 My name is Cheryl Matsuoka, the Executive Director of the Hawaii Restaurant Association and the Hawaii Restaurant Association's Educational Foundation. Mahalo for joining me here on behalf of Hawaii on the Think Tech platform. Today, you're going to get a treat. You're going to be learning all about the misconceptions and commercial lease negotiations from our Hawaii Restaurant Association member, Ziva Law. Welcome to my guest. I'd like to, first of all, mention the theme of this show, which is successful commercial lease negotiations. It really requires understanding of contract terms, seeking advice, allocating times, and the due diligence. And businesses face unique lease issues, especially restaurants. Commercial leases are negotiable, and tenants often have more bargaining powers than they realize to secure favorable leases for their businesses and restaurants. So today, I'd like to introduce my guest. The first is, of course, Shanice. Hey, Shanice, how are you? Hi, Cheryl. Thank you so much for having us here today. You're very welcome. Shanice, please introduce your company, Ziva Law. Yeah, so my name is Shanice Kanimoto Iwamasa. I am a commercial leasing attorney and the owner of Ziva Law. I have a niche law practice where I primarily help small business owners negotiate leases and navigate lease issues. Thank you, Shanice. Welcome to the show. I'd then like to introduce Sue. Sue, could you please introduce yourself? Tell our audience a little bit about yourself and your concept over there in Kahola. Hi. Thank you for having me. My name is Sue Hu. I'm a co-franchise owner of Capri's Sandwich Shop in Hawaii. Well, currently in Las Vegas has the most locations, but overall there are 112 locations in the United States. So it will be our first location in Hawaii. We'll be in Kuo Ono Marketplace near Kahola Mall and we are planning to grant opening on July 31st. Exciting. Congratulations. And please introduce yourself and your concept over there on Waili Avenue. Hi, I'm Jason Chow. I am part owner of the local general store. We are a hybrid butcher and butcher shop and bakery. I am the butcher. My wife is the baker. We hope to open grant opening probably in mid-June. Congratulations. I'm so excited. As I mentioned, you know, that whole Waili Kahola is my stomping ground as I am a Kalani Falcon. I'd also like to have Harley, please introduce yourself, Harley. Hello. Thanks for having me. I am the other half of the local general store. And like Jason said, we are opening our shop in the old kind of piece of bread space, half a tree, half a bakery. Welcome. So nice to meet you. Looking forward to your. So, so basically the reason we decided to do this show is I used Ziva Law's services when I had to negotiate a 10-year lease in a local mall and I've negotiated many leases in the past. But this time it was like, you know, we need to really be sure that this is what we understand what we're going into. So we engaged with Shanice and we were so pleased that we did and that's what today show is all about. So Shanice, the first question is, what are some of the common misconceptions about commercial leasing space? Well, that's a very good question, Cheryl. I think one of the very common misconceptions to start off with is that a leasing commercial space is similar to leasing residential space. And while there is a lot of overlap, there's also a lot of significant differences that some people don't realize the full magnitude of. And the main one being that when you rent an apartment, say, most people don't hire an attorney to review your rental contract and you don't really negotiate anything, you just accept whatever they give you. There's a lot of differences there. So with residential leasing, there's usually a comprehensive body of statutory law that governs the residential leasing relationship. And that's going to be in like your landlord tenant code in whatever jurisdiction that you are in. And so that's a consumer protection statute, right? It's helping to protect tenants and landlords too. But that's baked in and that's going to give you some statutory protections. Now with commercial leasing, you don't have that equivalent of a comprehensive statutory law to protect you. So really what you're relying on is the terms that are negotiated into the lease itself. So that's why it's really important for people to understand what they're getting into, that they understand the rights and responsibilities before you sign the lease. The second, yeah, go ahead. Very important, Shanice. And Shanice, how long have you been in commercial, do I say commercial real estate law? Is that what it is? Yeah, I've been practicing here in Hawaii for a little over 18 years now. So I, you know, I started off doing a little bit of litigation, but for the vast majority of my career, I've been focused on commercial real estate. And in the past five years with Ziva law, I really niched down and now I only do commercial leasing. So I love it. I love being able to help small business owners with leasing. I was looking for when we were negotiating our 10 year lease, you