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In the last few
Franchisors should be able to accurately predict and include sufficient contingency in their revenue and business cash flow models.
How much difference can there be?
Often the emphasis in lease negotiation is on annual rent, to the exclusion of many equally important cost elements.For example, the difference in cash flow in the first six months of trading between an annual rent of £24k and £20k is
Similarly for properties with annual rents of £50k per annum cash flow differences of £50k are not uncommon. Clearly getting the model wrong can have catastrophic consequences on the business.
Areas that materially affect cash flow?
Rent-free periods, deposit payments and monthly rather than quarterly rental payments are the obvious ones but
The effect of VAT needs to also be recognised. Knowing if the property is VAT registered is clearly important. Not only because of the effect on rental payments but that any deposit will likely include VAT and the amount of Stamp Duty Land tax (SDLtax) payable is calculated on rent payable including VAT.
The effect these various terms have
carefully in conjunction with the other business requirements.
Landlords will all have different priorities in a lease negotiation, depending on their own personal circumstances. With falling rents, many are increasingly being driven by funding restrictions.
Presenting your prospective landlord with a professional looking document detailing the history of the franchise, training and back-up given and it's
If cash flow rather than the absolute rental figures
the rent!