How To Lease a Restaurant Space (and Avoid $50k+ in Nasty Surprises)

Key Takeaways

• Avoiding a bad lease can save restaurant owners $50,000 or more in unexpected infrastructure, legal and repair expenses.
• Due diligence and a professional property inspection are essential — always check for hidden violations, old systems or costly upgrade needs before signing anything.
• Negotiate tenant improvement allowances and get clear maintenance terms in writing so you don’t get stuck with surprise bills during buildout or day-to-day operations.
• Work with a commercial real estate agent and lawyer who specialize in restaurants — they'll help protect you from legal traps and spot expensive pitfalls others miss.
• Use the lease negotiation process to clarify who handles repairs, your exit options and exclusive rights so you have long-term flexibility and cost control.
• Plan for the lease process to take 2–9 months — give yourself extra time for permits and buildout before you schedule your opening.

Signing the wrong restaurant lease can destroy your business before you even open. With hidden costs and traps common, knowing what to ask and check is vital. 

Below is a step-by-step guide to leasing a restaurant space — and sidestepping six-figure mistakes.

Step-by-Step Guide To Leasing a Restaurant Space

Leasing a restaurant space means much more than finding a location you like. From planning to legal review, each step — if skipped — can lead to setbacks and costly surprises.

• Print or save this guide for reference as you visit properties or negotiate your lease.

1. Assess your needs and create a checklist

Start by defining your restaurant concept and required features. Create a checklist that includes:

• Seating capacity for your concept
• Kitchen/prep size (enough space for fast service and safety)
• Storage space (dry/cold/frozen)
• Private and street parking for guests and staff
• Ventilation/hood systems, ADA compliance, restrooms

Estimate a maximum budget — not just for rent but also buildout (construction and design), equipment, legal fees and contingency savings (usually 10–15% extra for surprises). 

Bring this checklist to every site tour and update it as you learn more. If you’re new to the process, consider reading the essential steps in the hiring process to help with staffing down the line.

2. Research locations and market conditions

Identify neighborhoods with high foot traffic that fit your target diners. Look for:

• Busy hours and patterns (visit weekends and peak lunch/dinner times)
• Direct competitors and complementary businesses nearby
• Demographics: disposable income, age, interests

Use local reports (city data) and talk with other operators if possible. A restaurant-focused commercial real estate agent can share rent price comparisons and which landlords are "operator-friendly." 

You might also want to find the best staff for your restaurant to ensure your business thrives in a competitive market.

3. Evaluate potential spaces

Tour each space in person with your needs checklist. Carefully check for:

• Zoning approval for restaurants (ask the agent/owner directly — don’t assume!)
• Past tenant type (was it previously a restaurant/bar or something else?)
• Ventilation, grease traps, fire suppression and kitchen plumbing (get rough ages/capacities)
• Parking numbers — count it yourself if in doubt!
• Any visible damage/old infrastructure — note if plumbing or electrical look outdated

Write down questions for your real estate agent about upgrades or recent repairs since old systems are a main culprit for surprise costs. Review the key restaurant positions and roles you’ll need to support your concept in the space.

4. Perform thorough due diligence

Order a property inspection by a licensed professional before you sign. Insist on a report with photos and estimates to fix or replace any issues (e.g., plumbing, electrical, roof, HVAC). Research:

• Current compliance with health, fire and safety codes (ask for written proof)
• Landlord reputation: Google the property/company for lawsuits or disputes
• Open permits, unresolved fines or complaints — ask your inspector or agent for city records

Just as thorough due diligence is crucial when inspecting a property, ensuring compliance with health, fire, and safety codes is equally important—after all, 70% of diners are deterred by health code violations when choosing a restaurant.

5. Negotiate lease terms carefully

Besides the base rent, drill into key sections like:

• Lease length and options to renew (write down both start and end dates)
• Rent escalations (exact % increase per year — ask for a chart or table with numbers!)
• Maintenance/repair responsibilities: specify HVAC, electrical, roof and plumbing
• Allowed upgrades — will the landlord pay ("tenant improvements") and how much?
• Buildout timelines and what happens if construction is delayed
• Rights to sublet or transfer the lease (“assignment”)
• Clear exit/termination clauses for emergencies or business downturn
• Exclusivity — protect your concept from direct competitors in the same property

Get every commitment in writing. Double-check language with your lawyer so it’s not vague.

6. Understand all upfront and ongoing costs

Request and review a full breakdown (ask for this as a printed/email table):

• Base rent per month and per year
• CAM fees ("Common Area Maintenance" — usually a monthly add-on, can be $5–15/sq. ft. or more)
• Insurance premiums (property/liability — ask for estimates)
• Deposits (security, last month’s rent, utilities, etc.)
• All utility costs (with recent utility bills if possible)
• “Triple net” charges (if any) — this means you pay for your share of property taxes, insurance and CAM
• Expected buildout/improvement costs — get numbers and deadlines
• Potential surprise repairs — ask about recent plumbing/electrical/HVAC fixes

Create a spreadsheet to tally up all costs — and flag any unclear item for your lawyer or accountant before signing. For more on tracking and calculating these figures, see ways to fix your restaurant's money problems.