know, 10 years is a long time. And so I wanted someone that had the experience and with all the experience that Shanice had, it was a really, really a great, I mean, it went back and forth, right? Shanice is not like, nothing is always the same time, but it was the negotiation back and forth red lining back to the mall and back to us. And so thank you for holding our hand through the process. And Shanice, I know you're not going to be, you're going to be surprised, but this December makes three years. Oh, yeah, time flies. Go on, then you can go ahead and continue. And then I know that you have a question to Harvey. Sure. So the other misconception that's very, you know, common is that leases are what uncle standard, right? So a lot of times the leases themselves can be a little misleading because they're titled standard retail lease or standard restaurant lease. And so people will often tell me, oh, but it's just a standard lease. So what do you have to realize is, you know, there's no real thing such that such a thing as a standard lease because all leases are drafted differently. Now they may have similar topics covered, right? They're just going to talk about rent, operating expenses, insurance, but within those categories, there's often very different clauses and they can vary a lot from lease to lease. So it's important to keep that in mind. And the last misconception is just that leases are not negotiable. So a lot of people will come to me and think that like, can you even negotiate a lease? And I say, yes, you can. Right. So just keeping that in mind when you're starting into a lease negotiation that a lot of these terms are negotiable and especially if you're dealing with an experienced commercial landlord, they're used to negotiating. And all of the bargaining power that you have is before you sign the lease. So you really have to leverage what you have to make sure that the lease can be a good fit for your business and releasing needs as well. So Harley, I know you had mentioned to me the importance of mindset right in negotiating your lease. You want to share a little bit with us about that? Yeah. So this was our experience with signing on to a commercial lease. So all of this was new to us and pretty much all the misconceptions that Shanice just mentioned was everything that we were going through. And so having as a small business, we also like just really didn't have the time to sit and fully understand the lease plus all the legal jargon that we don't know. So it was really nice to have someone explain it to us and really fully understand the bargaining power that we have. Very nice. And the other part of it too is there are common mistakes commercial tenants make when negotiating a lease. Right, Shanice? Maybe Shanice you can share some of those things that our viewers are also, I guess, you know, experiencing, especially when they're negotiating a lease. Yeah, so a common mistake is that, you know, some restaurant owners, either to save money or, you know, whatever other reasons they think I'm just going to do it on my own. Right. Like I'm just going to sign the lease. If something bad happens, something bad happens. Because I negotiate leases on the front end, but I also help on the back end when people have issues, right, they already are in a lease and they have issues with their landlord and they come to me if they come to me early on in the process, a lot of times I'm able to help them resolve those issues peacefully right without having to having it escalate to go to court and whatnot. And a lot of times a lot of the issues come out of leases that were negotiated without they didn't they didn't use an attorney they didn't use professional advisors to help them. So I always recommend that people really don't do it. You know, don't try to do it yourself. Right. You know, business owners, you are the, you're, you're experts in your line of work. You're, you're the butcher, you're the baker, you're the, you know, that's, that's what you do. That's your craft. And so you shouldn't expect yourself to be an expert in leasing as well. So I encourage my clients to always have surround yourself with a team of professional advisors to help you through the leasing process. Now, who would those advisors be a lot of times in a commercial lease you're going to use a commercial real estate agent or broker. And again, make sure that they are specialized in commercial right versus the residential side because it's very different. There's also a commercial attorney, a real estate attorney or someone who's who's versed in commercial leasing to help you through the lease negotiation contract. And accountant or CPA is a critical piece to advise you on the tax consequences. And then particularly if you're doing a build out right you're going to want to consult with your architect and contractor. I don't think that that comes after, but I always say, hey, you need to bring them on early in the process so that a lot of times the information that we get from them on estimates for costs estimates for time building permits, all of those things