Guide for Food Entrepreneurs

In association with

The Restaurant Consultant’s step by step guide

1. Start with a simple business plan; a short one is sufficient at this stage.
There are many templates that you can populate. Research what you
don’t know.

2. Talk to other restaurant people; most restaurant people are very
friendly, so ask your questions!

3. Observe the competition; what are they doing right? What could be
improved? Who are the leaders and what sets them apart from the
rest?

4. Define the segments of the market that you want to target for your
establishment. How will you let them know about your business?

5. Is your establishment self-service, waiter service or a combination?
Start preparing your menu, contact suppliers and decide on
provisional prices.

6. Many areas have different day part trading patterns so it’s good to
visit your ideal locations during several time slots. Observe the
movement of people and the levels of business in these
neighbourhoods.

7. Start thinking about the average spend per head; how may customers
will you serve per day? How much money will they spend? What will
the cash flow look like?

8. What would be your initial outlay by the time you open your
restaurant? What sums will you have spent on the property, design, fit
out, equipment, marketing and PR, management/team hiring and
training, website, professional fees etc? When will you break even?

9. Your team will represent you to your customers; plan for their
recruitment and training.

10. How many seats will the restaurant have and how many team
members will you need to hire to serve your clientele?

11. Think about the name of your business. Is the website available?

The Restaurants Consultant’s step by step guide

Consider registering your brand.

12. It’s good to trade as a company. You may have to register for VAT.

13. There are a lot of technologies, apps and websites to help a restaurant
business. Electronic tills are not expensive and you’ll need terminals to
accept credit card transactions. There are many apps and websites
that can help you market your venue and reach a wider audience.
It’s well worth considering inclusion on them.

14. It’s good to familiarise yourself with health and safety, food safety,
HACCP, COSHH, fire and alcohol licensing regulations. There are many
courses that you could attend.

15. Ready? Always do a soft launch to rectify any teething problems. Try
to be on the floor making sure all of your customers are delighted!
Enjoy the journey!

Tips from a Property Consultant

Understanding the challenges first

Your company will require very good brand presentation material. The
landlord wants their income to be secure by having a company that will
enhance the capital and rental value long term.

Planning Permission

Cold food sales and coffee shops are A1 use (retail shopping) generally,
but hot food is A3. Where sales are mainly take away an A5 planning use
is required. Under 1600 sq ft of space A1 can be converted to A3 without
consent as it is “permitted development”.

What is the landlord and their agent after?

• An enticing brand
• Media brand profile
• A quality fit out
• Accounts showing net profits at 3 X the rent to be paid. If not then they

may settle for a rent deposit of 6 to 12 months.

Tips from a Property Consultant

How do I make an offer?

After the negotiation you must provide the detailed terms and these
need to be thought through properly. You need what is known as a
“landlords pack” to go with your offer with all references etc.

The types of deal available?

Usually you will have to buy a lease or take a new lease direct from a
landlord. Most food operators like 10 to 25 years for security as a great
deal may be spent on a fit out. You may even have to pay a premium
for a new lease and a premium is fairly certain if you are buying a lease
with A3 use.

How do I find properties?

There are “business for sale” websites or websites like Shop Property or
individual agent’s websites.You can appoint an agent to make the
search for you, but you will have to pay them a fee if they succeed in
finding a suitable unit that you complete on and most will do so
speculatively but only as your sole agent.

Why do companies appoint agents rather than doing it themselves?

All companies rely on agents to keep them up to date. Agents act as
filters, and as a go between, while adding credibility to a brand, as the
agent may be much better known in the property market than the client.
They can often source information and contacts better. The agent should
be able to outline all your property outgoings on the chosen property
and even guide you as to your potential sales and prepare your
landlord’s pack.

Avoiding mistakes

• Avoiding personal guarantees
• Have a building survey before you exchange
• Research if the price you are paying is reasonable
• Research your market
• Have a landlord’s pack ready from day one

The Legal bit

Short term lease or licence?

