Opening a restaurant is an exciting venture, but navigating the lease agreement can be just as critical as crafting the perfect menu. For food service tenants, a commercial lease isn’t just a rental contract, it’s the foundation of your business operations. One overlooked clause could impact your hours of operation, delivery options, or even your ability to install a kitchen hood.
Here are the most important lease clauses restaurant tenants should evaluate before signing on the dotted line:
1. Use Clause – Define What You Can and Can’t Do
This clause defines the specific business activity allowed on the premises. Restaurant tenants should ensure the clause covers:
- Dine-in, take-out, and delivery services
- Sale of alcohol (if applicable)
- Hosting events or catering services
2. Exclusive Use Clause – Protect Your Market Niche
An exclusive use clause prevents the landlord from leasing to direct competitors in the same center or building. For example, if you’re opening a taco restaurant, you’ll want to prevent another Mexican food concept from moving in next door.
3. Ventilation and Utility Access – Critical for Kitchen Operations
Many restaurant tenants overlook the importance of proper HVAC, grease traps, hood systems, and utility access. Make sure:
- The lease specifies who installs and maintains these systems
- The infrastructure supports your operational needs (e.g., gas lines, amperage)
- You can make necessary alterations or upgrades
4. Hours of Operation Clause – Avoid Operational Conflicts
Some retail centers may mandate opening hours or restrict late-night operations. Ensure your lease:
- Aligns with your desired business hours
- Permits extended hours on weekends or holidays
- Doesn’t conflict with liquor licensing or local regulations
5. Percentage Rent Clause – Pay Based on Your Success
In addition to base rent, some landlords charge “percentage rent,” where you pay a portion of your monthly sales over a certain threshold. Understand:
- What percentage is charged
- How “gross sales” are defined
- Whether third-party delivery sales are included
6. Tenant Improvement (TI) Allowance – Get Help Building Out Your Space
Restaurants often require heavy buildouts. Negotiate a tenant improvement allowance from the landlord to help offset the cost of:
- Installing kitchen equipment
- Plumbing upgrades
- Interior finishes
7. Repair and Maintenance Clause – Know Your Responsibilities
Restaurant operations involve heavy usage of infrastructure, especially in the kitchen. It’s essential to understand:
- Who is responsible for repairing HVAC, grease traps, plumbing, and electrical systems
- Whether the tenant or landlord handles roof, exterior, and structural maintenance
- Whether you are required to maintain appliances or can rely on the landlord for repairs
Negotiate clearly defined responsibilities, especially for restaurant-specific systems that undergo significant wear and tear.
8. Restaurant-Specific Utility and Appliance Requirements
Unlike traditional retail spaces, restaurants require specialized infrastructure. Ensure your lease permits installation and exclusive use of the following:
Kitchen Equipment:
- Commercial ovens and ranges
- Deep fryers
- Walk-in coolers and freezers
- Exhaust hoods and ventilation systems
- Dishwashers and sanitizers
- Food prep sinks and handwashing stations
- Ice machines
- Grease trap/interceptor
Utilities and Systems:
- Three-phase electrical panel
- Gas line connections
- High-volume water supply and drainage
- Fire suppression system
- HVAC with adequate tonnage and air circulation
- Wastewater and grease disposal compliance
Clarify whether these are provided by the landlord or must be installed and maintained by the tenant.
9. CAM Charges and Operating Expenses – Transparency is Key
Common Area Maintenance (CAM) charges can include everything from landscaping to security. Ensure:
- You receive a detailed breakdown of CAM expenses
- There’s a cap on CAM increases where possible
- Restaurant-specific services like grease trap cleanout aren’t unfairly included in shared expenses
10. Go-Dark & Co-Tenancy Clauses – Safeguard Against Low Foot Traffic
If a key anchor tenant leaves or the property loses footfall, your restaurant may suffer. A co-tenancy clause can provide rent relief or early termination rights if such situations arise.
11. Assignment and Subletting – Plan for an Exit Strategy
In case your business model changes, or you sell the restaurant, you’ll want flexibility to assign or sublease the lease to another party. Ensure the landlord’s approval process is reasonable.
Final Thoughts: Legal Review is Non-Negotiable
Every restaurant lease is unique, and the fine print matters. Before signing, have a commercial lease attorney or a tenant rep broker review the document to ensure it aligns with your business model and growth plans.
At Mohr Partners, we help restaurant tenants analyze, negotiate, and manage lease terms that support sustainable operations. Whether you’re expanding, relocating, or opening your first space, the right lease terms make all the difference.
