Commercial Leasing Considerations for Convenience Stores in Australia

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Table of Contents

• Reviewing Rent Terms for Convenience Store Leases
• Option to Renew Convenience Store Lease
• Key Takeaways

From Lucky 7 to 7-Eleven to individually-owned convenience stores, the industry for the convenience stores is competitive. The industry is also subject to increasing competitive pressure from supermarket chains, fuel retailers, and takeaway food establishments. If you are thinking of joining a franchise convenience store network, or starting up your convenience store, it is important that you are aware of the legal considerations associated with entering into a commercial lease. Any commercial lease you enter into on behalf of your business will have a significant effect on its success well into the future as a sound commercial lease will provide you with the security to consolidate and grow your business. Conversely, without the security of a watertight commercial lease, you may find yourself facing expensive or unfair rent hikes. Therefore, before entering into a commercial lease, you should at lease be aware or the legal considerations surrounding the term of the lease, and any option for renewal of the lease.

Reviewing Rent Terms for Convenience Store Leases

Each commercial lease will be unique as your needs will be different from the previous lessee. Therefore, there is no magic number when it comes to choosing the term of a commercial lease, as it will rely entirely upon the negotiation process between you and the owner of the commercial property. Nevertheless, there are a number of legal considerations you should be aware of before entering into a commercial lease for your convenience store.

First and foremost you should be aware that the term of a commercial lease should be agreed. The term may vary from three to five years; however, does not mean that you cannot sign a lease that is substantially more in length than this term on behalf of your convenience store.

Another legal consideration relating to the term of a commercial lease is that you will want to be absolutely certain of the beginning and termination dates of the lease. Problems arise in this area due to the fact that some commercial leases can begin as the result of an event, such as the handing over of keys to the property, and terminate say, five years after that event. Therefore, if you sign this type of commercial lease it is imperative that your talk to the owner of the property and gain clarity in relation to when exactly the termination date will be.

Option to Renew Convenience Store Lease

An option to renew a commercial lease will allow you to extend the original lease beyond the initial termination date so long as it is exercised within a specified timeframe. Generally this timeframe is between 6-12 months before the original lease expires. However, one legal consideration that you should be aware of before signing a commercial lease for your convenience store, is that the option to renew can be included as part of the minimum lease timeframe, for example, five years. As such, you can sign a lease that lasts three years, with an option to renew for two years, and fall within the statutory framework. This will prove beneficial for new businesses or expanding your business as it will mean that you can shorten the length of the lease to minimise risk.

Key Takeaways

The location of convenience stores is an important success factor for stores. Convenience stores are often located in residential and metropolitan areas. Understanding the terms of your commercial lease will ensure your business is not forced to close for a leasing issue you were not aware of. A leasing lawyer can help you understand your commercial lease.