Farm'r Story Part 2: Why it took us 2.5 years to find restaurant space
After hashing out the concept, our effort focused on finding a restaurant location. Here is the story of how we found our spot in an old fish and chips joint by the St Lawrence Market. Yes, it was a long journey, much longer than we imagined, but after 2.5 years our persistence resulted in a deal.
It was the end of 2014 when we pushed forward with the idea to start a Toronto restaurant. From there, we didn’t open Farm’r until August of 2017.
To speak honestly, the experience was a struggle. Though part of that was self imposed, people don’t like dealing with rookies. It took us so long because on the one hand we were picky, but on the other hand most landlords or brokers didn’t want to hear from us.
Through it all we looked at dozens of locations. We were rejected by some landlords, didn’t like other spaces and found many of them more expensive than we could handle. Oh well, we got through it and here is the story.
Why Finding Restaurant Space is Hard
Finding restaurant space isn’t quite like finding a house, condo or apartment in Toronto. The biggest difference is restaurants are typically built around 10 year lease agreements, much different than the typical 1 year residential lease.
The long lease period means locations don’t come up for rent often, but that makes sense. Renovating a restaurant can cost $300,000 to $1 million (or $10+ million if you’re Cactus Club). That’s a lot of money for anyone, and you need a long lease to cover all those upfront costs. Moving after a year or two isn’t an option.
On top of the location scarcity, there’s the problem that landlords hate you when you have an unproven concept. Most of them hated us, though luckily we found some exceptions.
I don’t necessarily blame them, think of it from the landlord perspective, a new restaurant is all risk and little upside. The risks are:
New restaurants don’t have lots of money to pay rent
New restaurants aren’t proven and don’t have sophisticated owners
As a landlord if you have Tim Hortons knocking at your door, interested in a lease, you go with them. They have a reputation, they pay rent on time. Tim Hortons is boring, but boring is exactly where the big landlords look.
To combat this we prettied ourselves up with a nice marketing package full of inspirational pictures. It was sort of like a joint resume meets artistic portfolio. With this, out into the world of commercial real estate we went.
The Places That Got Away
Over the 2.5 years of searching we looked at dozens upon dozens of places. Not all in person, but we saw a lot. Sometimes we’d find a great space, call the selling agent and they’d immediately say no because we were rookies.
There were three particular locations where we went further down the road of consideration and at least some negotiation. We liked each one, but in every case when it came down to negotiating a lease with the landlord it didn’t work.
We’re risky, I always understood that, but we were happy to pay market rent. That being said, we couldn’t afford to pay a ridiculous premium just because we were unproven. When talking to landlords they were all fairly hesitant and seemed to want us to compensate them for the risk through higher monthly rent or an unheard of deposit.
We didn’t have the negotiating power of a Starbucks or a McDonalds who can dictate price themselves. All we could do was say no.
If you’d like to know where Farm’r could have been, here are the three places I mentioned:
Our ‘Bad’ Broker
When we first started looking for a location to rent I did a lot of walking through the streets of Toronto, jotting down the contact information of the listing agent for empty retail space where I saw a sign.
When we found a spot we liked, one of us would call the listing agent to set up an appointment. Our trouble was, agents don’t like dealing with out of the blue phone calls from non-agents.
We found about half of the agents we called wouldn’t entertain the idea of showing us a listing in person. We just weren’t worth their time.
So we asked around, the same way you would if trying to find a real estate agent to help with buying a house. We were referred to one of the retail focused brokerages who find commercial space for all sorts of restaurant and retail tenants (I won’t mention the name because I have nothing nice to say about them).
We were small fish, not a “juicy” commission by any means, but our contact met with us and was nice enough to enlist a junior member of the team to help.
Our agent sent us some listings, they weren’t great, but we went to see a few. We told them to narrow down the search and become more targeted in what we thought could work. There was no point in going if the opportunity wasn’t realistic.
We scheduled 2 appointments and maybe a quick third when all of sudden our agent stopped responding to emails. This person wouldn’t return our calls.
My impression was a bigger fish came around and time to work with us dwindled away. Still, the disappearing like a ghost strategy of customer service is a bad one. Bottom line, we were too small. At this point we figured using an agent was useless. From here we focused on doing it ourselves.
Our Great Broker
After the failure working with our first agent, we assumed the path forward was doing it on our own.
As we continued to view locations offered by the select brokers who would actually take our calls, we looked at a couple listed by a different broker. He focused on restaurants and we saw his name around from time to time.
Each time we met this guy he would offer to help us with a location he thought might work, and even offered to represents us. He seemed professional and knowledgeable (much more than our ‘bad’ broker) so I honestly didn’t think he was serious. We didn’t hire him right away.
Well after a few months we kept running into him, and each time he would politely offer. Eventually we said why not? Lets hire the guy, it can’t hurt.
His name is Ryan Earl, he was terrific. He found our eventual location, helped us negotiate the deal and never flaked.
Because of our first experience I always thought he would disappear or stop answering our calls at some point in the process. Yet, through months of offers and negotiations he stuck with us.
Today, I can’t recommend him more. He’s the guy you want when buying or selling your restaurant.
Finding The One!
It may not seem like all of that could take 2.5 years, but it did. The part I mentioned above about looking for places on our own, we did that for a long time. We saw many bad places that would have been a big struggle to renovate or make work.
It was easy to find a place in a building that was going to be torn down soon or was in the middle of a construction zone (ahem, Yonge & Eg), but nothing was great.
Having a broker definitely helped. We got so good at saying no, it was hard to imagine saying yes.
In the fall of 2016 we finally felt plugged in, we were getting close. Ryan was showing us some decent options and we seemed to have access to more listings that we did before. One day we saw our fish and chips place on the Esplanade.
It was a sit down restaurant with a kitchen at the front, a big bar in the middle of the space and a pool table in the back. Not exactly what we wanted, but workable. The best part, we loved the location.
It was close to downtown, but far enough away where the rent was reasonable. There were condos close by, traffic from the St. Lawrence Market, walking distance from the Distillery and Union Station, it was ideal in many ways.
It was also close to several Toronto community housing buildings, and actually our landlord is Toronto Community Housing. As far as accessibility to food healthy food and being in proximity to help others, the spot was perfect.
On top of that, the kitchen was right at the front, which was important to us. So many restaurants bury their kitchen in the back, but one of our goals was to be transparent and cook out in the open. We wanted to include our customers in as much of what we were going to do as possible.
Pulling the Trigger – Buying the Business
We knew we wanted to make a bid on 140A The Esplanade. It wasn’t the landlord listing the space, it was the owner of the restaurant selling the business.
In essence they were selling the lease (which was cheap but fairly onerous) and all of their stuff. Not much of the “stuff” was useful to us other than some of the kitchen equipment, but having a hood, some fridges and other basic cooking equipment had some value to us.
We did the usual negotiating as you would a house, meeting somewhere in the middle of asking and offering. When the deal was done we were set to buy the assets of Times Square Fish and Chips.
Our deal would close at the start of April, 2017. We made it, were were now restaurant owners!
(though of course at this point we owned the wrong restaurant, but the transformation to Farm’r is another story)
Thanks for reading. More to come.
-Greg and team at Farm’r