit of the business. Look at all costs/income sources and critically examine both. I.e. if its a cost and its not essential cut it. If its an income source are you maximising its potential. Good managers are hard to find. Good honest managers even harder. Think about running the business yourselves for at least 12 months before going that route. You will also need to closely supervise any new manager during the initial stages until you are sure you have the right person. To do that you must know the business and be able to regularly monitor the activity. You are lucky to have the benefit of your parents experience. Try to learn from their experience but make your own decisions. They need to understand the difference between advice and interference. Good luck.
 
BrenG said:
A couple of important things you need to look at before taking over the business. Firstly what are your expectations re income. Is this to be the sole source of income for both of you and if so can the existing business afford to pay you your expected salaries. Secondly do an operational audit of the business. Look at all costs/income sources and critically examine both. I.e. if its a cost and its not essential cut it. If its an income source are you maximising its potential. Good managers are hard to find. Good honest managers even harder. Think about running the business yourselves for at least 12 months before going that route. You will also need to closely supervise any new manager during the initial stages until you are sure you have the right person. To do that you must know the business and be able to regularly monitor the activity. You are lucky to have the benefit of your parents experience. Try to learn from their experience but make your own decisions. They need to understand the difference between advice and interference. Good luck.
Click to expand...

Thanks for all of that, basically that's everything we're doing and planning on doing! I already have a business which I would be willing to step back from and devote myself fully to the new shop for the next six months, after that slowly moving back quite a bit so that eventually I'm only in a managerial role, not behind a till for 12 hours a day. I would still be monitoring, and in the shop most days, just not necessarily tied to it.

My parents' problem is that they are too involved - the figures show that they could pay a manager and have a nice little income themselves but they can't hand it over to anyone as they've been too tied to it for so long. At the same time they are desperate to be finished with it so that they can enjoy a retirement!

As you said, we do need to make a big distinction between advice and interference, which is why I'm trying to determine lease costs etc so that everything is done above board and in proper business fashion, so that we can completely call all the shots. They are willing to just hand it over and let us 'try it out' for a while, then discuss money later, but I'm adamant that if I'm doing it at all then it'll be done properly.
 
I'm pretty sure your parents has done all the trials and errors all through the business. Perhaps you shouldn't try, instead do the same practise. If you need someone to suggest creating more service to the existing business try here :
 
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