Episode 252

Tips for Negotiating with Your Gym’s Landlord with Pete Dupuis

In this episode, Pete Dupuis joins me to answer some questions about negotiating with your gym’s landlord.

[00:00:00] Hello, fitness business nerds. What’s up? Welcome to another episode of the Business for Unicorns podcast. Today I’m here with Pete. Hello, my friend. Hey Michael. How are you today? You know, we’re having a great day. We’re both been doing a lot of coaching today, so we’re really kind of in the zone. Got a lot of amazing things happening with unicorn society members.

Also, a lot of challenging things as, as is always the case with running a gym. And so, yeah, having a full day. I know you are too. Yeah, it’s nice it feeds the content wheel. ’cause the days that we do a lot of coaching, we tend to have a lot of podcast studies. Yes, 100%. There’s. No shortage of ideas for what to talk about on the podcast.

Well, before we dive into today’s topic, I do wanna do a quick little shout out for our listeners. If you didn’t know yet Mark Fisher put out a book in the last year. It’s Mark Fisher’s Book of Fitness Business Secrets. And you should go get it. It’s really a collection of all kinds of. Email content he’s created over the years.

It’s full of tips and tricks for really every area of your business, from lead [00:01:00] generation to managing your team. And you can get it@businessunicorns.com slash book. So you can certainly search for it on Amazon or anywhere you get books. But if you go to business unicorns.com/book you can order it right through our website.

It’s a great book for people who are just opening a gym or veterans who’ve been around for a long time. Pete, I know you’ve read, you know, a lot of Mark’s, Mark’s emails religiously over the years. You just maybe just wanna say, share anything about what you tend to get from Mark’s content. I was gonna say that I would contend you will not find a book written more accurately in the voice of, of the author.

You can feel Mark’s energy in every piece of copy he writes and hey, it’s, it’s with 10 years of small business ownership experience behind it. So I will not argue with any of his thoughts.

Yeah, 100%. It’s mark has a very unique voice and writing style, and so not only do you get great tips, but you also get to see what it’s like to model someone who has a very [00:02:00] specific and consistent brand voice, which is something we all strive for. So, yeah, go grab that book, business unicorns.com/book, which brings us to today’s topic.

Today’s topic came from some conversations Pete was having recently. I feel like I talk about this a lot on my coaching calls with Unicorn Society members. And the topic today is tips and tricks and lessons learned from Pete and I about negotiating with your landlord. And both of us have lots of experience in this.

Both good, bad, and ugly. And I think a lot of people wanna talk through this with us as coaches because there’s a lot of things to consider. You know, you wanna ask for a lot and be a good negotiator, and you also want to establish a good relationship with your landlord. ’cause I. For most of us, we’re signing five 10 year leases, which means these are long-term relationships.

These are bridges we can’t afford to burn. So negotiating well with your landlord is an important skill to learn. Pete, where do you wanna kick this conversation off? What are some lessons you’ve learned over the years about [00:03:00] negotiating with your landlords? I’d encourage people to think about this, not just as negotiating or renegotiating, but think of some of the feedback that, or the insights we share today.

As tips for identifying a good first landlord as well, because Hmm, that’s great. I, I brought this topic to the table partially because it was discussed in a coaching conversation and partially because I recently renegotiated a lease and I did so for the first time with a new owner, I. And I have since that time come to realize that I had a pretty comfy sweetheart deal with my old landlord who was willing to make some concessions to us because he was kind of more of a friend than a landlord, and he was pretty emotionally invested in seeing us succeed.

And he didn’t see us as like a cash register to him. He was, he was definitely doing us some favors that I didn’t feel, because I’ve been in the same building since [00:04:00] 2008 and I’ve been in the same space since 2012. And when that happens, you, it might not be a good thing. But I didn’t do a whole lot of homework on what the market really looks like out there because I liked my landlord, I liked my space.

  1. And I wanted to continue to do business with him. And so when it came time to renegotiate, this wasn’t about going out and getting quotes from competitive agents in the area or anything like that. This was about finding middle ground that we were all comfortable with. And then he sold the building and he, we stepped away from a mom and pop scenario where the, the landlord was like, was like unofficially our, our third grandfather sort of a deal and into a scenario where we are.

