Biggest Mistakes in Lease Renewals & New Lease Negotiations with Jeff Grandfield

But I think some of the biggest mistakes that I see in there are ones they don't realize, you know, how they're going to impact them today. But it's down the road, a year, two years, three years, five years, 10 years. It's negotiating those assignment or transfer clauses, the personal guarantee.

How to get smarter in business and in life. This is the question and I'm on a journey get you that answer. I'm going to interview the world's top entrepreneurs and deconstruct their winning secret. Going to talk about everything from marketing, money and living a bucket list life. I'm Rick Lau, healthcare entrepreneur. I grew and exited my 127 locations in my 30s. Welcome to the clinic boss show. Welcome to the clinic boss show, everyone. Today we got Jeff. Jeff is the lease coach and he helps tenants get the best possible deals when negotiating commercial leases. Did I get that right, Jeff? You've been doing this for like 18 plus years?

Yeah, it's coming in. I lose track of it. I think about 18 years now. I've been working with exclusively with tenants, helping them with their new leases, lease renewals, transitioning their clinic, selling it, dealing with the assignment of the lease, pretty much any aspect of leasing and real estate is what I've been doing for the last 18 years. And really specializing with healthcare tenants.

Yeah, super interesting. You know, and I think you work with both like Canadians, also like self of the board with Americans as well, right?

That's right. Our company does work with tenants all across North America.

Okay, can we talk about like maybe the impact of interest rates and what's going on with like, like remote work and what impact that's having on commercial leases right now? Like is, is that something that you're seeing like with this and it's giving shifting more power to the tenants where like they never had this before?

Yeah, it really depends on the market. I mean that's a complex topic in there and there's a lot of layers to that. You know, what we've seen, you know, higher interest rates, inflation, all this stuff that's been a result of, you know, predominantly Covid and the aftermath of that. You know, we're seeing impacts, but it really does depend on where a tenant's located. I mean, you can speak globally, large cities are generally facing pretty similar challenges. But if you look at any large city, you're going to have a different impact on how this remote work as you touched on. And you know, what's happened in the real estate world depending on where you are, you know, if you're a clinic that's in a downtown core. You know, you, you're usually seeing a lot of cities, a lot more vacancy, a lot more flexibility, a lot more opportunity for, for tenants in there to be aggressive on the renewals or be aggressive on leasing new space. But on the flip side, you're also seeing impacts from inflation and interest rates on more retail. Suburban spaces being almost the opposite. You know, you're seeing less construction in a lot of areas because construction costs have increased with inflation. The cost of borrowing that's pushing rates up. You know, there's less new construction. Everyone's moving to the more remote suburban, in theory, working from home, living there, seeing their, you know, healthcare professionals there. So you're almost seeing in a lot of cities where there's rents going up in some suburban, more retail markets and in the inner cores and more office, you're seeing that go down in a lot of cases. So there's impacts on both sides of that.

Well, it's interesting. So you probably seen like hundreds or thousands of like leases. You know, you probably understand the financials of a lot of these different business or practice owners. Right. What would you say is, what have you seen as like the best type of locations, right, that do well, you know, is it typically in these like, you know, like third floor story, like medical buildings? Is it the, is it like the retail in suburbia or is it like the downtown, like downtown clinics, you know, in one the high rises or is it like within, like, you know, one of those like, you know, villages within downtown? Do you see like, like, you know, if a practice owner wants to start up a new clinic, what, what have you seen like do the best, you.

Know, financially, you know, it's surprising. I wouldn't say there's a consistent answer to that because I've seen my clients and tenants in every type of building and property, you know, out there, you'd expect. And I've been somewhere, I've been surprised when working with them on the renewal. And I, I kind of look at it and go, you know, I wouldn't think that would be necessarily the best location, best opportunity. Maybe not my first choice if I was picking it, but they've done well. And I think that part of that is to, you know, how they manage their clinic, how they market their clinic. All that stuff is a factor in there. But I, I would definitely say recently there's been more of a push to, you know, those more suburban strip centers in there. And I think part of that is again, the, you know, work from Home and people trying to live and work closer to their, you know, to their house. Maybe they're only commuting downtown a couple days a week. So I've seen a lot of push for the more retail suburban stuff, but I've still got a lot of clients in, in core downtowns and those types of properties.

Yeah, yeah. And I see those ones as well as where like you know you are, you know, like you're next to the most popular coffee shop. You know, you're next to the most popular grocery store. You know, there's like a fitness center there, you know, or one of the big box store and like people just don't want to leave that area. Right, you know. Right.

So yeah, I mean if people can go, I mean that's the draw to the grocery anchored centers of the big box store anchored ones in there is that everyone can do most of what they need to do in that one center. It becomes a matter of, you know, convenience and, and repetition for people going, well if I can go to my physio clinic here and get my groceries and get my dry cleaning and do everything, it just becomes this is where I go to do my daily needs.

Yeah, I've seen a lot of P. Ls over the years and I would say those ones are the ones where I'm seeing like these two, three or four million dollar practices. You know, like they were just like part of that like anchor grocery store and like you know there's free parking there. Like they just go there and it's just like super easy, you know. Right, yeah.

And I'd agree, I think those are probably the ones where you're definitely going to see the top line numbers, probably be the strongest, but you're also going to see some of the highest rents in those ones too.

So. Yes, true, true. What about, what about these medical like third floor buildings or a fifth floor. Is that like when I used to own clinics like that was where we started but none of the doctors within that building would refer. So like and we didn't get retail traffic and you have to like pay for parking. Like are those like have you seen those locations do well or are they kind of like going down over the years?

