Questions to Ask When Leasing a Restaurant Space
Written for anyone about to sign a lease on a restaurant space, whether it is a first restaurant or a fourth. Some questions are for the landlord and the listing broker, some for your own broker, and a few for the city and the utilities, and they run in the order the decision does: the space and its history, the kitchen systems (hood, grease trap, gas, power and HVAC), the build-out and who pays for it, use and licenses, rent and the personal guarantee, then the term and what happens if you sell. Zoning, licensing and lease law differ by state and country, so where a note touches on them, ask how it works where you are and have a lawyer read the draft.
The questions
Each question, and why to ask it
The space
Was this space a restaurant before, and what kind of cooking was done here?
Why ask it
A former restaurant, which brokers often call a second-generation space, may already have the hood, the grease trap and the floor drains that make a kitchen expensive to build. Ask what was cooked, because a sandwich shop's setup will not carry a fryer line or a charcoal grill. If it was never a restaurant, every question under Kitchen systems is a cost you need a quote for before you sign.
Is a restaurant an allowed use at this address under the zoning, or would I need a change of use?
Why ask it
Confirm it with the city's planning or building office instead of taking the broker's word, since the rules and even the names of the documents differ from place to place. A unit last approved as a shop may need a change of use, and that review can bring demands for more restrooms, exits or sprinklers before a single seat is approved.
Why did the last tenant leave, and how many restaurants have come and gone here in the past ten years?
Why ask it
One closure tells you little. Three in a decade points at the location, the rent or the building, and the businesses on either side can usually say which. The former operator will often talk too, if the broker gives you a name.
Which fixtures and equipment in the space belong to the landlord, and which could the previous tenant or a lender still claim?
Why ask it
The walk-in, the hood and the bar you saw on the tour may be owned by the old tenant, rented from a supplier or pledged to a bank. A written list of what stays, attached to the lease, settles it; whatever is not on that list, budget to buy.
Does the equipment that stays actually work, and can I bring my own technicians to test it before I sign?
Why ask it
"As is" on a kitchen that has sat dark for a year can mean seized compressors and an exhaust fan that no longer turns. A refrigeration technician and a hood company can check in an afternoon what would otherwise surface in your opening week. A landlord who refuses the visit has given you a preview of how repair requests will go.
How many seats was the last restaurant approved for, and what sets the limit: exits, restrooms, parking or the fire code?
Why ask it
Your sales forecast is built on seats, so find the limiting factor before anyone draws a floor plan. If restrooms set the cap, adding one means plumbing under the slab. If parking sets it, no amount of construction changes the answer.
Did the health department ever cite or close the restaurant that was here, and for what?
Why ask it
Inspection reports are public in many places, so look the address up or ask the health department how to see them where you are. Repeated findings about drains, pests or hot water describe the building as much as the operator, and the building is the part you would be leasing.
Do the restrooms meet current accessibility rules, and are there enough of them for my seat count?
Why ask it
The number of restrooms is generally tied to occupancy, and a new tenant or a permit application can bring the space under today's accessibility standards; the building department can say what triggers that locally. Enlarging a restroom takes seats out of the dining room as well as money out of the budget.
Is the space sprinklered and tied to a fire alarm, and would my occupancy require either?
Why ask it
A dining room over a certain occupant load may need sprinklers or an alarm where a shop did not. The threshold comes from the local code, so take the address and your seat count to the fire authority before you sign. Retrofitting sprinklers can reach into the rest of the building, and the landlord may refuse to share that cost.
Who else is in the building, and has any neighbor complained about smell, noise or late hours from a restaurant here?
Why ask it
Apartments upstairs and a yoga studio next door make for a different lease than a row of other food tenants. Old complaints tend to come back with the next operator, sometimes as conditions on a permit. On a second visit, knock on the neighbors' doors and ask them directly.
Where do deliveries come in, where do the dumpster and the used-oil container sit, and who pays for them?
Why ask it
Walk the route from the truck to the walk-in, and from the kitchen to the dumpster, with the broker beside you. An enclosure sized for shops fills in a day with restaurant waste, and the extra pickups are usually billed back to whoever caused them. With no rear door, the produce crosses the dining room at eleven in the morning.
Kitchen systems
Is there a commercial exhaust hood, what type is it, and where does the duct run to reach the outside?
