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  • Writer's pictureJimmy Carey

Difference between second generation restaurant for sale held by Landlord and Paying for key money

Updated: Jan 19


Jimmy Carey Restaurant Sales
Restaurant for sale

Determining whether a second-generation restaurant location held by a landlord or one involving key money is better depends on various factors, including your specific circumstances, financial resources, and business goals. Let's examine the advantages and considerations of each:


Second Generation Held by Landlord:


Advantages:

Direct Control: You have more control over the lease terms and negotiation process when dealing directly with the landlord. This can be advantageous if you have a clear vision for the space and want flexibility.


Lease Flexibility: You can negotiate a lease that suits your specific needs, potentially securing favorable rent rates and lease conditions.


Customization: You can customize the restaurant space from the ground up, ensuring it aligns precisely with your concept and brand.


No Key Money: You don't have to pay an additional upfront fee (key money) to the current tenant, which can save you money initially.


Considerations:

Higher Initial Setup Costs: You'll likely face higher initial costs for outfitting and renovating the space, including acquiring kitchen equipment and permits.


Extended Setup Time: Building and customizing a restaurant space from scratch can take more time compared to taking over an existing setup.


Unknown Lease Terms: Negotiating with the landlord may result in less favorable lease terms compared to those already established by the current tenant.


Second Generation Restaurant Location with Key Money:


Advantages:

Existing Infrastructure: You inherit an existing restaurant setup, including kitchen equipment, dining areas, and potentially permits and licenses, which can save time and money.

Favorable Lease Terms: You may benefit from the favorable lease terms negotiated by the current tenant, such as lower rent rates or an extended lease period.


Quicker Launch: Taking over an existing setup can enable a faster restaurant opening, allowing you to start serving customers sooner.


Less Upfront Investment: You may have lower initial setup costs since you're not building from scratch or buying new equipment.


Considerations:

Key Money Payment: You'll need to pay key money to the current tenant, which can be a substantial upfront cost.


Less Control: You have less control over the lease terms, as they are established by the current tenant. You must ensure these terms align with your business plan.


Adaptation: The existing setup may not perfectly match your concept, requiring some modifications.


In summary, the choice between a second-generation restaurant location held by a landlord and one with key money depends on your priorities. If you value control, flexibility in lease terms, and have the resources to customize a space, dealing directly with the landlord may be the better option. On the other hand, if you seek a faster launch, favorable existing lease terms, and can afford the key money payment, taking over an existing setup with key money may be more appealing. Ultimately, your decision should align with your business strategy, budget, and long-term goals.


For a professional assessment and assistance in securing a restaurant for sale in Atlanta, consider consulting with experts at Jimmy Carey Commercial Real Estate. Their guidance can steer you towards the ideal restaurant space aligned with your business aspirations. Contact Jimmy Carey Commercial Real Estate for expert advice on acquiring or selling a restaurant in Atlanta.

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