I would agree with you that there's getting less and less. Like that used to be the, the thing. And even some landlords now are always trying to push going while your health care be on the second floor of this building or be, you know, in those properties that are mixed use going. We don't want health care in the Main floor. We want that as our restaurants and coffee shops. But I think that's really changed over the years.

I don't, I don't want to be on the third floor of the Health Science Center.

Right, that's right. And I think that's, that's where you've seen a lot of it go in there, where the tenants are pushing in there and you're paying a bit of a premium in most cases over office floor. But you have to spend less money on marketing in a lot of cases in there. And I think that's where the ones that are in those upper floor medical buildings, unless they've got that really good referral source and co tenancy that works, I think it's more challenging. I think a lot more money gets poured into marketing to let people know you're there. So it changes in every building.

Yeah. And then parking is usually like ridiculously expensive, you know. Right.

So that's the challenge of any of those ones, those professional buildings or downtown core. You've got, you know, if people are coming to see you, if you're not servicing that walkable area in there. Yes, parking's always a challenge in those professional buildings as opposed to a large grocery anchored plaza that has an abundance of parking.

What about those locations in these industrial areas? Right. You know, because I seen a, I seen a lot of these clinics, you know, like be anchored. So they're in this industrial complex. Rent is cheap. They can get so much space but there's no traffic there. And then like, and then I, and most of the clinics I see typically like the revenues like get stuck. I don't see any growth outside of them getting these big contracts from maybe whether it's insurance companies or workers comp, most of them like, like struggle. Is that something you're also seeing as well or.

Yeah, I would, I would agree with that. That I think that you know, the, the ones in the more industrial and I do have clients and I see lots of, you know, clinics in more of those light industrial business parks, that kind of stuff in there. And you're right, I mean your, your rent is cheap in there. But I, you know, I always say that to, to tenants is you can't purely judge to some degree you get what you pay for, but you can't purely judge it on, on that some people look at it and go, well, I'll keep my overheads low and that cost is low, but if your top line numbers are low, well, doesn't really help you much in there. And on the flip side it's not always as simple as going, I'm going to find the most expensive location in there. You've got to look at and figure out where your clientele are going to see you, are going to be attracted to you. What is it convenient for? Parking. So I think visibility, ease of access, parking, all those things are big factors. And it's not always about the cheapest location to keep your cost down, but it's not always the most expensive location in there either.

Yeah, I love that. So I think that, that, that, that thing that everyone talks about, location, location, location is important when it comes to choosing a, like choosing the right clinic, choosing the right location for your startup, you know?

Yeah, it is. I mean that, that, I mean that is the mantra, I guess, for real estate. Location, location, location, as you said. But again, it's not always that simple. It is a bit more, it's as much of an art as it is a science to try to figure out what the right location is for your clinic. Because every clinic is going bit different on who are you serving, what's your demographic, you know, where do you need to be? How are you marketing all of those impact where you can have your clinic.

But isn't your marketing easier if you're in a high, like highly retail traffic, like dense area?

Oh, 100%. I mean that, but that's the, where you're, you know, it's almost like your marketing's baked into that to some degree. Right. You're paying a premium rent in a lot of cases, so you can lower your marketing budget, but you're paying that in, in a premium rent in there too.

Yeah. Cool, cool. And so let's talk about like leases for a startup. Okay. Like a new lease. So what would you say is some of the most costly mistakes you've seen over the years with people negotiating for a new lease for if for a startup?

Well, I mean, everyone always thinks about the financial things, right? Rent is the big one that comes to mind in there. It's, it's tangible. You can calculate that. What am I paying in rent in there? People realize that for the most part that that is negotiable to some reason. But I think it's the approach that people take on the negotiation where they kind of get led through the process on a lot of cases and they, they go in uneducated and they just kind of trail through the process and somebody's, you know, whether it's a real estate agent, the landlord, the property manager, somebody just kind of guides them through it and they don't really do the homework, they don't do the research and they leave a lot on the table, even from rental rate. But you know, beyond that it's, it's things like, you know, first time business owners especially overlook things like tenant allowances and free rent. You know, those can, those can be a lot of dollars that can be left on the table. And for a startup that's critical, you know, cash flow at the start, getting more free rent, getting more contribution from the landlord to offset some of your build out costs. Those financial ones are of course are really important and critical. But I think some of the biggest mistakes that I see in there are ones they don't realize, you know, how they're going to impact them today. But it's down the road, a year, two years, three years, five years, 10 years. It's negotiating those assignment or transfer clauses, the personal guarantees, your renewal option rights. There's so many moving parts to a lease that get overlooked and I think people get caught up in it where they're going, well I've got to focus on purely the rental rate and most tenants don't want to deal with the lease. Right. It's a means to an end of running dude.

Like you get this, like you get this document and you don't really understand it and you got to pay someone to go through it and like people don't want to go through all the different like clauses and some of these clauses are like you said, is detrimental to your business. Maybe not now because you're not paying for it, but it will is detrimental as you run your business or if you sell your business. Right?

