Your Lease: Reading the Fine Print

By PlanetLaundry staff | Nov 13, 2009

Beyond rent and lease duration, there are several other key clauses that you should be familiar with before even considering signing a lease to protect your coin laundry business within a shopping center or strip mall.

Here are a few of the more important ones:

Exclusivity and ancillary services.  One of the things you need to negotiate is an "exclusive" in that center to do your type of business, as well as the ability to offer the ancillary services you'd like to provide. You'll want to have those OK'ed ahead of time in writing so that the landlord can't come back to you and say, "I just gave you permission to run a laundromat, not drop-off drycleaning and vending." That must be clearly defined in your lease.

Perhaps include a clause stating that you plan to run a "laundromat business, incorporating wash and dry service, drop-off laundry services, vending of snacks and soda…" Add any other ancillary service that you feel is going to be an integral part of your coin laundry business.

In one case, a tenant received permission from the landlord through the lease to operate a coin laundry. However, he did not have specific permission to offer drop-off wash-dry-fold services. In the meantime, the drycleaner located in the same shopping center bought a washer and dryer and began offering wash-dry-fold. Of course, the laundromat tenant complained, claiming that wash-dry-fold was his "turf." But the landlord quickly corrected him, saying that the lease clearly spelled out the laundromat's mission as "self-service" washing and drying. That's all the coin laundry operator had asked for, and that's all that the landlord had given him permission to perform. Since then, the drycleaner asked for wash-dry-fold permission and got it. Now, the coin laundry owner has no way of offering the same service to his customers.

Other examples of this have included coin laundries that were denied the right to install ATMs because there were already banks or other ATMs in their shopping centers, as well as operators who could only vend soap in their stores because the convenience stores within their strip malls had already negotiated exclusive rights to snack and beverage vending.

Losing a major tenant. Another thing to protect yourself from in a shopping center is if, for any reason, the major draw of that center leaves. The reason you picked your location is probably because of demographics, visibility and "draw." People congregate in a shopping center because there are several businesses that complement each other. Those businesses feed off of each other.
 
Therefore, you should protect yourself in the event that your center becomes more than a certain percentage vacant and/or if the major tenant, such as a supermarket, should leave. In such cases, you should have the right to get out of the lease or at least be entitled to some sort of a rent abatement or credit.

Visibility. Perhaps you have a nice location in your center, maybe an end piece. Then, all of a sudden, a few years down the road, the landlord erects a building right in front of your coin laundry – and now no one can see you from the street. Again, you should be able to protect yourself from that, either with rent abatement or the ability to get out of the lease completely.

First right of refusal. If your coin laundry becomes a very successful store, you may want to not only stay in your current location, but expand. If that is the case, you should try to get the first right of refusal on the space on either side of you. This way, if that space ever does become vacant, at least the landlord has to come to you first and offer you the space. Sometimes, a space in a strip mall or shopping center will become vacant and the landlord won't notify anybody; all of sudden, you've got a new next-door neighbor, despite the fact that you may have wanted that space in which to expand.

Typically, this clause is a no-brainer that most landlords will be happy to offer you.

Utilities. Be sure you know what's happening with your utilities. Is the landlord providing the heating and air conditioning unit? Do you have to provide them? Or does he provide them, while it's your responsibility to maintain them? More importantly, if these units break down while you're in the space, do you have to replace them?

Many leases will provide you with these things; however, you have to maintain them, as well as replace them. Clearly understand your responsibilities in this area so that you don't get a surprise 10 years down the road when your air conditioning unit bites the dust. “Excuse me, Mr. Landlord, my air conditioner is out, please come and fix it." He may just reply: "Yep, it's out all right. And I had my guy take a look at it. It needs to be replaced. By the way, you've got to replace it."

That's a $15,000 hit you can avoid (or at least prepare for) if you read the fine print on your lease.

Parking. Ideally, you always try to find a shopping center where your customers can park their vehicles right by your door. If the parking is going to be tight, you surely will want to see if you can get some reserved parking directly in front of your store.

Signage. Have a clear-cut idea as to the type of signage the landlord will require you to put up. You cannot just throw up any old sign. You typically have to go with what the landlord tells you.

Also, find out ahead of time if renting space within your shopping center or strip mall also gives you the right to have your coin laundry's name on the marquee? If so, how many square inches or feet will the landlord allow you for that particular signage? Some coin laundry owners have taken the fact that they were going to be on the center's marquee for granted - only to have their business' name nowhere to be found after they moved in. Sometimes if you don't ask for it, you won't receive it.

Roof maintenance. Historically, the business owner has been responsible for the interior of the building, and the landlord has been responsible for the exterior of the building, including the roof. However, in the case of coin laundries, where there is a lot of roof penetration from dryer and plumbing vents, there can be an issue as to who is responsible for the roof. Obviously, a roof is a very expensive thing to replace so that needs to be clarified in your lease.

Remodeling. Many times, a tenant will need to receive permission from the landlord in order to remodel his store. Often, the tenant is will be required to submit some kind of plan. See what your lease says about this.

Insurance. Normally, the lease will specify how much liability insurance has to be carried by the tenant. You need to take that into account when you're getting quotes for insurance. In addition, most landlords require that they be named as an additional insured as well.

Personal guarantee. If your coin laundry is owned by your company or corporation, many landlords will insist that the lease be personally guaranteed by the owners or officers of that company.

Of course, all of the above items are merely a "wish list." When it comes right down to what your actual lease is going to look like, you may or may not get these concessions from your landlord. But at least you know ahead of time what you're getting yourself into.

(Editor’s note: The suggestions and guidelines within this article may or may not apply to your particular business situation. Therefore, it is strongly suggested that you consult your attorney before signing your lease or any other legally binding document.)