When we do site selection for a tanning salon owner, we are not looking for the cheapest location we can find, but instead the location that will enable the salon to maximize its client volume. Paying too much rent for a location is one thing; however, choosing a poor or weak site will negatively impact the potential of the salon.
If your lease is coming up for renewal and your salon is underperforming, perhaps you need to consider relocating (yes, we know it’s expensive). If a tanning salon is doing $550,000 in annual revenues, but could be doing $750,000 or more in a better location, the problem is not going to correct itself. If other tanning salons are beginning to move in around you as competition, and leasing newer or better locations near them will, in turn, make your location that much less desirable. A poor location will hold back your salons growth, reduce its resale value and make it more difficult to take home a good salary.
You can’t invest too much time searching for the right location for your salon. Consider neighborhood, traffic flow, demographics and parking. It is better to have negotiated a poor lease agreement on the right location than a good deal on the wrong one! Tanning salon owners about to open their first location typically do not allow enough time. If you are opening a new salon or moving, begin your site selection process at least 6 to 9 months before you plan to open. If you are already a tenant, initiate your lease renewal negotiations between 9 and 12 months before the lease expires. After all, if you can’t get a decent renewal, you will want time to negotiate a new lease and relocate without the pressures that every tenant feels at that time.
It is better to have negotiated a poor lease agreement on the right location than a good deal on the wrong one!
In viewing properties, avoid assuming that all the current tenants will remain – specifically, the anchors (or major stores). Tenants in a strip mall near one of our homes were previously caught off guard when a major grocery store moved out of the property. None of the business owners who had recently renewed their leases thought to ask if this grocer was staying. While this major grocer continues to pay their rent on the vacant space, the landlord cannot put another grocery store into the 25,000 square foot anchor spot, due to a non-competition clause in the lease agreement. The landlord continues to receive the rent payments, but traffic to the strip mall had dropped by 50 percent and the remaining tenants suffer the consequences. Brokers and in-house leasing representatives should know this type of information and will answer your questions – if you ask them.
Another common mistake is letting a single leasing broker assist you with viewing a variety of properties. Let us repeat this statement since so many salon operators don’t understand it … don’t let one broker show you space all over town. Yes, talk to the listing agent or broker and ask questions. But do not let the agent introduce you to another building that is not listed by his or her brokerage. In other words, let the agent know you are willing to look at only buildings for which he or she has an active listing to lease. Speak directly to the listing broker for each building in which you are interested – that is, whoever has his/her name on the “For Lease” sign outside of the building. This will result in your obtaining more accurate information quicker and will avoid commission splitting (where two brokers share the commission paid to them by the landlord for work performed), which could result in an inflated rental rate and may reduce your chance of leasing there if the listing agent has his/her own prospects for the space.
In some cases, the broker will present you with an Offer to Lease or Letter of Intent that states the broker is working in a dual agency capacity. You can cross this point off the offer and make your desires known to the broker. It is absolutely critical for you to realize that conventional commercial agents work for the landlord who is paying their commission (and not for you, the tenant). They are paid by the landlord to get the best deal for the landlord. Even if there are two agents involved, if they are sharing the commission, are they really working for you?