Why ask it
A hood built for grease and one built only for steam and heat are different equipment, and a fryer or a grill needs the first kind. With no hood in place, the duct route decides everything: straight up through a roof you control is simple, up through three floors of someone else's apartments may not be possible. Have a mechanical contractor walk the route before you pay for drawings.
Is there a grease trap or interceptor, what size is it, and does it meet what the sewer authority requires today?
Why ask it
Requirements are set locally and may have tightened since the last tenant was approved, so a trap in the floor is no proof of a compliant one. The sewer or wastewater office can tell you from the address and a description of your menu. If a new in-ground interceptor is needed, someone cuts the slab or digs up the lot, and you want it in writing who pays for that.
When was the hood's fire suppression system last inspected, and does it suit the cooking line I plan to install?
Why ask it
Suppression nozzles are aimed at particular appliances, so moving a fryer or adding a grill usually means reworking the system. A dated service tag on the cylinder and the last inspection report show whether anyone has kept it up.
Does the hood have make-up air, and can the heating and cooling keep the dining room comfortable with the kitchen running?
Why ask it
Air the hood pulls out has to be replaced, and when nothing supplies it the front door gets hard to open and the dining room turns drafty or hot. Give a mechanical engineer the capacity of the units serving the space along with your seat count: equipment sized for a clothing shop will not hold a full room on a hot evening.
What size is the gas service, and is there a meter for this space alone?
Why ask it
Add up the BTU ratings on your equipment list and give the total to the gas utility with the meter number; they can say whether the line and the meter will carry it. An upgrade runs on the utility's schedule as well as your plumber's, so ask how long the last one took. A building with no gas at all changes either the menu or the equipment budget.
How many amps and what voltage does the electrical panel provide, and is it three-phase?
Why ask it
Combi ovens, dish machines and larger refrigeration often want three-phase power, and plenty of small retail units were never wired for it. Photograph the panel and the service label for your electrician. If the service needs upgrading, the follow-ups are who pays and whether the building's transformer has anything left to give.
Are the water line and the water heater large enough for a dish machine, a three-compartment sink and the restrooms all at once?
Why ask it
Hot water that runs out in the middle of a Saturday service stalls the dish pit and can count against you at a health inspection. You need three figures: the size of the incoming line, the heater's capacity and its age. What the health department expects for your menu, and whether a backflow preventer is required, comes out of its plan review.
Are there floor drains and a mop sink in the kitchen, and where do the sewer lines run under the slab?
Why ask it
Health plan reviewers usually look for floor drains, hand sinks and a mop sink in particular places, and each missing one means trenching concrete. The plumbing drawings from the last build-out show what is there; where the landlord has none, a plumber with a camera can map the lines before you commit.
Who owns the HVAC units, the exhaust fan and the refrigeration compressors on the roof, and who repairs or replaces them?
Why ask it
Restaurant leases often hand the tenant every piece of equipment that serves only their space, however old it is on move-in day. Get the age of each unit and its service records. A landlord warranty for the first year, or a ceiling on what you pay toward a replacement, is a reasonable thing to request.
Build-out
What will you finish at your own cost before handing over the keys: the roof, the storefront, the utilities brought to the space?
Why ask it
The landlord's work belongs in a written exhibit with specifics, such as gas stubbed to the kitchen wall at a stated size and a panel of a stated amperage. "Delivered in good condition" settles nothing when the exhaust fan is dead. Tie the start of rent to the day that list is complete.
Will you contribute a tenant improvement allowance, and can it be spent on the hood, the grease interceptor and the utility upgrades?
Why ask it
Landlords are readier to fund what stays with the building and helps them rent to the next restaurant, so lead with those items. Then ask how the money is paid: as invoices come in, at the end, or as a credit against rent. An allowance paid only after opening has to be financed by you until then.
How many months of free rent will I have for permits and construction, and does the clock start at signing or when the permits are issued?
Why ask it
Restaurant plans often pass through health, building and fire offices one after another, and none of them works to your lease. A rent-free period counted from signing can be used up before a wall is touched. Check whether the other charges are waived too, since free rent often means base rent only.
Can the lease be made conditional on my getting the building permit, the health approval and the liquor license?
Why ask it
A contingency lets you walk away, or pause the rent, if an approval you cannot open without is refused. Landlords usually want a deadline on it and proof that you applied promptly. Leave the wording to your lawyer, because what can be made a condition, and how it holds up, varies from place to place.
Do you have to sign off on my kitchen layout, my contractor and my roof work, and how quickly will you respond?