Yeah, the long term ones to me if you make those big long term errors that are kind of hidden, they can be far more costly. Like if you do a poor, a poor job negotiating and pay maybe a dollar a square foot more than you probably needed to or should probably not going to make or break you. But some of those other points can, they can cost you tens of thousands of dollars, hundreds of thousands of dollars. Your ability to sell your clinic, all of those things are in my opinion, you know, huge. But I mean even things like, you know, upfront, people don't focus on timing. They get told, they say, well here's the lease, we're gonna, you know, know we've got this location, we're going to turn it over for your fixturing period three weeks from now. And I see this commonly where people don't, they sign the lease and then they map it out and they go, oh I'VE got to build out my clinic. They're giving me the space and they're giving me 60 or 90 days to renovate and build out. And I get it three weeks from now. But they don't realize by the time they work with their contractor, designer, space planner, go through the permitting process, all.

This stuff that takes way longer than three weeks.

Well, that's right. You know, and they end up being, they think they've got 60 or 90 days to build out, but they truly end up with 20 days by the time they've gone through all that. And now they're paying rent for three months while they're still under construction. And that's just a killer for new businesses.

So when you negotiate on the owner's behalf, like, what are you pushing out? Like, what, what is the ideal, like, time period for this tenant improvement?

Well, looking at, and it depends on the size and the scope of the renovation, the condition of the space. But that's something where I'm always saying to my client, like, I can give them some general parameter there, but I always say, like, this is where it's so important to have your full team with you. You know, so if you're doing a build out and you've got a designer or contractor, you want to talk to them, they know how long will it take them to do their plans and drawings to submit to the city? Those people are submitting plans to the city all the time. So they should know, is the city busy or are they slow? Are they fast? How long is it going to take? So we put out, yeah, well, we'll map it out. And if the designer, and I'm just throwing out numbers, if their designer or whoever is working on it says, look, I need two weeks for drawings. And. And they say, well, usually we're eight weeks for permits with the city. I always assume that things are going to be slower than what, you know, what we map out in there. So if we're looking at this and saying, okay, we're going to need, let's just say two months, whatever, for design and permits in the city, then I'll be saying to the landlord or in our proposal be saying we don't want possession till at least 90 days out, we don't want to start the process too, too late in there. And now we're running behind. So if we're thinking it's going to take two months, I might say, look, the possession date will be three months from now, unless mutually agreed to PR be earlier. So then now we've got the flexibility where we know we've probably got a buffer, but if everything goes well and the stars align, we're going to, we can move it up. And then from there it's calculating. How big is your scope of renovations? You know, sometimes you're taking over a space that's, you know, can. It's 60 usable from what you got, you know, and you're only 30 days of renovations. Other cases you're gutting and you're building from scratch, and you're going to need 90 days. So you've got to make sure you. You budget those timelines and your input from your contractors and other professionals are key.

Yeah. And then you just add up and then just like, you know, like just mapping it out, you know, based on the time that you get from the people you work with. Right. I think that's well said. Right.

So, yeah, yeah, you've got to map it out in time because most people that are. You're dealing with aren't doing that work for you. They're saying, here's the day, we're ready to turn it over to you tomorrow. Well, that doesn't make sense for you.

Yeah. What would you say? Actually, let me back up. You talk something about assignment. Can you maybe explain what that is and why that is important, you know?

Yeah, for sure. So assignment clause or transfer clause? To me, this is probably one of the most important components of a lease. If you ever plan to sell your clinic in the future, this is the clause that's going to govern that. So that's where this, what this clause is going to say is that if you sell your clinic to somebody in the future, you need the landlord typically consent to transfer that. So I see this clause chock full of nasty, nasty things all the time in there. Everything from the ability to increase the rent as part of the assignment or transfer to the right to simply terminate your lease simply by asking for it. You know, in there where you come to, landlord said, I've got a buyer, I want to sell my clothes. There's, you know, I see it probably 20% of the time where there's a clause in there that says the landlord can either grant your request for assignment, they can deny it, or they can terminate your lease in there. And there's all kinds of things I've seen in 18 years of what's in that clause and that that can create a lot of problems in that transition.

Yeah. Wow. And would you say that's. That's the most common one, like, like the one you talked about where like where they deny you.

Yeah, the most. Well, probably like the right to terminate is, like I said, I see it probably 20, 25% of the time. But sometimes it'll say, you know, it doesn't. It says you require the landlord consent to assign it, but they have. And it'll use this exact wording. It says the landlord has their sole and arbitrary discretion whether they want to grant it or not. Meaning that if they just don't like you that day, they can say no, or they can say, sure, we'll grant this, but the rent's going up or this is going to happen or this is going to happen. A lot of those clauses will take away rights. So if you've got an exclusive right to physio or Cairo or massage, a lot of times personal to the original tenant in there, renewal options may not be transferable. And for any buyer, if there's three years left on the lease and they can't renew it. Yeah, that of a deal.

Yeah. Wow. Wow. I think that's a good one. Yeah, I think, I think, yeah. I think any person that's thinking selling a clinic, they always look at that clause because that's the clause that prevents most buyers from buying the business. Right. You know, so.

Right, it does. And that's going back to that earlier point why I said, I think a clause like that is going to be potentially far more detrimental than what the rent unit on there.

Yeah, yeah. What about like, what about signage? Signage, something that most like startups think about, you know, like, how easy is it to negotiate? Like making sure that there's, like, you could do all the signage that you want, whether like in the windows or like, like mobile signs outside or like sandwich boards. Like how, how, how flexible are most like landlords on signage when it comes.

