How a restaurant lease differs from an ordinary retail lease
Grease, gas, ventilation and hours turn a standard shell lease into a negotiation about infrastructure that may not exist yet.
Signing a restaurant lease before establishing what the building can physically support is the most expensive mistake in the industry, and it is made constantly.
The use clause
A use clause defines what you may operate. Drafted narrowly, it can prevent a concept change or a sale to a buyer with different plans. Drafted broadly, it gives you room and gives the landlord less control.
Restaurants also need an exclusivity provision if the site is in a centre, preventing the landlord leasing to a directly competing concept nearby. Without it, a similar operator can open three doors down.
Infrastructure
**Venting.** A commercial kitchen needs a hood and a vent path to the roof. In a multi-storey building, that path crosses other tenants' premises and may not exist. Establishing it after signing is sometimes impossible.
**Grease interception.** Required, sized to the operation, and expensive to add. Confirm capacity and location.
**Gas and electrical capacity.** Restaurant equipment loads exceed retail loads by a wide margin. Service upgrades run into utility timelines you do not control.
**Water, drainage and floor sinks.** Cheap during construction and disruptive afterwards.
Tenant improvements
A landlord may offer a tenant improvement allowance, expressed per square foot, usually reimbursed against invoices after completion rather than paid upfront.
Restaurant build-outs commonly exceed retail allowances several times over. Treat the allowance as a contribution, and establish who owns the improvements at the end of the term.
“Ask what happens to the hood, the walk-in and the interceptor when the lease ends. The answer is in the lease, and it is often not what the tenant assumed.”
Rent structure
Beyond base rent, expect common area maintenance, taxes and insurance passed through. Ask for a cap on controllable pass-throughs.
Percentage rent — a share of sales above a breakpoint — is common in centres. Define gross sales carefully, excluding taxes, delivery platform commissions, gift card sales until redeemed, and employee meals.
Contingencies
Make the lease contingent on obtaining the necessary permits and licences, with defined periods and a right to terminate if they are not issued. Rent commencement should follow permit issuance or completion, not signature.
Practical points
- Have a contractor and a kitchen designer walk the space before you sign.
- Confirm the vent path in writing, with the landlord's consent to it.
- Negotiate the licence contingency, especially where a liquor licence is required.
- Define gross sales precisely if percentage rent applies.
- Establish removal and restoration obligations at the end of the term.