Part of an organization that has over a hundred million square feet of, of space under rental agreement in New England and my 15,000 square feet. Though it feels big to me, I. Could not be [00:05:00] any less urgent to them, and their only objective is to extract as much value from me per square foot as possible.

They don’t feel like they owe me anything. In fact, they weren’t particularly concerned with making me feel welcome in the process, and that was the moment that I realized, one, I really Ms. Good old Grandpa, Jim, and two. Yep. We are so far below market that this is really gonna sting. And so yeah. My, my tip for you in this process is, There is definitely value to be found in working with an owner who’s maybe looks at the building like singularly as their retirement plan or they, they own two or three pieces of property, but the bigger the org, the more bureaucracy there has been and the less customer service there has been from the perspective of feeling like I am more than like a serial number on a spreadsheet to them.

Mm-hmm. And I’d imagine you have. Maybe similar insights considering you’ve played this game in the last couple [00:06:00] years as well. Yeah. 100%. Yeah. I’ll just give a big plus one to that. I think when we’re talking about tips for finding your first landlord or your next landlord, this is a big one. I think I, we, we, we’ve had both Our landlord in Hell’s Kitchen has been a little bit like treated us like family.

I’m pretty sure he doesn’t listen to this podcast, so I think I can say out loud, like, I’m pretty sure they’re part of like a Greek mafia or something. Right. So once you’re in, you’re kind of. Family, you know, and so they’ve treated us very well over the years. They were kind to us during Covid, flexible, you know we’ve, we’ve increased our footprint with them and decreased it with them several times.

But we had a second landlord down on a Lower East Side location. And the same exact thing happened to us that you just explained. We first bought it, the people owned it. Were like a neighborhood developer. Their office was one block away. They were very highly engaged. You know, our, we were welcome with open arms, you know, the, the, the processes and the paperwork was all very clear and friendly.

And then they sold. [00:07:00] About a year into our into our lease. They sold so a little faster than you. You had more time with grandpa than we had. Mm-hmm. And, and a year in, they sold to a giant business where we were just a tiny, tiny, tiny. Little one line in their portfolio and they didn’t give a shit about us.

And so same experience, we wound up closing during that location, during Covid because they wouldn’t be help us at all. And so I think it’s a great first tip is that if you have the option of signing a lease with someone who is a local developer, It’s gonna be around, knows the community has roots in that neighborhood, their families nearby.

I’m gonna pick that almost every time compared to being part of some big, giant international portfolio of real estate with a giant investor. You’re just not gonna it. They don’t care about you. It’s not, no one there caress about you. And this is a, I think a sweeping brush, like a, a big generalization, but.

I’d be shocked to hear any exceptions to this. Yeah, and so I think that’s a great one. Well, the other tips that I think, lemme say this though, go ahead. Since, [00:08:00] since they have started extracting more dollars from everybody in the building pretty aggressively, I will give them the credit that the entire exterior of the building has been painted in the past month for the first time in the.

15 years I’ve been in the space. Sure. So sure they are, they’re putting money into it. They have made repairs that we asked for. It’s just mm-hmm. It’s very mechanical in nature. The inter interaction. Yeah. There’s a professionalism. Right. There’s a professional nature to the relationship now. It’s like, you know, managing a relationship with another business instead of with a person.

Mm-hmm. And there’s, there’s pros to that for sure. And if I had my choice doing it the first time, I wanna talk to even a. Cranky old grandpa is sometimes easier to deal with than a giant B bureaucracy that treats you like a a number. Sure. And I’ll give you another’s a great one. Silver lining. We, yeah.

When you have a relationship of the nature that we did with Jim, I think we were very willing to overlook some shitty habits and [00:09:00] as a result, next thing you know, when your rent goes up in my case, 60%. Yeah, that’s the moment you say to yourself, ouch. I now give myself permission to be an asshole. So if the toilet in the bathroom has been broken for two days, I’m gonna be in every single inbox I have in my archives.