To lease really varies and that's why it's so important to get that in writing in the lease agreement in there on what you want or expect. And I. Signage and parking are probably two of the biggest areas of. I don't know if I want to say disputes, but maybe misunderstandings where I think a lot of tenants assume, well, I'll get signage, I can. Why can't I put up a movable signage, a sandwich board? Why can't I put signs in the window? Why can't I park here? I think that's a common area where people make assumptions and making assumptions in a lease is a really poor thing to do. So some landlords are pretty flexible where they'll within reason let you do anything, you know, on the property. Others are so particular where they say you can't have any signage in the window except for your hours of operation. You can put your sign in this area above the space and it has to be 12 inch by 4 inch depth channel cut.

The indoor sign, what was the sign is on the indoor inside of the window does that.

Most leases will say you can't. Well, I shouldn't say most. Most leases that restrict that will say you can't have any signage visible. So whether it's attached to the middle or set six inches back. So if you expect to have something where somebody can see, a lot of leases have very strict control over that and you do need to negotiate that.

But is signage parking negotiable as much as you think it is or like most land? Because don't the landlord just give you typically what they offer to all the other tenants in that, like in that strip on that area? They can't really deviate too much. Is there much room to negotiate on stuff like that?

There can be some, some bigger landlords are very strict when they say, here's our signage criteria package. And they, when you do the negotiation, they've got a four or five, six page document that outlines everything you can do in there and that's it. They won't deviate because they really want consistency in their center. Other landlords are, are far more flexible where they'll just go, well, if these other tenants didn't ask for it, I'm not going to grant it. But if this guy pushed for it and they really want to get you in there, that's where they'll get that. And whether that's the right to put window signage, the right to put temporary sign, even the location of your pylon sign. So those large signs on the edge of the property and those retail centers. Yeah, most centers don't have enough signage where every tenant gets one. So to me, that's, that's really important to negotiate 100%.

Yeah, yeah.

So if you want that exposure on that main intersection of that pylon sign in there, you've got to push for it because most of those centers are, are limited on how much they can put up with the city, how big those signs can be. And if there's 25 tenants in a center, just for example in there, there may only be 18 slots of the signs in there. So that means some tenants aren't going to get it. And there's also pylon signs. If you just negotiate in your lease saying I get a pylon panel. Well, are you at the top, the bottom, the middle? Are you on the pylon that's on the busy intersection or are you on the pylon that's down that dead street where nobody drives down? You know, what's the value of that to you?

Yeah. Wow, I love that. I love that. You know, let's talk about exclusive rights. You know, like how, how important is that for like a, like a new startup? Especially if like, you know, I want just do a physiotherapy clinic, you know, and maybe I might do massage.

Well, the use and exclusive definitions are again, the devil's in the detail on these things in there are critically important. Like you're seeing a lot more. At least I am. And maybe you can speak to this a lot more. Multidisciplinary clinics.

Yes. Days.

Yes. And that's where things get complex. Like if you were, if you're purely a physio clinic and you say, well, I want, you know, I'm going to be a physio clinic. That's the only thing I'm going to offer our physio services in there. Okay, well then that's pretty straightforward in your permitted use. What are you permitted to do? Physiotherapy clinic, physical services. What do you want? Exclusive on physiotherapy? I don't want anybody else offering physiotherapy services. Is as simple as that sounds though it can get complicated where even your exclusive, it might say, well, you have an exclusive on a principal use of physiotherapy, meaning that that has to be the majority of that person's sale. So you could think you have an exclusive on physio, but it's on principal use, meaning that a chiropractic clinic could come in three doors down and do 51% chiropractic and 49% physiological. Oh, you think that nobody's offering a competing services. But that's again where the devil in the detail can anybody offer those services, period?

Exclusive rights, like written like that, it's based on the, the majority very common.

Like that, that word principle use. And then they'll define no way. So like that's the kind of thing that people overlook in the, in what seems to be the most simplistic things. And then you get into the details of, you know, okay, well, I'm, I'm a physio clinic, but I'm offering chiral massage, acupuncture or traditional Chinese medicine. Whatever you're offering in there, you know, what are you Permitted to do. Because if you don't list those as your permitted use and let's just say massage and you assume you can offer massage, but then a massage clinic comes in and gets an exclusive on massage. Now you can't offer that.

What have you seen when like someone does that? Like have you been involved in negotiations of trying to, you know, like add that back after, like they signed the lease as, as like a couple years into the business.

It's tough to do after the fact, especially if you do it a year or two. But I mean I often do this. This is one of the things when I'm doing lease renewals. When I do lease renewals for a client, it's a lot of cleanup. You know, it's fixing mistakes that you made in that first negotiation.

Let's talk about that after. That'll be the next chunk on the list. Renewals. But like if you enjoy my content, I write a clinic owner newsletter. I share with you what's trending now in marketing, selling your business, recruitment operations, front desk and more. Become a better clinic owner. Join over 22,000 clinic owners who get this free newsletter each week. Go to clinicowner.com to sign up today. But yeah, on, on the, on that.

Where you can get it right. You got the most leverage when you're initially negotiating lease. So if you come to them and you're locked in two years and go, I want to change this. Nine out of 10 landlords are going to say too bad, that's what you agreed to.

I think, I think these exclusive rights is part of one of like I would say it's like top three, you know, like it's equally as much important as like the signage and parking because you know, you spend all this money, let's just say you get 2,3000 square feet or whether it's a, you know, you spend all this money to build that startup, you know and you think you got exclusive rights to like physiotherapy for example. And then you realize that like that one word in there actually allows a multi district clinic to have 49% physio next door.

Yeah, yeah. And it happens especially in those medical professional buildings in there, you know, where they're intended to really have a real mix of uses in there and there's so much overlapping nowadays in these different disciplines for sure.