Why ask it
Roof openings for the exhaust fan are where owners are strictest, and many insist on their own roofer so the roof warranty survives. Get the review period written in days, and find out whether you are billed for the landlord's architect to read your plans.
Has anyone priced a restaurant build-out in this space before, and may I see the drawings or the bids?
Why ask it
A previous tenant's plans, an old permit set or a contractor's bid from a deal that fell through can save you weeks and a survey fee. Permit records for the address are often public at the city as well. If an earlier deal died over the cost of the kitchen, ask what the number was.
Who pays if construction uncovers something nobody planned for, such as an undersized sewer line, asbestos or a slab that cannot be cut?
Why ask it
Restaurants cut more floor and open more ceiling than most tenants, so they find more. Request any environmental or structural reports the owner holds. Before work starts, try for a clause that puts hidden building defects on the landlord, or lets you leave if the fix passes a set figure.
Use and licenses
What exactly will the use clause let me serve and sell: my full menu, alcohol, catering, takeout, delivery and retail items?
Why ask it
A clause that says "pizza restaurant" can block a later change of concept, and one that is silent on alcohol can be read against a bar. Push for the widest wording the landlord will accept, along the lines of a full-service restaurant and bar with related sales. Then read it against the exclusives your neighbors already hold.
What exclusives or restrictions have other tenants been given that would limit what I can put on the menu?
Why ask it
The coffee shop two doors down may hold the sole right to sell espresso drinks, and a grocery anchor may restrict prepared food. Those promises sit in other people's leases, which you will never see unless you ask. Get the list in writing and have it attached to yours.
Will you grant me an exclusive on my cuisine or concept, and what happens if you lease to a competitor anyway?
Why ask it
The wording matters more than the yes: "Mexican restaurant" is far easier to enforce than "fast casual". The remedy matters as much, whether a rent reduction or a right to leave, because an exclusive with no consequence is only a courtesy. Expect existing tenants to be carved out.
Is there a radius clause that would stop me opening a second location or a sister concept nearby?
Why ask it
Landlords who collect percentage rent sometimes bar the tenant from opening another restaurant within a set distance, so that sales are not drawn away from this one. If you plan to grow in the same town, try to have the distance shortened, limited to the same concept, or dropped.
Can a liquor license be issued for this address, and has one been held or refused here before?
Why ask it
Distance rules, quotas and neighborhood objections are decided by the licensing authority, not the landlord, and they work differently in every state and country. Call the authority with the address before you sign anything. The landlord's part is narrower: whether another tenant's lease, or the owner's own rules, forbid alcohol on the property.
Will you sign what the licensing and permit offices need from the property owner, and how fast?
Why ask it
Liquor, health and building applications commonly ask for the owner's consent or a copy of the signed lease. A landlord who takes three weeks to return a form adds three weeks to your opening date, so get a promise in the lease to respond within a set number of days.
May I use the sidewalk or the lot for a patio, and is that area part of what I am leasing?
Why ask it
Outdoor seats on ground that is not in the lease can be taken away with a letter. Find out whether the patio is inside the leased premises, licensed to you separately, or public sidewalk that needs a city permit, and whether rent is charged on it. Heaters, railings and an awning may each need the landlord's approval as well.
How many parking spaces can my guests count on at dinner, and is valet or a reserved pickup space allowed?
Why ask it
Go on a Friday at seven and count the empty spaces yourself. Some cities tie the seats they will approve to parking, so ask the planning office how the figure is worked out for this address. Two short-stay spots by the door for takeout and delivery drivers are a small request that pays back every day.
Does the lease or the building limit my opening hours, music or outdoor service after a certain time?
Why ask it
Mixed-use buildings and shopping centers often carry quiet hours that close a patio at nine or rule out live music. Hold any limit against the hours your sales plan leans on, brunch and late night above all. The opposite clause exists too: one that makes you stay open on days you would choose to close.
What signage can I put up on the building, on the roadside sign and in the windows?
Why ask it
The landlord's sign criteria and the city's sign rules are two separate sets of limits, and each can refuse what the other allows. Places on a shared roadside sign are often rationed, so have your panel named in the lease. A menu board, a neon piece or window lettering may each count as signage that needs approval.
Rent and costs
What is the total monthly occupancy cost, with base rent, taxes, insurance, common-area charges and any marketing fund shown separately?
Why ask it
Set that total against your projected monthly sales to see what share of revenue the space will take. Your accountant or tenant rep can tell you the range that restaurants of your type work within. A space that only pays at the optimistic sales figure does not pay.