For email correspondence with this commercial group, and if there’s a leak in the ceiling, they’re all gonna hear from me twice that day. If there is a hole in the wall that kind of got patched, but then they didn’t paint over it, I’m gonna send them a picture every day for a week. Because you know what?

If you’re gonna take an extra a hundred grand for me and rent this year, I’m going to be. The neediest most challenging tenant in your portfolio for a little while. While I feel like, fine, I’m gonna extract my value, and they have protocol for that. I think they’re very used to doing this, acquiring, eating up a little local business, putting their systems in place, saying, ah, we’re gonna have a lot of cranky people who are pissed that we’re charging ’em more now.

Well, [00:10:00] here are our SOPs for dealing with that. And these are the four people who are gonna be used and abused by that community. And they’ll be responsive to your emails and that’s fine. So there are things that I’ve been kind of displeased with around the building for a while now, and I’ve got all of those addressed in the last 90 days, and I will continue to do so.

So, I mean, it’s business, it’s fine. They have not lied to me at any point. Yeah, it’s a, it’s a perfect example. Yep. Yeah, it’s a perfect example of now you’re paying more, you can expect more. Yep. And a business like that, that requires you to charge more, should have the operations in place to be able to meet those higher expectations.

So, you know, the bars has to be raised all around, which makes perfect sense. I think, you know, if I, if I think big picture about other other tips I’d have for, You know finding a new landlord or your very first landlord. I think the other things that really mattered to me is I really think if it’s your, especially if it’s your first time, you really need a lawyer.

Yeah. Especially if you’re in a city like New York, it is so essential. When we first got a [00:11:00] lawyer, To help us, us help us with our initial negotiations. I learned about all kinds of things that I should be asking for that I never would’ve thought of on my own. Even if I spent, you know, days Googling good, you know, good terms for New York City real estate, I still wouldn’t have found it.

Like, you know, having a good lawyer to help advise you about all the things you can ask for the free rent, the concessions, the things in the building. You don’t wanna be responsible for the insurance considerations, like the, it’s a laundry list of things that you have negotiating power for that I never would’ve known without, without some good advice.

Sometimes a broker can do that in some markets for you. Other times you really need a, a real estate lawyer, depending on your market. So I think that one is really kind of huge for me in terms of finding a landlord for the first time, and then when it comes to kind of negotiating or renegotiating with that landlord, this is, you know, maybe gonna sound super basic, but I just think with that kind of negotiating, you wanna ask for way more than you think you’ll ever get.

  1. [00:12:00] Right. You really have to take that stance of, is really starting with kind of pie in the sky kind of requests, because then maybe you’ll land somewhere reasonably, but if you go into sheepish at first, and especially if you’re a brand new business owner, you might have the confidence yet to go in and make big, sweeping asks.

But but I think if, if. You can go in asking for way more than you think you’ll ever need, then you might wind up someplace even better than you thought you would land. So I think, you know you know, and I think early on in the relationship I think if you do that with kindness and with confidence, it’s really hard to damage the relationship.

People know that in negotiations, people are gonna come in swinging. So I think, you know, there’s times in our history with. M f f I wish I would’ve been a little more aggressive as a negotiator. And I think that’s something, you know mark and I have been talking about a lot recently. He’s certainly gotten more aggressive as a negotiator and maybe aggressive is the wrong word, more confident, assertive in, in, in our ability to ask for more and more assertive.

I think that’s a good thing. I think that’s a good thing. And I think we did pretty good early on for what we knew and what we didn’t knew. [00:13:00] No, but that’s a skill that That can be improved with some good guidance and with some time. So, I don’t know. Those are some thoughts about getting started and renegotiating.

What else, what other lessons learned do you have there, Pete? Oh, if I could go back in time. I wanna give Jim credit. He gave us a heads up. He said, Hey, I’m shopping the building. Yeah. I’m in my eighties. I’m, I’m ready to be done with this. And I, I want it to be on your radar that people will be looking at the space.

And what I would’ve done, if I could go back in time is I would’ve said, that’s wonderful. I’m excited for you. I’d like to extend my lease right now. And so, yeah, if you’re in a space that you, like, you’re two years into a five year lease and your landlord tells you you are he’s going to consider, he or she are going to consider moving the building.

