Negotiate your watersport business lease in the right way and learn the different types of agreements that marina management offer.
Hey everyone, thanks for dropping in for this week’s episode of the Weekly Wave presented by WaveRez. My name is Greg Fisher and today we’ll be talking about how to negotiate your lease for your watersport business. If you haven’t already, I suggest listening to episode 4, which talks about finding the perfect location for your business. This will help you understand some of the concepts we’ll talk about on this show, and make sure you are getting the most ideal location for your operation.
When negotiating your lease, keep in mind that there are several ways to structure them. The most popular is a monthly slip rent lease, which is pretty straightforward. You agree to a term such as 5 years, and you pay monthly for use of that slip space. Another type of lease is a percentage rent, where you pay a percentage of your sales each month. I’ve also seen a hybrid of the two as well, where it’s a base rent plus percentage of sales. Let’s take a moment to go into more detail on why you might consider one or the other.
In a straight monthly lease agreement, you’ll find this more common at marinas that don’t provide additional services such as fuel, dock hands, advertising, booking assistance, and daily management. You are basically on your own, and that might be a good thing for savvy marketers. You will also will find that there is more flexibility in how you run your business since there is typically no daily management or vision for the location. Most operators prefer these types of leases because the fixed cost helps them budget, and doesn’t penalize them if they grow. The lack of services could be a concern for some, and also be the additional spend for marketing.
The percentage rent lease is an interesting concept that is starting to become more popular at marinas. The advantage to the percentage lease is that you only pay for what you book. This could be a great option for new businesses that are testing a new concept, or for those that want something turnkey. Marinas that offer percentage rent often provide more services such as dock hands, booking booths, and an overall greater footprint in the destination. In some areas, this might be the only option you have, so you’ll need to understand if your business can afford it. I caution percentage rent leases due to the fact that marina’s will expect your business to perform. And if it doesn’t, you can expect that they’ll find another business after your lease ends that can earn a greater return for that slip.
Before I talk about what to look for when negotiating your lease, it’s best to negotiate when you are not happy with the current situation. If you are happy with the current situation and you are re-negotiating just for the heck of it, then you’re creating a scenario that might work against you. Many marina owners renew leases with very small increases or changes, so it’s best to just say nothing.
Now if you have a situation where your lease has increased significantly, this is where you will want to push back. Most marina owners will expect a negotiation, and your dialogue will determine where you’ll end up. The first thing you’ll need to understand is that this is a negotiation, so you have to expect to end up somewhere in the middle, which means the lease might still go up. Start with asking why the lease went up. Maybe the cost went up because they plan on upgrading the facility, or insurance has increased. If it’s an arbitrary increase, then see if this is in line with other marinas in the area. Sometimes the older marinas take years to raise their rent, so your renewal might have come right at the time of the adjustment. Understanding why the increase is happening gives you the ability to come back with a strong counter.
If the manager is clearly raising the rent arbitrarily to a level far greater than other marinas, then I’d suggest the following. Write an email or letter explaining the value your business brings to the marina. If they have a dock store or sell fuel, you can mention how your business is responsible for increasing these ancillary sales. Mention how the new rent is far greater than other marinas and draw comparisons. Explain what a fair increase would be, or suggest other options such as reduced fuel costs, discounts on supplies, or marketing assistance. In my experience, people are inherently objective and can be convinced with the right approach. If you come in with the right attitude and the expectation that you are trying to meet in the middle, you’ll be better off.
And if the negotiations don’t work in your favor, still be sure to thank the marina management for their effort. If you decide to leave, I can’t stress enough to do it professionally in case you ever have to come back. In some destinations there are only a few commercial marinas so burning bridges will surely put you out of business.
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