It is likely that you are new to the market or first time occupiers and so a
short tenancy or pop-up licence may be preferred. This means less
financial commitment and more flexibility to see how the business
develops. This is not always attractive to a landlord but they are
beginning to realise that short term lets can bring a rejuvenating buzz to
a poorly rented area and also attract other potential tenants. Also, if
successful it is likely you will be happy to take a longer lease once the
short term arrangement ends.

As you might expect, a lease is likely to tie you in for a longer term and
contain some additional or more detailed obligations.

What do I need to know?

Whether the landlord requires you to enter into a lease or a licence to
occupy here are some key issues you will need to consider:

Rent This will usually be payable either monthly or
Service charge quarterly in advance. Sometimes a tenant can
agree a rent that is inclusive of all other expenses
such as service charge, insurance and rates. Often
on longer term leases the landlord will require a
review of the rent generally once every 5 years on
an upwards only basis to the greater of the current
rent and the market rent at the time of the review.

If the property forms part of a larger building or has
areas that are used in common by you and other
tenants, then it is likely you will be required to pay
towards the cost of these through the service
charge. You might want to consider agreeing a cap
on your contribution or certain exclusions to keep
you liability down.

The Legal bit

Insurance Usually, the landlord will be responsible for insuring
the property and you will be required to repay your
VAT proportion. You need to obtain 3rd party insurance
and also ensure you are protected if there is
Business rates damage that prevents you trading or if damage is
caused by something the landlord has not insured
Security of against.
Tenure
It is likely that the landlord will be registered for VAT
Dilapidations/ and be charging this on top of the rent and so you
repairing will need to consider whether you should register for
obligations VAT to enable you to recover the VAT you spend.

Rights A landlord will be keen to fill a vacant unit not just to
receive some income but also to pass on the
business rates liability to the tenant. However, as
touched on above you may seek to avoid this extra
cost by agreeing an all inclusive rent.

A landlord is likely to insist that any lease is excluded
from the Landlord and Tenant Act 1954, meaning
that you, as tenant, would not have an automatic
right to renew your term when it expires. You would
therefore need to negotiate new terms upon expiry
of the lease if you wished to stay at the premises.

Often a tenant is required to keep the property in
good repair and condition and to ensure the
property is returned in that state at the end of the
term. It is a good idea to agree a schedule of
condition when you take the lease to ensure no
potentially onerous rectification requirements are
imposed on you at term end.

It is crucial that your lease or licence grants you the
rights you need to operate. Items such as seating
outside your demise, signage, car parking and
access are some of the important issues you will
need to consider.

The Legal bit

Alterations and The landlord will want to approve any alterations to
Fit-out the property and this means your proposed fit out
will need to be considered by them too. Often they
Break rights will need to see plans and a specification and will
require a separate licence for alterations
Assigning or documenting and consenting to your proposals.
underletting
You may decide you want the ability to terminate
Permitted use the lease earlier than the full term. This can be useful
and planning if you are not sure how well you will trade and gives
you added flexibility. Often a landlord will require a
few months notice and insist that the property is
vacant and all rents paid up to date. Sometimes a
landlord will also insist on a penalty payment should
you decide to break the lease.

Another way of removing your oblications under the
lease is having the ability to assign it to another
party or to grant an underlease to another party. To
do this you will probably need to get the landlord’s
consent.

Some key consideration will be the use you intend
to put the property to and the extent of your
proposed works. If the existing use needs changing,
the building is listed or your fit out works are
potentially substantial then it is probable that a
planning consent will be required. Also, your
restaurant will need to have a valid premises/liquor
licence in place. These requirements will obviously
needs to be considered early on as it could cause
potential delays to your opening.

In association with

Simon Ralphs Vasken Jermakian Michael Whitby-Smith
Clarkslegal LLP Foodication Whitby Smith

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Covent Garden Stratford Office Village London
London 4 Romford Road W1J 9HF
WC2E 8LH London
E15 4EA 020 7917 9867
020 7539 8049 [email protected]
[email protected] 020 3713 3236
[email protected]

www.clarkslegal.com
www.foodication.co
www.whitbysmith.com

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