Above the Trees
Creative Lease Agreements, Simple Respect Saved This Business Owner Big Bucks
Posted Oct 29, 2005 5:13 AM CST
By Joan Indiana Rigdon
In New York City, real estate is a cutthroat business. But sometimes it pays to be a nice guy, too.
Big Apple restaurateur Jon Bloostein has this strategy down. He’s scored some of the city’s best locations and sweetest rent deals by making an art out of being a good tenant.
That doesn’t just mean paying the rent on time. Bloostein has also learned when to negotiate with landlords--and when to hold his tongue. Over the last decade, his “creative tenancy” has saved his Heartland Brewery chain and his Spanky’s BBQ restaurant well over a million dollars.
In many cases, he just took good risks. One year, he located a Heartland Brewery in an “up and coming” neighborhood. By committing to multiple years, he scored one free year. And patience paid off; Union Square is now a city hot spot.
Last year, he won a coveted spot in the Empire State Building by agreeing to pay an above-market percentage of profits to the landlord if his revenues hit certain levels. He likes these types of deals because they keep his fixed costs lower, and the landlords have a vested interest in helping him succeed. In this case, his landlord shares the building’s tourism mailing lists, making it easier for Bloostein to woo tour groups. The landlord also links to Heartland Brewery on the building Web site.
Getting in is just the start. Next comes keeping the landlord happy. Bloostein tries to do this by being very responsive. Once, a landlord realized she’d forgotten to bill him for years of utilities and taxes and sent him a $150,000 bill. Bloostein gave her a check the next day. The result? Landlord Cindy Dial calls him “a man of his word” and is willing to make handshake deals with him.
Bloostein wants to keep her faith, and so far, he has. After Dial told him she’s allergic to gluten, he marked his menus to show gluten-free items and even installed a separate fryer so she can eat Heartland’s french fries. “If she had a headache, I’d find the Tylenol to take care of it,” he says.
Bloostein wasn’t always so smart. When he opened his first restaurant in 1995, he got a tough landlord who did not like his soundproofing or the way he vented his boiler exhaust.
Years later, Bloostein realized the complaints were valid. But at the time, the two exchanged angry letters. “At one point, we were belly to belly in the alley, ready to go at it,” Bloostein recalls. He won in court, but not in life. “I won the battle, but I didn’t win the war,” he says. He had almost two decades to go on his lease, and now his landlord disliked him.
Learning the Hard Way
Bloostein salvaged the relationship by paying the man respect. Once, when the landlord asked him to pay the water bill for the whole building, including three residential units, Bloostein initially balked. After all, he had already paid to install water meters. But then he realized his brewery used almost all the water, and if he paid a little extra for someone else’s water, he’d win loads of good will. So he did it. Years later, when Bloostein wanted to hang banners, the landlord repaid in kind and let him.
Holding his tongue has also helped. Once, a landlord agreed to let Bloostein hang a 12-foot neon sign but then reneged. Bloostein could have won in court but decided to negotiate a happier ending: He traded down to a smaller sign in return for a 50-seat outdoor café. “I’ve learned,” he says, “that it makes sense to be very reasonable.”
Above the Trees looks at leaders and industries outside the law. It lets you draw analogies to how you run your business, how you deal with your clients and how you face your own challenges.