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SMALL BUSINESS | SMALL TALK / KAREN E. KLEIN

No Written Lease Agreement Leaves You at the Mercy of Your Landlord

May 06, 1997

Q: I have been in business for 10 years. I signed a lease for the first five years, but at the start of my sixth year I told the owner I preferred not signing a lease and he said fine. The lease contained rules and regulations plus an annual increase in the rent. Since I have not had a lease, I have not had a rent increase. By not having a written lease agreement, what surprises am I leaving myself open for?

--Name withheld by request

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A: If you do not have a lease, the landlord can raise your rent at any time by simply giving you 30 days' notice. He or she can also ask you to vacate the property. If the landlord defaults on the property or sells it, you will be at the mercy of the new owner. By operating with a month-to-month rental agreement, you are putting the landlord solely in the driver's seat. You will have to do things his way.

Lease agreements usually include language protecting your right to use the common area, parking spaces and storage areas. They also typically spell out issues such as who will pay for maintenance, insurance, utilities and signs.

For these reasons, and most importantly to protect themselves from sudden rent increases, most entrepreneurs negotiate lease agreements. The only reason for staying with a month-to-month rental agreement might be if you are not sure that you want to stay at your current location--or if you are not sure your business will be around after 12 or 36 months.

Sign a lease that will work for you. If you think you may want out sometime in the near future, you may be able to negotiate a provision that allows you to get out of the lease with 90 days' notice.

--Harry Dictor

Small-business counselor and workshop chairman

Service Corps of Retired Executives, Glendale

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Q: I'm investigating opening a 1,200- to 1,400-square-foot delicatessen or breakfast/lunch establishment in a business district or industrial park in north Orange County. Is there any advice you can offer me about this industry?

--Terry King, Yorba Linda

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A: A restaurant is no different from any other retailer. If you don't have a good location, good visibility and plenty of people to frequent your business, you're just not going to make it. That said, there are some decent restaurants in industrial parks in Orange County that do very, very good business. Their biggest competitors are the hot-lunch trucks that come in and out of the center.

Look at the population of the industrial park you are considering and figure out how easy it will be for that population to get to your restaurant. If it has a small population, say 200 or 250 people who work there every day, you will really struggle to make ends meet.

If you can locate in a park of 500 to 700 people, and if you are the only restaurant inside without too many restaurants around the perimeter, you can do very well. Realize, however, that you will only be open for breakfast and lunch, and you are going to have to work very hard during that time.

Make sure you have a good business plan and a detailed strategy for marketing yourself to let everyone in the park know you are there. Distribute your menu widely. Push to become the caterer of choice, so that everybody looks to you when they are thinking of having a small luncheon or office party.

--Gerald Breitbart

Consultant, business issues, California Restaurant Assn.

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Q: Can you give me any information about groups that specifically help people from minority groups start small businesses?

--Harout Kantzabedian

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A: There are many resources the minority entrepreneur can tap into--both in the public and private sectors. On the federal side, the U.S. Department of Commerce has a Minority Business Development Agency that offers information, business enterprise development, consultations, research and other services to minority entrepreneurs. They have two district offices in Southern California and can be reached at (818) 453-8636.

The U.S. Small Business Administration offers a minority pre-qualification loan program and provides federal government contracts and other assistance to small companies owned by socially and economically disadvantaged people. Call (818) 552-3201 for more information.

Private-sector agencies of all kinds advocate the interests of minority- and/or women-owned businesses. Some, like Operation Hope ([213] 891-2907), are nonprofits that serve businesses in inner-city communities. Others are designed specifically for women entrepreneurs. Look under "associations" in the Yellow Pages to find business associations that serve particular ethnic or racial groups.

You can also read special-interest publications that might have calendar listings that pertain to particular minority groups. Check with your foreign consulate if you are an immigrant, watch local cable television shows that include public service listings or contact your local Chamber of Commerce to find out what kinds of minority chambers are located in your area.

Our program has developed targeted training for particular immigrant groups that has been translated into many languages. You can reach our agency at (562) 983-3747.

--Margo Upham

Director of public relations

Women's Enterprise Development Corp., Long Beach

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