What have restaurant tenants in comparable spaces nearby signed for lately: rent, free months and allowance?
Why ask it
This one is for your own tenant representative, who can see deals the listing broker has no reason to mention. Comparisons with shops mislead, because restaurant deals often trade a higher rent for more landlord money in the kitchen. Have the comparables sorted into former restaurants and bare shells before you read the rents.
Is there percentage rent, what is the breakpoint, and which sales are counted?
Why ask it
Sales tax, tips passed on to staff, comped meals, gift cards until they are redeemed and the commission delivery apps keep are all exclusions worth requesting. Check that the breakpoint goes up whenever the base rent does. You would also be agreeing to report sales, so find out how often and who may audit the figures.
Will I have to sign a personal guarantee, and can it be capped or made to fall away?
Why ask it
Ask for the document itself, not a description of it. Common requests are a cap in dollars or months of rent, a guarantee that shrinks each year, or one that ends once you give notice and hand back the keys with the rent paid up. What a guarantee exposes you to depends on local law and your own circumstances, so read it with a lawyer before you agree.
How much is the security deposit, and will it come down after a year or two of rent paid on time?
Why ask it
Landlords often ask restaurants for more than they ask shops. A deposit that steps down on a schedule frees cash at about the time the first equipment repairs arrive. Some owners will take a letter of credit in its place, so check what your bank charges for one.
Will I pay for water, sewer, gas and trash on my own meters, or through a split among all the tenants?
Why ask it
A kitchen uses far more water and gas than a shop, so an owner may want a submeter or a weighted share; whichever it is, see the formula. If a restaurant was here before, ask for a year of its bills. Sewer charges based on water use, and any surcharge for grease, are questions for the utility.
Do food tenants here pay a larger share of common-area costs than the shops, for trash, water, drain cleaning or wear on the parking lot?
Why ask it
Some leases weight the restaurant's share upward. That can be fair, but you should see the multiplier and what it is applied to. Last year's reconciliation statement for a comparable unit shows what the weighting came to in dollars.
Which insurance policies does the lease demand of a restaurant, liquor liability included, and how high are the limits?
Why ask it
Send the insurance clause to a broker who writes restaurant policies and get a quote before you sign, since the premium belongs in your occupancy cost. Limits drafted with a national chain in mind can be heavy for a single location. A beer-and-wine concept can fairly ask whether lower limits would be accepted.
Term and exit
How long is the first term, and how many renewal options will I have at a rent fixed now or by a stated formula?
Why ask it
A kitchen takes years to pay back, so add the options to the term and compare the total with your loan and your payback plan. An option at "market rent" with no method for settling a disagreement is an argument postponed. Put the notice dates in your calendar the day you sign.
If I sell the restaurant, can the buyer take over this lease, and on what conditions?
Why ask it
For an independent restaurant the lease is often a large part of what a buyer is paying for. Look for clauses that let the landlord raise the rent, take a share of the sale price or cancel the lease when you ask for consent. Your lawyer can say how such clauses are treated where you are.
After an assignment, am I released from the lease and from my personal guarantee?
Why ask it
Under many leases the original tenant and guarantor stay answerable for the buyer's rent unless the landlord agrees otherwise in writing. The request to make is a release when the lease goes to a qualified buyer, or at least a guarantee that ends a set time after the sale. Raise it now, because at the moment of a sale the landlord has no reason to give it.
Can I bring in a partner, sell shares or move the lease into a new company without it counting as an assignment?
Why ask it
Change-of-control clauses can treat a new investor as a transfer that needs consent. If you expect to raise money or make a chef a partner, have those moves allowed from the start, along with passing the lease to a franchisee or a sister company.
At the end of the lease, what stays and what do I take: the hood, the walk-in, the bar, the furniture?
Why ask it
Leases commonly say that anything attached to the building becomes the landlord's. If your equipment is financed, the lender will want its own right to remove it, and the landlord may be asked to sign a waiver. Settle a list now, as an exhibit, of what counts as yours.
Will I have to strip the kitchen out and return a shell, or can I leave it as a working restaurant?
Why ask it
Pulling out a hood, capping the gas and patching a roof is a large bill at the moment you have least to spend. Many landlords would rather inherit a working kitchen, so have the restoration clause say so. Get the standard defined: "broom clean with equipment in place" is easier to meet than "original condition".
