Restaurant Lease Terms to Know

Are you planning to sign a new lease to open your new restaurant soon?  If so, here’s 5 terms that you might see in your new restaurant space lease.  Understanding these terms will help your new restaurant opening go more smoothly. 

1. NNN (also known as Triple Net) – Many leases are what’s called triple net (NNN).  This means that in addition to rent, the tenant also pays a share (usually its “pro rata” share – see below) of the shopping center’s insurance, taxes and common area maintenance (see below for details) costs.  Your restaurant lease will explain if you are required to pay this and outline how your share is calculated.
2. Pro rata – Often businesses pay their proportionate share of the shopping center’s tax, insurance and/or common area maintenance costs.  To calculate proportionate share, divide the businesses’ square footage by the total square footage of the shopping center. (Ex: A restaurant leasing 1,500 square feet of space in a 150,000 square foot shopping center would have a pro rata share of 1%.)
3. Common Area Maintenance (also called CAM) – Common Area Maintenance includes all of the maintenance, repairs, etc. that are required to operate a shopping center and benefit all of the businesses in the center. Examples include parking lot sweeping and landscaping.  Your restaurant lease will define what is considered part of common area maintenance for that property.
4. Buildout period – This is the period of time between when you sign your lease and take occupancy or open for business.  This is when you are adding shelving, painting, etc. 
5. Sales reporting – Many leases require the restaurant to report sales volume to the landlord either monthly or annually.  This is to help the landlord understand how the shopping center – and your restaurant – is doing.