7. Review the lease agreement with professionals

Bring in:

• A restaurant-specialist commercial real estate agent (not a generic broker)
• A commercial real estate attorney (ideally with restaurant experience)
• An accountant who understands hospitality leases and can help you model expenses, taxes and cash flow

Ask them to highlight any red flags, unclear sections or risks. Bring your own list of questions — no detail is too small. 

If you’re curious about salary and hiring trends for General Managers or staff, take a look at the Restaurant Manager salary guide to budget for leadership roles.

8. Obtain necessary permits and licenses

Before you sign, confirm:

• Zoning permits (food service and, if needed, liquor license eligibility)
• Current health/safety code certificates — request copies
• No unresolved city violations

Just as maintaining compliance with health and safety codes is vital to avoid violations, ensuring your property has the necessary permits and licenses in place is equally important before moving forward.

9. Finalize the lease and plan your buildout

After every issue has been checked, sign the lease and confirm progress in writing:

• All buildout/renovation promises are detailed in writing, including what the landlord pays for
• Your timeline for opening (include buffer time for supply or permit delays — add at least 1–2 months just in case)
• Photograph and document the “as is” condition of the space and any promised upgrades — this protects you if there’s a dispute later

Make a printed “move-in” checklist so nothing gets missed as you take possession. 

Not sure how to write a job description or what to include for your first job post? Read how to write an effective job description.

Hidden Costs and Common Pitfalls That Can Cost $50k+

Many first-time restaurant owners face huge, unexpected expenses after lease signing — sometimes totaling over $50,000. Here are some of the top risks (and how to dodge them):

Unclear maintenance responsibilities

If your lease doesn’t spell out who pays for major repairs (like HVAC, plumbing or roof), you can get stuck with sudden five-figure bills. Always demand explicit details in your lease — for every system, who pays and when? Put this on your negotiation checklist.

Inadequate infrastructure for Restaurant use

Older spaces might not have upgraded kitchen drainage, ventilation or fire suppression. Upgrades like new grease traps, hoods or sprinkler systems can cost well over $20,000 each. 

Solution: Bring your inspector and contractor with you and ask for estimates to avoid these traps.

Expensive leasehold improvements

If the lease is vague about buildout or the allowance the landlord gives is too low, even minor changes can blow up your budget.

• Get buildout scope, allowance amount and payment timeline all on paper.
• Ask for recent construction cost histories from the landlord or broker.

Unknown legal and compliance issues

Spaces with old code violations or improper zoning can leave you facing work stoppages or fines.

• Have city records pulled and verify with your agent or lawyer.
• Request proof of legal food service status from the landlord.

For a more detailed perspective on handling compliance, see these Restaurant Manager interview questions that can help you identify leaders who know compliance inside and out.

Ambiguous exit or assignment clauses

If your lease restricts leaving or subletting, you could be stuck paying thousands a month after closing. You need clear, written options for getting out — ask for examples from your agent or lawyer.

Tips To Avoid Expensive Leasing Mistakes

Make it a rule: never accept “trust me” or vague promises from brokers, landlords or contractors. Practical strategies:

Work with experienced real estate and legal professionals

Choose a real estate agent and attorney who have leased to restaurants and know the “tricks” in these contracts. Interview them:

• How many restaurant deals have you closed in the last year?
• Can you explain triple net, CAMs and improvement allowances in plain English?

Their answers should be specific and practical. If they dodge, move on.

Request detailed, itemized cost breakdowns

Ask for every fee, allowance and scheduled expense in an easy-to-read, itemized table. Compare this to your own spreadsheet — call out any vague numbers. 

If you’re scaling operations, be sure to check out best practices for Restaurant operations management to keep your costs sustainable.

Negotiate for lease concessions and protections

Push to include these in your agreement:

• Higher buildout allowances or direct reimbursement for renovations
• Rent abatement (free or reduced rent) during construction/delays
• Specific assignment/sublease language so you can pivot if needed
• Detailed maintenance responsibilities for each system (get it in writing!)
• Early termination or "good guy" clauses for emergencies

These can save you tens of thousands in a bad scenario.

Consider lease renewal and exit strategy

Plan renewal and exit options now. Add reminders to your calendar for 12–18 months before lease end dates to start negotiating again (or explore other spaces). Write down step-by-step what you’ll do if you need to exit early. 

Looking for real-world insights? Read up on key restaurant owner responsibilities before you negotiate.

Prepare for lease renewal and certification needs

Schedule regular reminders — at least annually — to check your business licenses, health permits and liquor license expiration. This could save you headache (and shutdowns) later.

Lease Preparation: The Real Recipe for Restaurant Success

Leasing your space is where many restaurants succeed or fail before a single meal is served. With clear checklists, a committed team of experts and a contract you understand, you’ll protect your business, your finances and your peace of mind. 

Invest extra time now so you can focus on excellent service and great food — not on lease disasters down the road. For additional insights, explore our spotlight on becoming a successful restaurant owner.