Is there a demolition, redevelopment or relocation clause that could end my lease or move me?
Why ask it
An office can be moved down the hall; a kitchen cannot. If the clause will not come out, ask for long notice and repayment of the part of your build-out you have not yet earned back. An owner who will not discuss it may already have plans for the site.
If a kitchen fire or a burst pipe closes me for months, does the rent stop until I can reopen?
Why ask it
Start with who rebuilds what: often the landlord takes the shell and you take the kitchen, and each side's insurance should match that split. Rent that pauses only until the landlord's part is done leaves you paying through your own rebuild. Hold the answer up against your business interruption coverage.
How to use these questions on a restaurant lease
Practical guidance for the conversation itself
Who answers what
The landlord and the listing broker
They know the history of the unit, what is on the roof, what the neighbors' leases forbid and what the owner will pay for. The listing broker works for the owner, so treat what you hear as a starting point and ask for the paper behind it: the old permit set, the service records, the list of exclusives.
Your own tenant representative
A broker who represents restaurant tenants knows what comparable kitchens leased for and which concessions landlords in your market give. Put the Rent and costs group to them before you put it to the landlord. Ask at the outset how they are paid, since that works differently from market to market.
The city and the utilities
Zoning, occupancy, the grease interceptor, the liquor license, the inspection history and the gas service are not the landlord's to promise. Planning, building, health, fire, the sewer authority and the gas and electric companies will usually answer a question about a specific address by phone or at a counter. Write down who told you what, and on which day.
The people who will build it
A kitchen designer, a mechanical contractor and an electrician can turn the Kitchen systems answers into dollars and weeks. An hour of each on site before the letter of intent costs little next to a hood that has nowhere to vent.
On the walk-through
Bring your equipment list
List every appliance with its gas load, its electrical load and whether it sits under the hood. With that page in hand, the questions about gas, power and exhaust stop being general and become a comparison of two numbers.
Photograph the labels
Take pictures of the electrical panel and its service label, the gas meter, the data plate on the hood, the tag on the suppression cylinder, the water heater and the nameplate on each rooftop unit. Your trades can read capacity and age from those without a second visit.
Go up on the roof and around the back
The roof shows where the exhaust fan sits, how far it is from windows and air intakes, and how tired the units look. The back shows the delivery door, the dumpster enclosure and where a used-oil container could stand. Brokers tend to tour the dining room; the lease is decided out here.
Come back at dinner time
A second visit on a busy evening answers the parking question, shows who walks past and lets you hear what the people upstairs would hear. Eat at the nearest restaurant while you are there and ask the staff how the block does in winter.
Getting the answers into the lease
Price the gaps before you talk rent
Add up what it would cost to bring the space to what your kitchen needs: hood, interceptor, gas, power, restrooms. That figure is your case for an allowance, for free months or for a lower rent, and it is stronger with a contractor's estimate attached.
Put the restaurant terms in the letter of intent
Letters of intent tend to cover rent, term and deposit and leave the rest for later. Add the use wording, the exclusive, the patio, the permit contingency, the right to assign on a sale and the shape of the guarantee. A point agreed at that stage is hard for either side to reopen in the draft.
Ask for exhibits
Four attachments do most of the work: the landlord's work with sizes and capacities, the equipment that stays and who owns it, the restrictions other tenants hold, and a plan showing the patio, the parking and the trash enclosure. A promise that is on an exhibit does not depend on anyone's memory of the tour.
Have a lawyer read the draft
Guarantees, assignment, casualty and default clauses are read differently from one state or country to the next, and this list cannot tell you how yours will be. A lawyer who handles restaurant or retail leases will know which of your requests are routine locally and which are a stretch.
Former restaurant or empty shell
What a former restaurant saves, and hides
An existing hood, interceptor and set of floor drains can take months off an opening. The same kitchen can hide a layout that fights your menu, equipment at the end of its life and approvals that date from older rules. Ask every question in The space group and have the systems tested.
What a shell costs, and gives
A unit that was never a restaurant means building everything, and the landlord's contribution matters most here. In return you get a kitchen laid out for your own line, new equipment under warranty and no inherited grease. The Build-out group decides whether the numbers work.
Compare two spaces on cost to open
For each candidate, write down the build-out cost after the landlord's money, the months of rent paid before the first guest, and the monthly occupancy cost afterward. A lower rent on a shell often loses to a higher one on a kitchen that is ready, and sometimes the reverse is true.