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Q: I'm starting up my own
small business and want to rent space in a small strip mall.
The mall owners want me to give them a financial statement, which is
normal; but they also want my business plan, which I think odd.
Why would I have to give them this type of document, and how much
actual detail must I provide? Is this legal for them to ask of
me?
A: They want your business plan for two
reasons.
The first is that they most likely
have commitments with the other tenants as to what types of
businesses can be in the mall. As an example, they may have
committed that there will be no adult stores. Many malls also have
non-competition clauses in their leases. This means that they will
only allow one type of any store in the mall - one lady’s wear
store, one shoe store, etc. By having your business plan, you’re
committing to a business style, in writing. If you change and
become a competitor of another tenant, they will be able to cancel
your lease. By having, your business plan, there can be no
misunderstanding of what you said you were planning on selling.
Second, they want
to be reasonably confident that you are going to survive; they want
to feel that you have thought out and planned the business. Malls
do not like vacant stores and neither do other tenants. Having
tenants come and go gives the mall a bad reputation with respect to
shoppers.
There are no laws
that prevent them from asking for a business plan. On the other
hand, there are no laws that require that you give one. You can
tell them that you do not have a plan or are not willing to provide
it. If that is a deal breaker, so be it, you will go elsewhere.
Whether they will demand it or not depends on how easy it is for
them to get tenants.
Remember that
their lease is not a "cast in stone" document until you sign it.
Read it over and make changes and exceptions as you see fit.
I
recommend you take it to a lawyer.
The lease they hand you will be
very one-sided giving them everything and you nothing. It’s only a
starting point for negotiations.
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