And I just want to make a cab. This is why it's important that you do not like as you negotiate these leases like that you spend the money with people like Jeff, like lease coaches and Also with lawyers who actually understand this language so that like you understand the full ramification, like the years to come, you know. Right. So I think this is important, you know, because most people, like most practice owners typically, you know, wouldn't fully understand this. And it's just like a, like a one word, you know.

Well, that's what I always say. Like you're not going to get everything that you want in a negotiation, but it's about making educated decisions. Is that being blindsided after the fact going, well, I thought this, I thought this, I thought this. At least if you know what you can do, what you can't do, what that clause says, you're making an educated decision before you commit to that lease.

Yeah. So I hate like, I hate like giving personal guarantees on leases. Is there any, is there any strategies on not to give it?

I mean, yeah, there is and I agree with you. Nobody wants more liability than they, they have to get right in there. And I mean it's, you know, it is a pretty negotiable thing. I think that's the most common mistake or, or you know, misunderstanding that people have with personal guarantees. Is that, is it a personal guarantee or no guarantee, full guarantee, no guarantee, that's common thing. Well, I don't want that, but they tell me I have to. And it's common. It's normal if you're doing a startup, you know, new location in there, and especially if you don't, you know, have multiple locations in there, if your corporation is a new corporation, there's not much substance to it. It's not unreasonable for a landlord to go, well, gee, you're asking for us to contribute to your renovation, we're paying a commission to our listing agent, we're giving you free rent. You know, they may actually be risking tens of thousands of dollars, if not more. Whereas if you go in there and default in that first year, they're out of pocket, a lot of money in there. So that's, in my opinion, it's not unreasonable for them to have some security. But I also have a problem, like if you're signing a 10 year lease and your risk, and obviously I work for tenants every day, so this is my argument on this side of the equation. I'm going, well, if your true risk is that $30,000, whatever tenant improvement allowance and the ten thousand dollar leasing agent commission and whatever this amount, it adds up to $60,000, well, okay, we'll guarantee you $60,000, but I don't want to guarantee you $600,000 of rent. You know, over the five or ten years in there.

Oh yeah.

So yeah, you can cap it both in. And this is where it's truly negotiable in amount and time. So I'll often, for example, I'll say, well look, we're not going to give you a full personal guarantee worth 600,000. We'll give you a guarantee worth 60,000 and it's going to decline every year over the first five years to zero. And now you're going, instead of having a $600,000 guarantee declining over time, you're going to have a 60,000 declining over time in there. And that's much more palatable.

Okay, I love that. And then for, for, for, for, for something that's thinking of doing a startup, you know, how much time should they out, how much, how long does this take? How long does this process take to negotiate like a lease that you want, you know, before. Yeah, you know, is it 12 months, 15 months, like six months? You know, like what have you seen? Like is a good amount of time that a practice owner should allocate.

So usually I'll say at least six months. Like if you're kind of targeting circuiting a date on your calendar of saying I'd like to be open around this time or I'm trying to plan six months is probably your bare minimum. And where I say that is that it's your wild, your biggest wild card in my opinion is finding the right location. You know, sometimes there's an abundance of options, sometimes there's very little. So like when I'm doing site selection work for a client, for example, that's what I'll always say to them. Depending on their criteria, like if they say I need to be in a grocery anchored in this tiny little segment of the city and there's only one grocery anchored center in there and it's already got a competitor or it's fully leased. Well, they may have to take some time to look around to look at other alternatives. So the site selection process can be very lengthy. But by the time you go through site selection, the actual negotiation of the lease is probably, you know, anywhere from 6 weeks to 12 weeks in there.

Okay.

And then you factor in all that stuff on plans, permits, you know, that kind of stuff. So usually you're going to be in that six to nine month window by the time you start the process to when you open your clinic.

So starting the process means site selection. Right. So you're saying from site selection to negotiating the lease to like, you know, like figuring out working with your contractors on when you could start like you know, building and permits like that you should give yourself a window of at least six to nine months.

That's what you're saying? Yeah, I think if the stars align and everything goes perfect, can you build and find and negotiate and get permits within six months? It's possible, but I mean that's probably the tightest it can be. And then you're looking more realistic closer to the nine month period and maybe.

Because some rides are process of people who don't know, like what would that look like? I think you kind of talked about it. The first step is like site selection, right. You know, that's kind of the first out. What else is like the key like processes to identifying like, like, like getting a lease for a new startup.

So one of the things that I go through there, and this is one of the big tips I always say to people, is that negotiate or look for multiple locations. If you're in the luxury where you're going out and you're saying, okay, and I'm just going to use an example of a suburban component of let's just say a southwest region of a city saying, look, I've identified, this is my market, this is my area, this is where I want to open my clinic. A big mistake that people make is they'll spend weeks looking around and they'll find one location and then they just start negotiating on it and they start going through the process. There's two reasons why that's a mistake. One is that if you focus purely on that one location and you go through two or three or four or five or six weeks of negotiation and it falls off track and falls apart. Well, now you've just burned all that time and you're back to square one where you're searching for locations again. So I always strongly recommend if possible finding at least two potential sites. When you're doing that first, what I'll call phase of site selection, you'll say, I'll say to my clients if they're doing it, here's the process. If I'm doing it, here's what I'll do. So I'll create a checklist of what my clients needs are, okay, what's your geographic boundaries, what kind of building do you want to be in, what's your size criteria, what are your permitted uses? You have to have to make sure you're not going to be conflicting with other tenants in there. Once I know the parameters of what my client wants for their checklist, then I go out And I look at that whole region in that geographic one and I go, okay, you know, there may be 20 properties in that region that meet their, you know, most of their checklist. But then we may find out that some are already have a physio clinic. Well, that may knock off half of them. And the half of them may not have a big enough or it's too big of a location. All of a sudden you go from 20 potential properties down to like three or four in there. And that's where I say that's the way to do it. And if you find two or three or four that could work for you, sure, there's probably going to be one that you really like. And but I always say start negotiating on two of the locations, maybe three. And you do that for those two reasons that if one falls off track, your lease, you're not at square one on location number two, you might be a couple steps behind, but you're at step three, not at step one.

