The Restaurant Owner's Guide to Negotiation: 17 Basic Rules & Principles

QUESTION FROM: Fran in D.C.

"We currently have a booth at our local farmers market where we sell empanadas, filled pockets and globally inspired wraps. A local developer who is very well respected in our area approached us this week and asked if we would be interested in taking over a ground floor full service Restaurants space. The space is in a mixed-use building made up of offices and apartments.

My partner and I agreed to discuss a plan, how much we can afford to pay for it and had been weighing pros and cons for the last few days.

The guy came by again this morning and we told him we were interested but still discussing. He told us that if we were serious, we should put together proposal and email it to him by the end of next week.

Is there a particular format we should use or terms we should insist on when negotiating?

Right now we just have a list of things we would want to do menuwise and a list of equipment we would need.

Could really use some help here. Assuming the price part is going to be a pretty sweet deal because he knows we're a small business and when I mentioned that we probably couldn't afford it he said he told us not to worry about it and that they would make it work."

HH REPLY FROM: Josh Sapienza

There's a common misconception that good negotiators are tough negotiators...being inflexible and not giving an inch is perceived by many as a sign of strength. In reality, the opposite is true.

Much of the work I do as a hospitality consultant involves deciphering, negotiating, and drafting agreements between parties where a significant imbalance exists when it comes to experience within a given industry or simply experience with contracts.

Although only one or two out of every 10 inquiries results in an executed agreement for my services, I treat every one of them as though we're moving forward with an agreement in place.

I do this, not to manifest another profitable engagement but because thinking of creative viable solutions that meet the needs of two disparate Parties is a great exercise for me that often results in me considering scenarios that are applicable if not for the person currently inquiring, then very likely for another Client down the road.

This process often gives me an idea or two of how to approach an existing Client's renegotiation of a contract that is up for renewal.

At the very least, it saves time if the potential Client does decide to hire me which means I can spend more time on the most important and preliminary part of any negotiation: due diligence.

In going through this process recently, a potential Client revealed that they intended to break some of the same fundamental rules you would be breaking by forwarding a written proposal.

So, in an effort to assist you, them and anyone else who may be facing a similar scenario; I've decided to share my own personal "Rules of Negotiation" which serve my clients well.

Never negotiate against yourself (i.e., don't be the first to make a proposal).
The first step in any negotiation is research.
The second step in any negotiation is more research.
The first Party to the table may not present the best offer but they are usually the Party most likely to close with realistic (albeit not the most desireable) terms.
Keep to a tight timeline and check your ego at the door. The three greatest threats to any deal successfully closing are emotion, time and lawyers.
Get to know all Parties involved in-person whenever possible and keep your phone (or any other potential sources of distraction) off the table.
There's always another Party (whether it's another interested Party, another Party to which one or both sides are beholden, another Party who shares your interests and another Party / location for you to do what you want to do).
Whenever possible- share a meal or a cup of coffee or tea or smoothie...and instead of offering your objectives, inquire about their underlying interests and goals (both short and long term) i.e., create more opportunities to listen intimately than explain clearly.
Read between the lines. Consider what might be driving body language and explicit language.
Vet all Parties & seek to discover what's hiding under the carpet: purchase price and date, condition, age of people, property or assets involved, partnerships, maintenance schedules, lawsuits, liens, debt, contracts, conflicts, proposals, emails, LOIs, associated assets, other interests, failed deals, plans in local jurisdiction that might create impacts, etc...
Consider the next best alternative yo the Agreement you're negotiating - for both sides.
Get Creative. Don't let conventional or existing deal structures / boilerplate agreements govern your terms no matter where they come from. If both parties agree to: an offer, some acceptance, verified awareness, valuable consideration, realistic capacity and legality all within a defined / specified timeline - then you have all the necessary elements of a binding contract.
Offer more than one integrative solution that offers relevant benefits for both sides.
Offer the other party a "golden bridge" on which to retreat or walk-back any items / terms previously identified as "non-negotiable".
God is in the details. Agree to specific and sweeping terms first and have lawyers draft those terms for execution second.
Don't ever agree to something that the other Party may determine or unilaterally decide later.
Before signing anything, re-read every word of the agreement while comparing to last agreed upon draft and paying particular attention to the differences between "shall", "will" and "may".

For more specific information on deal structuring and contract negotiation see:

"The Ubiquity Group Restaurant Lease Guide" under SHOP

"Evaluating A Chef Partner Agreement" under FACILITY

"Three Partners One Restaurant" under FACILITY

"6 Rules For Restaurateurs Navigating Negotiation" under FACILITY

"Responding To A Foodservice RFP" under FACILITY

"Things To Consider Before Opening A Second Location" under FACILITY

"Restaurant Profit Sharing & Partnership Agreements" under FACILITY

"How To Structure A Partnership" under FACILITY

and more...

Josh Sapienza | Managing Partner

UbiquityAdvisors.com & Paire.io: The Dating App For Taste Buds