Arby’s executives say a good letter is the first step to building a prosperous relationship.

“One of the keys to our real estate success is we don’t take an adversarial approach,” says John Todd, senior vice president of development. “Because we might make future deals with these landlords, we want a good, working relationship.”

Landowners want good relationships with the likes of Arby’s, too.

“Landlords want concepts that have legs and will put people in their shopping centers,” Todd says.

On the other side of the spectrum, independent operators have less brand reputation and the landlord assumes more risk with them as tenants. Take Meltz for example.

“If I were a big name, I probably could have had my terms met,” Engelsher says. “But they just look at Meltz as a mom-and-pop operation,” which does not carry the weight of a thousand-store franchise. But it’s fair to look at this from the landlord’s perspective. With a virtual unknown concept, he has no guarantees that the restaurant will succeed.

“Risk and dollars, that’s what you’re negotiating in a lease,” Kotis says. “When we talk about what somebody should do, it really depends on how much money they have and how much risk they want to take. Simply put, there’s no formula.”

But there are red flags.

One potential red flag is yearly rent increases based on the Consumer Price Index, which could be costly during high inflation years. “They might also be compounding the rent more than you expect,” Frankel says.

Other unknown fees may include public utilities in multitenant buildings. Landlords will often call the costs “administrative fees.”

“If utilities are going to be sub-metered and administered by the landlord, you can negotiate and demand a minimal mark-up,” Frankel says. “Almost all landlords will try charging for this, and that should be a nominal fee.”

Additional overlooked issues include necessary tenant improvements, bad neighbors, noise pollution, plumbing, lack of parking, and maintenance. But these are all concerns that can be alleviated with a little research.

“When you know the problems beforehand, you have a lot more leverage working with the landlord than coming to him after you have begun negotiations,” Frankel adds.

Then there’s the exit strategy, which “all the major players have,” he says. “If McDonald’s needs one, so does everybody else.”

Some landlords balk at exit strategies and require operators to run their stores.

“The last thing we want is to have continuous operations clauses in the lease,” Todd says. “We will not operate a store at a loss.”

In some Arby’s leases, operators can reassign the property to another Arby’s affiliate or sublet the property.

Frankel says landowners may put restrictions on whom you sublease. For example, you may not be allowed to rent to an adult bookstore or tattoo parlor. “If he doesn’t allow for subleasing, give him the option of buying back the space,” Frankel says. “The bottom line is everybody should have an exit clause, because you never know what could happen.”

One thing is for sure, the lease is a legally binding document. That’s why Engelsher is cautiously moving forward with Meltz’s site selection.

“It makes no sense to find the dream spot and start everything off with a bad lease,” Engelsher says. end