Substantially reducing your start-up costs starts with the construction cost estimates. Local and landlord brokers are fully aware that you may NOT know this or how and when to maximize these savings opportunities. Local and landlord brokers do not want Franchisees to know what roles construction cost estimates can play in the lease negotiation process. A local broker has not been trained on your Franchisor’s functional and prototypical floor plans unless they are trained and have performed multiple franchisee assignments prior to yours.
There is a risky gap and lack of understanding that exists between you, being a new Franchisee, and the local broker, with you having too little knowledge of the unique nuances that are critical, financial and operational savings opportunities the Franchisor would like you to enjoy. It is also much faster if the local broker can “sidestep” these discussions with you and eliminate them as a critically timed and high-quality step within the lease negotiation process.[read more=”Read More…” less=”Read Less”]
If you have unintentionally made the mistake of calling the landlord broker, who is legally representing the landlord, without you having proper Franchisee representation, you are at a much higher risk of paying for the capital improvements that are the landlord’s financial responsibility. Additionally, you will not be positioned to maximize the tenant improvement allowance to reduce your start-up costs. Landlord brokers know they can take unfair advantage of Franchisees when they are called directly. Franchisees innocently think they will save money negotiating on their own. This will result in a Franchisee paying more money in all aspects of the transaction, and the landlord broker will still be paid 100% of all of his/her commission from the landlord as stated in their listing contract. Being properly represented in the negotiating process will maximize each savings opportunity without cost to the Franchisee.
Construction cost estimates are not sealed architectural plans with mechanical, engineering and plumbing (MEP) drawings. (This means that there will be a percentage “variance” in the actual material, labor and profit presented by the contractor providing the estimate. It would be fair to say that a smart contractor will verbally disclose this or put it in writing.) However, there is a perfect time in the negotiating process that, if ignored too early or too late, you will not receive or maximize your landlord’s financial responsibility to provide capital improvements prior to negotiating additional tenant improvement dollars to reduce start-up costs. Timing is everything.[/read]