I’d say that’s great. And, and who knows how long that’ll take. But I know for a fact that when the time comes, having a high occupancy is a good thing for you, assuming they’re not in Yep. Backbreaking deals. And I’d say, you know, [00:14:00] I’d love to talk to you right now about extending for as long as you’re willing to have me.

If I could go back two years right now, I would sign a 10 year lease without hesitation because I know, even if Jim said to himself, well, I got a course correct a little bit because you need to be a better lease on the books for me, a little bit wouldn’t have been a 60% increase. He would’ve, he known that it would be terribly insulting to me based on our relationship to, to change the playing field that much, and I might have been.

Roughly where I was, maybe even as much as halfway to where I ended up. But that was a missed opportunity that I don’t think I necessarily messed up on. But now that I know, if I were in that position mm-hmm. If I were a gym owner who was in a building Yeah. Are unicorn society members who are in this situation, who are in buildings that they said right now the landlord could sell at any point.

I’ve had that conversation this past month and I say to ’em, if you like where you are, You go to them right now and ask them how far out they’re [00:15:00] willing to extend you. Tear up the existing deal, rewrite it, offer to go up a little bit if you need to. You will not regret this. You can trust me because my lease was untouchable when the building was sold, but I only got about 18 months of, of kind of coasting on the old rates before we had to course correct.

Yeah. That’s a big one. That’s a big one. And you’re right. I, I find that that does happen pretty frequently. People are in buildings and the owner let the person know, Hey, I’m trying to sell. If you know anyone, but you’ll see people coming and looking around. That is a moment to seize on. ’cause if not, you’re right.

New ownership takes over and they’re gonna squeeze you for everything they got. ’cause they just bought the building they’re trying to make up for that investment. So yeah, I think that’s a really good one. I think another one I’ve add, and I feel like maybe I’ve talked about some of the podcasts before, but I think one of the most important clauses to get into a lease, That is maybe the most important clause I wanna make sure is in every lease I ever sign that in New York, this, this clause is called the Good Guy Guarantee.

In other places it has another name, but essentially it’s a, [00:16:00] it’s a clause in your lease that says, if I can prove financial hardship in my business and give you the landlord sufficient heads up, you will let me outta the lease with very little if no penalty. Mm-hmm. The idea is that if I am just honest and upfront with you that the business is tanking and I’m going to, in a few months not be able to pay my bills, and I can prove to you that financial hardship, share my p and l or whatever you need from me, and I can give you 30, 16, 90, you know, three months, four months heads up, then you will let me get out of my lease with maybe just forfeiting my security deposit.

Yep. Right. But there’s some, there’s some safety net to that to say if things are going south, I don’t wanna be on the hook for another three years rent, if I can prove to you the business is not sustainable. Yeah. And for most of us gym owners, we don’t have a big, we don’t have backers, we don’t have investors, we don’t have super deep pockets.

So that even if they, we were on the hook for another two or three years of rent, we wouldn’t be able to pay it. We’d wind up in court. Right. And so having some lease. You know, some clause in your lease that allows you to kind of [00:17:00] get outta jail free. Maybe not free, but cheap, like that’s just one of the most important things to negotiate.

Like I just will never sign a commercial lease without that escape hatch. Yeah. When we came down to the wire, one of Eric’s final requests, since he’s full-time in Florida now, was that if they’re asking us to personally guarantee the lease, that it would be me and John and not him, and ultimately they did not require a personal guarantee.

Basically the L L C. That we’re under is, is gonna protect us there. But I can’t just say, Hey, I don’t like the terms here. I’m gonna move down the street. The business has to dissolve for me to walk away from the lease. Yep. But it would not be at the expense. You know, I’m not losing my home. Yes, exactly.

Yeah. I mean, this becomes extra important if you are, if you are a personal guarantor of of it, you know, if you’re backing it yourself personally, and even if it’s just the business, it’s still useful to know you don’t have to dissolve your whole business if one location doesn’t work out. Mm-hmm. Right.