As far as you got to negotiate like with the other person because you're choosing another location as well. Right.

That's the big, the second huge factor. And I'll use that all the time, like if I really like a location. But they're being unreasonable. I'll say, well, we like your location, but landlord be down the streets offering us more free rent or they're limiting our guarantee or they're giving us more allowance. If you are in that luxury where you have multiple locations and multiple landlords interested in your tenancy, use that. You know, sometimes you don't have that luxury, but if you do, absolutely use that as a bargaining chip.

Yeah, I love that. I love that. Okay, so it's a site selection and then it sounds like the next step is the negotiations, right? Am I right?

That's right. So first step, site selection. Then once you've identified those one or two or three properties, you're going through the negotiation phase, which like I said, you could take as little as maybe three weeks. You don't want to rush the process though. But it may take up to six weeks in there to go through that process of negotiation.

And would you say that during that time is also when they're also negotiating with like their trades and contractors, like on the build out as well, like, or they, or should they do that before looking at the lease? Well, no, they actually, actually have. They actually have to have concurrently at the same time. That's right. Because it's based on the space.

Right. So yeah, you do. And that's where I'M saying to my clients early on in the process, to have your team around you, because, you know, even knowing what your space needs are, some people don't really know, do I need 2000 or do you need 2800 square feet? If you've got your designer that can say, well, if this is how many beds or treatment rooms or stuff that you want in there, this is the size that you need in there.

Yeah. So they should actually line up your trades, your, your, your trades and your designer even before the site selection begins.

Right, you know, yeah. Or around the same time in there. You might have a ballpark in there because, like, we may put in if you know roughly what you want. That may be a condition of our lease where it said this offer subject to us doing an initial space plan, things like that. So you, you can do it early, you can do it during. But I don't recommend signing the lease, removing conditions and hoping for the best. Right. That, you know.

And there's some people that do that. There's some people that do that, right.

A lot of people do, yeah.

All right, let's talk about what are some cost mistakes for lease renewals? You know? Right. What would you say is some of the biggest mistakes you've seen people do over the years? Right.

Probably two, you know, as I, I. Two things I'll touch on that I think are the biggest mistakes, as I touched on earlier, you know, when you do your lease renew, now's the time to fix anything that's broken in your lease. So you may have not negotiated or very poorly negotiated your original lease. Now is the time to fix that. Or things change over time. Over five or ten years, things change on the services you're offering, you know, aspects of your business that may no longer fit with your lease. So the renewal is the time to fix anything that's broken. And I think the two most common mistakes that people make on the renewal is simply a lack of knowledge on how the process works or how to approach it. And one thing they often do is they, they exercise their option. And for a lot of people go, well, isn't that what you have to do? I negotiate, yes.

It's just exercising your option, Right? Yeah.

And that's what a lot of people do. And it's your. I look at your renewal option as your safety net or parachute, meaning that that's what you should pull that trigger and exercise the option if you're fearful that your landlord's gonna kick you out or not keep you. So if you exercise your option and here's why this is relevant. If you exercise your option, most lease renewal option clauses are going to say if you send us written notice in here, the you're locking in for the next five years or whatever your option says. And nothing else is negotiable, only the rent. So in theory, you pull that trigger. If you want to try to remove your personal guarantee, you want to add more options, you want to clean up your use clause, you want to work whatever you want to client.

Yes, yes, yes, you're right.

Okay. You've shot yourself in the foot. So that's rule number one. Why you don't want to just exercise that.

If you're close, you should not renew your option. This is the reason why. Right?

That's right. And so if your lease says you've got a renewal option and you have to exercise it by the six month mark left on your lease, then you should start the renewal process 12 months in advance and spend six months trying to negotiate effectively a new lease or an extension. And then if you get to that point where your landlord's not negotiating or it's not going well and you're fearful they won't keep you, that's when you put that trigger in there.

You're right. This is the right way of doing it, you know, versus like what I think most people, you know, think, yeah, like I got other five years, I'm just going to renew it. But then you can negotiate all the stuff you talk about. Right. You know. Right, right.

Yeah. It doesn't mean that the landlord won't be willing to change some stuff, but they've got no legal or ethical obligations.

Yeah.

So that's kind of point number one. Go ahead.

Yeah. And I'm just gonna say like something you talked about is like the things you would change is like to clean up some of the clauses in there, like, you know, the, you know, like getting a titan exclusive rights, you know, or like signage and parking, if that bothers you. Right. Or, or like removing that personal guarantee or at least capping it, you know. Right.

