The Three Golden Rules for Starting a Hospitality Business
There are 3 golden rules for of starting a new hospitality business. Every day 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 and communicate with industry experts, and don't be afraid to ask for assistance. – They will be happy to assist you. My 3 golden rules:
- 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 the business profitably under management.
- 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.
- 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 Etc… 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. For obligation free advice and assistance call me on 0412 817 059 Emil Parthenides Specialist – Food Service Division emil@benchmarkbusiness.com.au