You can down, you can, you can walk away with sufficient notice, maybe [00:18:00] with a few, a few scars, a few wounds, but not having to really. Bring everything down to zero. Sure. Or be in giant debt. Yeah. Yeah. I’ll give one more before we go. That’s, go for it. That’s protected us a couple times. I’d imagine. I’ve discussed it with you on the podcast over the years since we’re probably pushing 40 episodes or something together, but we’ve been protected on, on more than one occasion, probably more than like five occasions over the 15 years we’ve been in the building where the language in our lease that allows us to have basically right of first refusal on competitive business entering the space.

Yeah. That played in our favor to the point where we deflected you know, a personal training studio directly across the hall. A CrossFit gym. Mm-hmm. In like three doors down from us, an American Ninja Warrior set up directly across the hall. You name it. Wow. We had to squash it on a number of occasions.

Wow. And I mean, I didn’t basically the, the rights that I had in that capacity was if [00:19:00] they did put it in here, I could effectively walk away from my own lease, no questions asked, but I. They, they valued our footprint that we were in we’re the third largest tenant in a 200,000 square foot building. So it never got to that point.

Mm-hmm. But those people also never got into our building. And I know that, that Jim’s daughter who ran the space loved us, but she hated me every time she had to make that ask. ’cause she knew the answer that was coming back. Yeah. Yeah, that’s a really great one because, you know, if you don’t have that in your lease, they can absolutely open up a competitive business right next door, you know?

And so I think that’s a really good one to have in there. I’ll add one little short one just to, to wrap things up. I just thought of it, that’s, I’ve seen this one be a real issue. Again, this was maybe more specific people in more tight communities, especially cities. But one that’s about noise.

Because it’s the, one of the number one problems I see gyms have is noise and vibration. When you share walls or ceilings or floors with other [00:20:00] tenants to make sure there’s something in your lease that protects you, that your landlord’s gonna say, I have your back. If there’s disputes about noise that that you know, you we’re not gonna, you’re gonna have to move out because you’re dropping weights on the floor.

I think that’s another really important one to have in there. Yeah. But again, I should, I should probably, should have prefaced this all to say that today’s podcast is us just sharing our experiences. This is not legal advice. You should speak to a professional in your area for legal advice. But these are ways that we’ve both I think come out ahead and also gotten burned that I, we at least think should be on your radar.

Yeah. Well, you did give the caveat. You should have an attorney. I probably did. Before you, before you sign anything, have someone look it over. And I want to give a shout out to Alan Cosgrove ’cause he single-handedly helped Eric and I avoid the biggest noise related headache. With his feedback on our signing of our second lease, he was very clear about it.

He said, you’re gonna make a lot of noise. In fact, I remember him saying to me, I’ve seen Eric Cressey lift. You’re going to have angry [00:21:00] neighbors. And it was a, it was this moment of clarity where we were like, we’re definitely getting that language in the least. And we did. Yes, and I don’t think we were 72 hours into our new space before our next door neighbor was in my office demanding to speak with the owner.

And so, wow. It was, it was pretty easy at that point to play nice obviously. ’cause I wanna be nice to my neighbor’s. Yeah. But to point at good old Jim and say, Hey, there’s language in our lease that says this is Jim’s problem, not mine. We’ll do our best. We’re gonna make some modifications, but we’re not on the hook for it.

Ultimately, the costs associated with dampening the vibration issues were Jim’s problem. You wanna leave it there? Yeah. Good for you. That’s a good one. Shout, shout out to Alvin Cosgrove. Thanks. Thanks. So thanks for the tips, Alvin. Yeah, I think it’s a great one. Let’s leave it there. I think it was a great conversation, listeners, hopefully you, you got some takeaways and notes about either looking for your first.

Landlord or negotiating your next lease. And if you found this podcast valuable or any of our podcasts valuable, leave us a review. Give us five stars everywhere you’re [00:22:00] listening to the podcast. We would love to hear from you in the reviews or email us or I should say, and email us and let us know what you want us to talk about next.

You have questions for us to ask or guests you want us to speak to. It’s mike lippi unicorns.com. P pi unicorns.com. Thanks again, again for the great conversation. Talk, Pete. I’ll see you on the next one.