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Running a Restaurant/food service in commercial office building

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Question
I manage a 225,000sf office building in Ct. we currently have a small food vendor that sells coffee bagels, soups snacks etc. Other than soup and coffee there is no onsite prep. Like everywhere our occupancy is down significantly. I would estimate our building population is around 600-700 capacity is 1000-1100. My current operator is asking me to subsidize their operation until we start to fill up again. I am not sure how to calculate whether or not a subsidy is warranted or at what point it should stop. Are there any type of ratios or formulas that I can use to determine this?

Thank you

Answer
There are no formal formulas or ratios for determining whether or not you should offer a subsidy to the only food vendor for your office building. The question is how much value they provide to both existing and future tenants and what will be the thinking of both if you allow them to go under. Will it signal that the building is in trouble financially and therefore they should look elsewhere when renewal time comes up? If other locations with comparable size and amenities have similar foodservice operations that service the tenants and you do not, what picture does that create for prospective tenants trying to weigh the value of multiple locations?

Most of the time, when we negotiate leases for foodservice in mall locations where traffic is critical, we insert a "going dark" provision that offsets the rent should enough tenants leave to impact that traffic significantly. I doubt your small vendor has that provision in their office lease (but they should) and you should consider what their loss means to your business.

If I owned the building I would discount their total rent contribution comparable to the loss in traffic/tenants with the stipulation of course, that it reverts as you get back to appropriate levels.  

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Jeffrey Summers

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I am the Founder & Owner of Summers Hospitality Group. We have over 300 years of successful experience in operating and consulting with chain, franchise and independent restaurant & hotel operators around the world. Check us out on the web for more information at http://SummersHospitality.Group or call us toll free at 888-998-8744.

Experience

We have experience on any topic related to the restaurant & hospitality industry - from Menu R&D, Menu Engineering, Marketing Strategies, New Store Openings, P&L Analysis, Lease Negotiations, Staffing, Policies & Procedures, Building & Design, Site Location, Branding, PR & Promotions, Multi-Unit Development, and any other area effecting the operation of your business.

Organizations
The National Restaurant Association. The Society of Hospitality Management. The Gerson Lehrman Leisure & Lodging Council The Professional Business Coaches Alliance The International Council on Hotel, Restaurant and Institutional Education Several state restaurant & hotel associations.

Publications
My articles and opinion pieces have been featured on several industry websites, magazines, blogs and forums including: Money Magazine Wall Street Journal USA Today RestaurantOwner.com RestaurantEdge.com FoodService.com Ezinearticles.com Restaurant Startup & Growth Magazine American Express' Briefing Newsletter Nation's Restaurant News and tons more!

Education/Credentials
I hold degrees in Economics, English, Culinary Arts and industry certifications in Hospitality Management and Restaurant & Catering Management.

Past/Present Clients
Here's a list of some of the brands we have worked with: Hardee's, Marriott, Hilton, Connie's Pizza, Burger King, Chili's, Long John Silver's, Bar Louie's, The Purple Sage Bistro, Applebee's, Shoney's, T.G.I. Friday's, La Dolce Vita Pastries & Catering, 5 Seasons Sports Clubs..and many more.

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