can factor into your lease negotiation. And then, you know, other people insurance agent, right? So your insurance agent is going to help ensure that you're going to require, you're going to satisfy all of your insurance requirements under your lease. There are various other consultants that you might need depending on your, you know, property and whatnot but sometimes people will need to consult with a plumbing contractor, mechanical, electrical engineering that kind of thing as well. Very good. Yes, you're right. You might as well have a team behind you because as they say right, that's the best way to do it so that you have all the professionals lined up with you in partnership. So, what professional advisors did you use in your lease negotiations and how did those professional advisors help you? Yes, so, you know, I've been in this restaurant industry for a long time, but this is my first time to open my own business. And I definitely need, you know, the professional advisors to, you know, support and help me with my new restaurant. The professional advisors we used including, you know, my business number one was, you know, the commercial real estate broker who we could trust in finding the perfect location for our concept. And second, you know, we had a great referral for an attorney who was Chinese. She definitely helped us so much with reviewing the, you know, this agreement and they gave the best recommendations to make sure that the this agreement is beneficial and favorable for us in the, you know, the network as well. And we work with, you know, project manager and, you know, general contractor. You know, I mean, they were great, you know, they were able to work with our type budget, you know, but also they gave us the best quality work in the service and, you know, without them, you know, I don't think I could done this by myself. So, I'm really grateful for that. Thank you, Sue. So Shanice, how much time, you know, time is money, right. And so if you're a person who's looking to negotiate at least is not giving enough time to the process. It just delays it, right. So what is your suggestion on time. Yeah, so I definitely think that's another big common mistake. Right. So I have so many people calling me like on a Wednesday and saying, Hey, I want to get this lease signed by Friday. Can you help me and I'm like, that's, that's a tight time frame. So I think, you know, going into any lease negotiation, you do have to understand and accept that a lease negotiation is a process that takes some time. You know, there's often multiple parties involved. We have no control over, you know, how long they take to review stuff as well. So you just have to try to, you know, incorporate your professional advisors earlier in the process rather than later again so that you can plan accordingly for that. Very nice. So to Jason and Harley. Now, what was the timing on your lease negotiation? Did it take longer or shorter than you anticipated? It took, it definitely took a lot longer than what we anticipated it to take. But I think what we learned is that, like Shanice said, like, don't try to rush things. And Shanice helped us out a lot on kind of breaking down everything and making sure that things were in our favor. And being able to negotiate with our landlord to kind of make sure that that happened for us. Nice. And Harley, you have any input on that, on the timing? Yeah, like Jason said, it did, it took a lot longer than we expected. But in the end, I think everything worked out so that, you know, we weren't rushing into a lease and just signing because we wanted to move in and get our business working. The timing of being able to look over the lease, which Shanice and then having the landlord agree with us was it worked out perfectly. And I always want to push things so that it's the most efficient. But I had to learn how to step back and be like, okay, we're signing a 10 year lease, maybe we should probably review and take this like long process into our favor. Yeah, that's exactly right. And I had, I used to have a paralegal many years ago, who she's always say, haste makes waste. And I repeat this to my clients, because it's so exciting. It's easy to get caught up in the excitement of opening up your first location. Right. And so everyone wants to just get in as soon as possible. But sometimes you have to slow it down and make sure you're making some, you know, wise decisions you think through things you run numbers sometimes if necessary so that you can make informed decisions for your business. That's right. If you got a case that comes with a dollar sometimes, Shanice, and that's one of them. So really and truly, you know, we know as restaurateurs, yeah, especially, oh my goodness, and he's argue cockles, you know, we've got, you know, the vacuum system underneath the floorboards and water sprinklers over every one of the gas burner so the due diligence of a physical the physical condition of your premise, doing it with enough detail and you have enough time. Do you want to cover that a little bit about being sure that you do do your