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I've completed negotiating a Letter of Intent to Lease with a commercial retail property landlord (his real estate representative actually). We came to an agreement regarding rent amount and term length as well as improvement allowance and a couple other things I asked for. Both parties have signed off on it. I am confused about another request I just received. The potential landlord would now like a copy of my business plan (presumably before he presents me with a standard lease agreement he's creating).
I guess why I am confused is because my business plan is personal and proprietary, and something I don't want copied by others. I don't know the landlord, nor his rep well enough to trust that they won't just pass the ideas or plan itself to a friend or relative looking for a good business idea/model. Aside from that I don't see what the landlord or his rep would have to gain by seeing it since I've already shared my personal financials and demonstrated an ability to repay any debt. I certainly am not looking for them to invest in my business. I've also already shared business plan excerpts with them during negotiation which provided overviews about the business, market, and bios for my partner and I.
I guess I'm just at a loss for how to proceed. Am I just being paranoid or overly protective of my business plan? Should I have my landlord and rep sign a non-disclosure agreement? Should I just send particular components of the business plan (and if so which ones; or which ones do I absolutely want to omit?). I definitely want to ensure I can go into the lease agreement negotiations with as much leverage as possible - can anything sent along in my business plan reduce potential leverage? I don't want to appear to be unprofessional in how I proceed and would love to hear any advice any of you current or past entrepreneurs might have.
I cant imagine what reason they would need to see that business plan. As you said that is private and you dont have the lease in hand. I would definitely go with your feeling something doesnt sound right there. I mean they can always use the argument we want to make sure this makes sense but in the end they have a signed leased so what difference would it make. I am in the beginning stages of starting a business of my own with a friend and a silent partner. I havent given them a business plan and I dont intend on doing it until I speak with a corporate lawyer to protect my interests. You may want to think about consulting one. You could always just say no and see where the chips may fall. Good Luck
It sounds like you don't have a real estate agent representing you. If it were me I would tell them that I was not comfortable giving them my business plan and that if they insist on it that I will need to get a real estate agent of my own to advise me. When they consider that they will have to pay commission to your agent they might back off.
Part of the reason they ask for a plan is that they do not know you or your track record. It is one thing to lease a space to a cookie cutter operation, quite another to a newbie business. Malls in particular like to see business plans.
Of course, they have another reason, too, and that is to see what kind of gross sales and net profits you anticipate, so they can in turn maximize the return on their property. In other words, to gouge you for as much as they can.
Retail is a tough way to earn a buck these days, and the number of failed businesses is very high unless they are well established, well financed or a proven franchise.
Just another one of many hurdles I am sure you are (or will soon be) facing. Good luck, you will need it.
As a business credit manager I request financials from newish buisnesses. Maybe you do not have financials. If so produce this as the notes. Business credit law is very differnet than consumer. You may feel it is yours but expand upon it to keep your goals and mission flowing, employees motivated, and used as a marketing tool. Leases are just as important as regular contract law per UCC. Care and consideration is given equally. The more I can learn about a business to extend credit and the more reasons someone gives me to extend credit the better.
It sounds like you don't have a real estate agent representing you. If it were me I would tell them that I was not comfortable giving them my business plan and that if they insist on it that I will need to get a real estate agent of my own to advise me. When they consider that they will have to pay commission to your agent they might back off.
As a business credit manager, anyone hesitating in providing plans and financials sets off warning bells. What do they have to hide? I do not need a plan to extrapulate future cash liquidity and flow. That can be garnished from that data on the balance sheet and income statement. I would be very careful in telling someone to hold their plan close totheir vest, it may not get them approved for a lease or the credit line they need.
Thanks for your input everyone. I ended up sending an abridged form of my business plan to the Landlord's representative. Abridged in the sense that I didn't include all my projections and detailed strategy and operations process and vendor relationship descriptions. I did include all which was relevant to demonstrate that although a new business for myself, it is one I've given a lot of thought to, and one for which I've been detailed-oriented and done my homework as good as anyone could. I referenced how if more detailed financials or projections are requested, I'd be happy to send them with a signed confidentiality agreement and a specific reason given for doing so.
I'm in a unique situation in the sense that I've already furnished complete personal financials which are stellar, and I've also negotiated the major lease terms within the "LOI to Lease" which has been signed off by both parties. The abridged business plan just goes into more depth regarding my plans... but it doesn't provide a turn-key solution for how to copy my business nor does it provide leverage for the Landlord to create a lease agreement which fleeces me out of my profits.
We'll see what happens - as of today I don't yet have the 1st draft of the lease agreement. I'm going to remain optimistic as the Representative I've been working with feels good about what I've written.
I understand that a Landlord wants to ensure I have the capability to pay what I agree to pay, but I do feel that as many of you above stated, there's little reason at this stage, for just a Plaza Landlord (not an Indoor Mall location) who is making very minimal investment up front on my behalf to receive all the details of my mid and long-term business operations and strategy.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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I often ask for a business plan when leasing to a new business, but it doesn't have anything to do with the general terms of the lease, just my due diligence on how soon I might need to look for a new tenant. I had one space turn over 5 times in 8 yrs (food joint). The other two tenants in same building stayed the duration. I immediately give a copy of the lease to prospective tenants, as they need to review it for a good fit for them. Some times there is not a good match, (Landlord / tenant) best for all parties to not tread that road
I will not lease to anymore food joints, as it is very hard on the facility and services, and vacancies between tenants are costly and stressful.
I feel the abridged plan you mentioned should be great. For established firms a D&B would usually suffice. The business plan helps me do a 'reality' check on prospective tenant, as with us all... some ideas are 'way-out-there' and I prefer to sleep at night. (and pay my obligations, AND enable my tenants to be as successful as possible... it is a win-win.
I've completed negotiating a Letter of Intent to Lease with a commercial retail property landlord (his real estate representative actually). We came to an agreement regarding rent amount and term length as well as improvement allowance and a couple other things I asked for. Both parties have signed off on it. I am confused about another request I just received. The potential landlord would now like a copy of my business plan (presumably before he presents me with a standard lease agreement he's creating).
I guess why I am confused is because my business plan is personal and proprietary, and something I don't want copied by others. I don't know the landlord, nor his rep well enough to trust that they won't just pass the ideas or plan itself to a friend or relative looking for a good business idea/model. Aside from that I don't see what the landlord or his rep would have to gain by seeing it since I've already shared my personal financials and demonstrated an ability to repay any debt. I certainly am not looking for them to invest in my business. I've also already shared business plan excerpts with them during negotiation which provided overviews about the business, market, and bios for my partner and I.
I guess I'm just at a loss for how to proceed. Am I just being paranoid or overly protective of my business plan? Should I have my landlord and rep sign a non-disclosure agreement? Should I just send particular components of the business plan (and if so which ones; or which ones do I absolutely want to omit?). I definitely want to ensure I can go into the lease agreement negotiations with as much leverage as possible - can anything sent along in my business plan reduce potential leverage? I don't want to appear to be unprofessional in how I proceed and would love to hear any advice any of you current or past entrepreneurs might have.
Your asking for the landholder, to take some confidence in your ability to renovate his facility, and take confidence in your ability to complete your end of the agreement. He becomes one of your liabilities, no different then a bank would, if you asked them to take out a loan.
From a financial standpoint, if your lease is $1,000 per month for a year, your lease holds a value of $12,000, your asking him to loan you $12,000 by way of providing a facility to operate in. This is a financial transaction to your potential landlord and they should be given the same courtesy that you would provide a bank or investors, (since they become a quiet investor).
That being said, a confidentiality agreement would not be out of the question, and they should have no problem with one.
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