So that's right. And then the second mistake I think people make on there is they, they wait too long and they, they don't realize that the option notice, like some people assume they can renew their lease right up until the last day they can notice and exercise, but usually it's going to say 6 months, 9 months, 12 months in advance, you need to give that notice. And some people just, you know, whether it's, you know, simply forgetting about it or just not understanding it, wait Too long. And that can cost you because you lose that safety net in your negotiation where you can't pull that trigger to exercise that renewal option. So you're. You're negotiating without that parachute or safety net. And then the second thing is, is even if you don't have a renewal option clause, let's just say you were on your last option and you don't have a clause. Some people wait too long and they wait till there's three months or two months left. Well, if you wait till the two months left, the landlord knows you're not moving. They know you don't have time to negotiate a lease, renovate the space. Now they've got you painted into a corner. What incentive do they have to re earn your tenancy?

No. No.

Wow.

Yeah. So you should start like, what, 12 to 15 months ahead, is that what you're saying?

I usually say, you know, through at least three to six months prior to your deadline. So every lease is going to be different. And this is always the thing that I say to any time. I was speaking in front of a group live a few weeks ago, and it was mostly existing owners in there, and I said to them, one thing I want you to do when you get home from this session is pull out your lease agreement, see when your lease expiration date is and see how far in advance your option notice is. Know your timeline, because some will say six months, some will say nine. I was just reviewing a lease this morning that said they have to exercise at least 12 months in advance. So you want to start that. If yours says 12 months, start 18 months out. If it says six months, start 12 months out.

Yeah, okay.

You can really not start too early within reason. You know, if you exercise, if you sign your lease last year and you're going to start your renewal talks, you know, this year you're probably early. But if you're two years out, the worst thing the landlord's going to say is you're too early. Let's talk about this in three months or four months or six months. You're better to be early to the table than late to it.

Yeah, no, that's valid. And. Yeah, yeah, no, that's, that's a, that's a good one. And I think I asked you this earlier before the show is. Or maybe I did it. But if your business is doing bad, you know, or like you're just, you know, and you want to get out of your lease, or maybe like your space is too small and you want to get out of your lease because you want to move into a bigger space, right. Like, is there any strategies on how you could get out of like your lease?

There is and a lot will depend on. You know, most people don't go into their lease thinking that their business is going to fail, right? So I mean it's the last thing on people's mind to think about stuff like that. But it doesn't mean you shouldn't. You know, in theory you can negotiate a termination right into a lease where you say I can give six months notice in terminate my lease. You know, again I say in theory because as much as that's possible and I don't want to assign that off of that right, most landlords are not going to sign that for a variety of reasons. But it's not to say that I haven't gotten that in a lease. So is that possible? Sure, that's your perfect scenario. But it's unlikely. So that's where you've got to look at things like that. Personal guarantee. You know, this is part of the reason people form a new corporation for a location to shelter themselves from liability. That if something goes sideways, if their corporation doesn't have a bunch of assets and money in there, then there's not much risk in there. If you shut down the corporation, you walk away. This is where your guarantee comes into play. If you've got a limited guarantee versus a full guarantee, if you've been able to remove that guarantee, let's just say you had a guarantee for and you're able to get rid of it by year three, or that your, your obligations were a maximum of $10,000 by year three. That's certainly a lot better to be able to walk away from a lease and be, you know, maybe a ten thousand dollar, call it punishment, so to speak in there to get out of the lease versus being sued for the obligations of $220,000 of rent obligations for the balance of that term in there. So that's where it's so important to set up your tenant, your legal entity, your corporation and limit your guarantee. That's going to give you the most flexibility and strength to get out clause.

You know, like is that, is that something that you see like a lot of owners like landlords would be okay with now?

Well that that's yours. Your sublease usually is all under the same provision of that assignment and transfer clause where it'll say they can't unreasonably withhold that. But again the devil's in the detail in there where sometimes it'll say, well you can sublease it, but you can only sublease it if the use isn't changing. You can only sublease it to. You know, there may be a bunch of things that are going to impact your ability to do that. But yes, that is the other thing of making sure that assignment clause is reasonable. But now the onus you is you've got to go find that sub tenant out there.

Yeah. Well, at least you have an option to do that, you know. Right. You know, like, so if you want to, like, expand versus you, you kind of go through that. Right. So you sound like an amazing negotiator, Jeff. So I'm curious, you know, like, what are some tips on how you could. Like, what are some tips that you've seen that works with negotiations landlords over the years?

I think some of the biggest things that talking really broad in general strategies in there are, and I've kind of touched on this, on the stuff we talked about, is negotiating on more than one location. So, I mean, having options in there creates leverage. And. And this is just as important as a renewal. You know, I use this in lease renewals where that's where I don't exercise the option or recommend my client exercise the option. Where we'll say, I'll say to them, look, what if your location burned to the ground tomorrow? Where would you move your clinic? And they'll say, well, if I had to move, I'd go here, here and here. Or I think these are comparable buildings to mine. We'll create leverage, we'll create competition. Like, I just literally did this for a client of mine where another landlord, the landlord is being pretty stubborn and difficult as part of the renewal negotiation. And my client said, well, there's a building down the street that has a vacancy. And it's like almost turnkey. You know, it was a clinic previously, almost turnkey. I could walk into it, do some cosmetic updates. Pretty easy to go through. And the landlord, it wasn't financial terms, but the landlord is being real stubborn on things like assignment clauses and guarantees and all that stuff through the process. And this other landlord wanted him in there and said, look, I'll give you whatever you want in here. And their financial terms were as good or better. And they said, yeah, no problem on options, no guarantee. This, this, this. And so we came back and I came back to the landlord and said, look, my client wants to stay, but as you know, we've got a problem with this clause. This clause, this clause. Landlord be down the street wants them. The terms are financially Comparable or better, they're willing to bend on these points. And lo and behold, the landlord bent on all of those points we want and my client renewed. That literally happened this past week. So negotiating on multiple locations creates leverage. If you've got multiple options, multiple landlords pursuing you, that's great. Second biggest tip is allowing enough time. And we talked about that. Whether it's any renewal or a new one, people wait.

