By Alexandra Sheehan
Opening a brick-and-mortar store is a great way to build in-person connections, legitimize your business, and grow as a retail brand.
While it comes with tons of other advantages, it also comes with a price tag: anywhere between $2,000 and $100,000, according to Entrepreneur. That’s a major investment, so it’s important to get it right.
Choosing the right location can make or break your venture into physical retail. Below, we’ll look at how to choose the right location, find the best space, and negotiate a lease that works for your business goals.
Nailing your geographic location
Your first decision is where in the world your store is going to be. Think big — countries, regions, states, provinces — and then narrow it down to cities, neighborhoods, and specific locales. For some merchants, this might be an obvious choice: somewhere local to where you live. For digitally native brands, the possibilities could be endless.
If you’re more flexible in where your store will be located, consider the following factors:
- Where your target market is: If you have an existing customer base, look at where the highest concentration of customers and big spenders are. If you don’t have one, conduct market research to find out.
- Crime rates: Generally speaking, you want to stay out of high-crime areas. This could deter foot traffic and put your store and merchandise at risk of theft.
- Small business community: Is there an existing support system for SMBs? Is this place SMB-friendly? Your local community can help make or break your venture.
- Average cost: You need to find out how much real estate typically goes for sale or rent and if you can budget for that. In New York City, for example, you can expect to pay a lot more than a small town in upstate New York. Also consider local taxes and other fees.
Once you have a list of requirements, search for places that fit the bill. Here are a few sites to check out:
Rent vs. buy
Once you have geographic parameters, the next decision you have to make is: lease or purchase? This will determine which properties are available for your needs.
Renting and buying each come with their own set of pros and cons:
|Requires enough capital for a deposit and first month’s rent||Requires more capital upfront|
|No ROI — the money you pay in rent goes to the building owner||Business investment that can deliver ROI when resold|
|Smaller commitment, in terms of both time and money||Bigger financial and time commitment|
|Less control over the space||Complete control over the space (within code)|
|Not responsible for ongoing maintenance and upgrades||Responsible for ongoing maintenance and upgrades|
The right answer really comes down to your budget, business needs, and personal preference as a business owner.
You’ve searched and found a few properties that might fit the bill. Now it’s time to vet your options.
A good place to start is with a checklist of must-haves, nice-to-haves, and deal-breakers. Some items you might want to consider include:
- Parking: Is there on-site parking, a parking lot, or street parking? Do you need it?
- Public transportation: Are any train stations, bus stops, or other public transportation hubs nearby?
- Visibility: How known is this neighborhood? What about the actual storefront: Does it stand out or is it hidden?
- Local area: Are the sidewalks, streets, lights, and other local amenities well-maintained?
- Other businesses: Do you have competitors in the area? Complementary shops that could be potential collaboration partners?
- On-site amenities: Is there a bathroom, dressing room, sink, or other necessary on-site amenities? How about WiFi?
- Displays: Are there existing shelves, display cases, stands, and other tools to use for visual merchandising? Do you need to upgrade the space yourself?
- Size: How big of a space do you need? A general rule of thumb to follow: sales per square foot = sales / square feet of selling space.
If the properties check all your boxes, then you’ll schedule on-site visits.
Important: You also want to understand the local laws — beyond just the state level. Do your research before you sign anything. Get in touch with the local city hall and zoning commission about signage, construction plans that can affect your chosen location, and other regulations specific to the local jurisdiction.
Sealing the deal
You’ve found a place you love, and it meets all your requirements (and then some). You’re so excited, “tell me where to sign!”
But before you put pen to paper, you still have some work to do. You need to make sure the lease or buyer’s agreement works for your needs and gets you the best deal.
First, start by asking what exactly you’ll be responsible for as a tenant or owner. This could include things like maintenance and repairs, recurring fees, snow removal, lawn care, security, heating and A/C, and property taxes, among others. Get a list in writing.
If it all checks out, renters will want to look at the lease terms. There are different types of leases you can sign as a merchant:
- Single net lease: You’re responsible for paying property taxes and utilities, while the landlord handles everything else.
- Double net lease: You’re responsible for paying property taxes, utilities, and insurance. The landlord handles maintenance.
- Modified net lease: You and the landlord equally split the expenses.
- Triple net lease: You’re responsible for property taxes, utilities, insurance, maintenance, and most other things. The landlord only handles major repairs. This is one of the more common lease types.
So, how do you score the best lease? Some tips:
Hire an agent or lawyer
These people are professional negotiators. If it works in your budget, recruit an agent or lawyer to negotiate the lease on your behalf. They’ll be able to secure deals and clauses you may never have noticed.
Pursue multiple options
If you don’t have options, you have less leverage. Negotiating multiple leases simultaneously helps you get the best deal and puts you in a position to walk away from an unfavorable deal.
Ask for lower rates
The listing price isn’t necessarily final — this is true for both purchases and rentals. You can (and should!) always ask for lower rates. Landlord won’t budge? Offer to commit to a longer lease term, pay a bigger deposit (or smaller if they won’t budge on rent), pay upfront if you can, ask for the landlord to cover utilities or kick in WiFi — you can get creative.
Free rent is also a popular promotion landlords use to attract tenants. They may not reduce the base rent because it could lower the value future tenants are willing to pay, but they may be willing to give you a discount via free rent periods. For example, a single free rent period per year on a three-year lease amounts to an 8.3% discount on rent.
Validate the square footage
Just because the listing has a specific number, that doesn’t mean it’s accurate. These measurements quickly become out-of-date, and it’s not always representative of the total usable space. Bring measuring tape to your on-site visit so you can measure for yourself.
Ask for a fair “cure” period
A “cure” period is the time you’re given to rectify breaching the lease. The most common example is late rent payments. Without a cure period, you might have to pay fines or face legal action for minor mistakes. This should be a non-negotiable.
Negotiate lower early termination penalty fees
Find out what the fee will be if you terminate your lease agreement prematurely. If you can, eliminate early termination fees altogether, though you might have to compromise on a lower number than the landlord originally proposed.
In addition to the cure period, there are a few other ways to protect yourself:
- Sublease clause: If you need to leave the space, this can help you avoid early termination fees.
- Co-tenancy clause: If sales are slow or a collaboration is in the works, this will allow you to share the space with a fellow business.
- Competitor clause: Ask your landlord to add a clause preventing them from bringing in a direct competitor as a tenant in another unit. This is especially important for multi-unit commercial properties.
Haggle over the fixturization period
Chances are, you’re going to have some remodeling to do before the space is customer-ready. It may be a simple as hanging a few things or it may be a more intensive installation for permanent displays. Either way, you want the financial burden to fall on the landlord. Some may do the work for you, while others might prefer you do it and reimburse or provide free rent during this fixturization period.
Moving forward with your retail store
Once you’re happy with the location, the storefront itself, and the lease agreement, you’re ready to go!
Though finding a location for your new retail store can be stressful, it’s also exciting. Remember, don’t be afraid to walk away from a deal that’s just not right.
When you’re ready to get up and running, read these articles to make sure your shop is a success:
- 34 Small Business Ideas for Your Retail Store
- Why Now Is the Best Time to Start a Retail Business — and How to Do It Right (a Chat With Sanford Stein)
- Opening a New Retail Location? Here’s How to Drive Word of Mouth and Traffic
- What Every Retailer Needs to Know about Running Multiple Stores
About Francesca Nicasio
Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.