Commercial restaurant leases are among the most operator-unfriendly documents a founder will sign — and among the most important. NNN structure, CAM reconciliations, personal guarantees, and use clauses can determine whether a concept survives a slow launch or a market downturn.
What NNN means in practice
NNN stands for net-net-net: the tenant pays base rent plus property taxes, insurance, and common-area maintenance on top. In a shopping center, CAM covers landscaping, parking lot maintenance, shared marketing, and management fees. Your monthly check is never just base rent.
Ask for historical CAM and tax bills, not only pro forma estimates. Restaurant tenants with heavy grease trap and hood maintenance still pay CAM like every other tenant in the center.
Restaurant-specific clauses to review
Use clause and exclusives. Confirm the lease permits your concept, alcohol service if needed, hours of operation, and outdoor seating if applicable. Some centers restrict cooking odors, exhaust, or late-night hours.
HVAC and grease trap. Determine who maintains, replaces, and capitalizes major HVAC work. Grease trap pumping frequency and cost allocation should be explicit.
Assignment and sublease. If you may sell the business later, landlord consent standards matter. Some leases make assignment difficult, which reduces resale value.
Restoration and termination. Understand what you must restore at lease end. Restaurant build-outs can trigger expensive de-identification requirements.
Personal guarantee. Landlords often require personal guarantees from independent operators. Negotiate burn-down provisions tied to sales or time if possible.
CAM reconciliation surprises
At year end, landlords reconcile estimated CAM payments against actual expenses. Operators can owe additional amounts if insurance, taxes, or maintenance rose. Review reconciliation history for the property before signing.
How NNN affects site selection
A lower base rent with high NNN is not automatically cheaper than moderate gross rent. Model total occupancy across the lease term, including scheduled rent escalations and option periods.
Working with counsel
Have a lawyer experienced in restaurant or retail leases review the document before signing. The cost of review is small relative to a ten-year commitment with personal guarantee exposure.
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