Leverage. If you have no time, right. You know, you're back to the corner, like you said. Right.

I'm going to work for you or against you. And if you run out of time, either the landlord knows that and they use that against you, or you start feeling the pressure and going, oh, my God, I'm running out of time. I've just got to accept this best. So you've got a plan. Be proactive.

Yeah, yeah. What about, like, more of the soft skills, like how you communicate and how you negotiate with them? You know, like, you know, I see some people being really hardball.

Right.

You know, Right. This is the. This is the final line. You know, I'm gonna walk away. Right.

And it's interesting that you say that too, because I think every situation is different. You know, every property manager, every leasing agent, and every landlord's different.

And that line work.

Say that again.

Final offer.

Yeah, well, and sometimes it does. And I mean, I try to, personally. Everyone has their style. Like, I am not somebody that's aggressive or arrogant or ignorant. Through my negotiations, I try to treat it where this is. These are the facts, and these are the process. So I've tried not to, you know, and sometimes you're gently putting that. Like the one that. I just use that example. I didn't come back to the landlord and say, you know, you sign this tomorrow, where we're gone. But it was kind of gently inferred and saying, look, we want to stay here, but this is what it's going to take. So I took a bit of a soft approach, but it still had a pretty hard ramification at the end in there. And I don't believe in ever bluffing in negotiations in there. Like, in that scenario, I kind of gave him a bit of an ultimatum, but I wasn't seeing that in hoping he would. Where I was bluffing. And if he said no, we had no option. My client was truly ready to move and make that leap in there. So you've got to figure out where your strength is, where your leverage is, because sometimes you have very little strength. And if you come in at a bluffing and Being aggressive, I think you're going to fail. If you've got a lot of strength, you can be a little bit more aggressive, but it doesn't mean that just because you're in a position of strength. My opinion is you don't have to be a jerk about it for lack of better words, because just because you're in a position of strength today, five years from now, you might be in a position of weakness. And if you're professional about your negotiation, I think that says a lot about you on who you are, you know, through the process. And if you kick somebody when they're down, you can't expect them to not kick you when you're down. So I'm very careful on how I approach those negotiations.

Yeah, yeah. Reputation is important. Right? You know? Right. So, yeah. Cool. Awesome. That was awesome. I really, really enjoyed that. And I'll wrap up the last question. What would you say are some like, red flags that you see in, like, landlords that you should stay away from? Is there any question?

Well, and that's a really good question. Sometimes it's hard to really know, but I, I think, and this is a good example, like if you're dealing with, on that point of being aggressive and, you know, arrogant and hard to deal with, if the landlord you're dealing with in your initial negotiation to go in there and your initial response, if that's how they're treating you in the courting phase, you know, this is as good as your relationship is ever going to get. I always say to clients, so if they're a really terrible landlord to deal with when you're thinking about going into their property, to me that's red flag number one because once you sign that five or ten year lease, they're not going to be nicer to you. It's only going to get worse or it's going to stay the same. So that's what I look for. But do your homework. I mean, I'll do this with clients, like if I don't know the landlord. And there's hundreds and hundreds and hundreds of landlords across the country and they're sure there's some big ones that I see all the time across North America that are massive, big REITs, big publicly traded companies, right down to the small landlord that lives around the corner from the plaza that they own. So try to do some homework. You know, there, there are certain landlords out there.

The homework is like talking to the tenants. Is that what you mean by like.

Yeah, well, even just. Yeah. Researching a little like you can research online, but take everything with a grain of salt. Like, find out who your landlord is. Are they big, are they small? But yeah, absolutely. Talking to other tenants. Like, if you have the ability to go in and talk to three other tenants in the building and go, what's your experience? You may find out one go, well, I've been here for five years, but I'm leaving, I'm not renewing because the landlord's terrible. They treat you like garbage, you know, but you may hear the opposite too. Where this landlord's been amazing. Anytime there's a problem with the property, they help me out through Covid, you know, do some homework because that's other people's experiences are going to give you a pretty good indication of how that landlord is to deal with.

Yeah. Cool. That was awesome, Jeff. That was awesome. Like, I've learned so much with our conversation today and I'm curious, like, how do people find out more about you, Jeff, and what you do and how you help clinical owners that may not want to negotiate with all these, like, you know, tough, tough, you know, landlords, you know, and yeah, well, I, I.

That'S a big part of what I do every day. So, I mean, anybody that's watching this, I'm more than happy to jump on a, you know, no charge, consult and, and go through any questions you've got about leasing, about your existing lease. You're thinking about opening a clinic. So if they want to reach out to me, they can do that through our website, theleasecoach.com so www.theleasecoach.com you can email me directly, which I'll spell out my long name here quickly, but Jeff granfield@the leasecoach.com which is J-E F F G R A N D F F I L D atthe lease coach.com that is a long. Yeah. And our website has our phone number on there, so you can click to our website. There's forms you can fill out. My email's on there, our phone numbers on there. But any way they want to reach out to me, I'm always more than happy to, to chat with clinic owners and answer their questions.

Cool. Thanks, Jeff, for coming on the show.

I appreciate you having me. It was great to chat with you.

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