January 15, 2015

3 golden rules

3 golden rules of starting your new hospitality business

Everyday I see business owners in hospitality and feel for those that have entered into a lease, which ends up destroying them financially. Before purchasing or starting your own hospitality business, you should research and educate yourself as much as you can. Network with industry experts and don’t be afraid to ask for assistance.

My 3 golden rules:

1. Rent should NOT equate to 10% or higher on gross annual sales. A higher % will put financial strain on your business and rarely will you be able to run profitably under mangement.

2. Your lease should at least cover your payback period plus a number of years post payback equating to the revenue you wish to earn over the total lease period. You should keep in mind when you want to sell, the number of years remaining on your lease is a determining factor of price. Generally a lease over 10 years & in particular 15 years with options of 5 x 3 or 3 x 5 is seen as good lease.

3. Always have a lawyer review your lease before signing and hopefully highlight any areas of concern for example:
Body Corporate Fees
Restraint of trade
Renovation clauses
Demolition clauses

You’re entering a business to be profitable, don’t rush and take the time to understand what is in front of you. If it feels wrong, then it generally is.

Emil Parthenides
Specialist – Food Service Division
Tel: 1300 366 521

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