due diligence on your physical condition of the premise. Yes, absolutely. Like that's one of my biggest messages to tenants out there because I think a lot of people will just walk through one time. They're like, it looks good. I'm ready to sign the lease, you know, but I'm always encouraging people. Did you look at especially the high cost items right so one of the big difference again between residential and commercial leasing is that under most commercial leases. The tenant is responsible for repair maintenance, and in many cases even replacement of any of the improvements in your premises, particularly if it's exclusively serving your premises right. And some of the big ticket cost items there are like HVAC systems right so if you go into a lease space that you're leasing and you don't realize that it's 15 years old and it's, you know, it exceeds the average useful life for that type of equipment and then two years into your lease you have to spend $30,000 to replace your HVAC system you're not going to be happy about that right. So there's things you can do before you sign the lease as due diligence to send in an inspector. You can have an HVAC contractor go in and assess, you know, approximate age, condition, that kind of thing of the major items and make sure that you have what you need. And the benefit of that is if you find things before you sign the lease then you have some room to negotiate with the landlord rather than being caught off guard with a big unexpected cost down the line. That is so valuable. So valuable information, Shanice. Thank you. So to the restaurant tours, the owners, what were some of the challenges you faced when negotiating your restaurant lease? I'll start off with Harley and then go to Sue and then go to Jason. Yeah. So one of the biggest challenges that we faced, as I mentioned before, was just understanding the terminology throughout the lease and having the time to sit by ourselves and really look through the lease. But by sitting with Shanice, we were able to catch things that we wouldn't have been able to catch if we were to just look over the lease ourselves. I think there was miscalculations on the cam and the breakdown of it. And if Jason and I were just to look over that by ourselves, we would have just been like, yeah, that's great. But Shanice like was very quick to point that out for us. Very nice. And Sue, do you have any? Yes, the biggest challenge was, you know, first, you know, everything costs so much in Hawaii, especially. And, you know, we were trying to save money. And, you know, like Shanice said, you know, a lot of people made a mistake that, you know, oh, you know, I can do by myself. You need to, you know, save some money for something else. But, you know, reading all this long lease agreement is very confusing, especially the provision that, you know, so when we ask Shanice's help, and then she went, you know, everything in one by one and, you know, help us understanding of the lease agreement. And, you know, there's some back and forth to negotiate with our landlord. But, you know, it took time, but overall, you know, it benefit for us. So, you know, like Shanice said, you know, don't rush, take your time, you know, that's the best way to actually save your cost, extra cost, and then, you know, the mistakes. Very nice. Jason, do you have anything to input before we move on? Yeah, I think, I think the fact that we, we didn't really realize that we could actually negotiate some of the certain, certain things in the lease, like CHAM, like we have no idea how much CHAM is like a reasonable, reasonable ask, and like the going rate of CHAM in a particular place. And I think Shanice helped us understand that, hey, we can save a little bit of money here every month and see if they're able to go down a little bit on CHAM and other certain operating costs too that we would have. That is excellent. Good, good, good, that you've posted that in advance. So now we've got five more minutes. And so I'm going to go ahead and go around and just do any final takeaways or lessons that you learned or any kind of experience that you want to share with our viewers. I'll go ahead and start with Harley, then I'll go to Jason, then I'll go to Sue. Harley, any final takeaways before we close our show? Yeah, I would say don't rush into a space just because you want to like get started right away. You're going to see a lot of options out there and don't be deterred if it doesn't go through or if just any hurdles get in the way. Very nice, Jason. Going off of what Harley said, yeah, take your time and weigh all the options, take everything into consideration. I know that money and costs is a huge thing for a lot of restaurants. So make sure you make your spreadsheets, you make all your calculations and take all of that in consideration in your lease. Nice, nice. Sue, do you have any final takeaways that you want to mention before we close the show? Yes, I'll say, you know, get on accurate construction cost estimate. Keep in mind that there are always on first instance circumstances where you might have to spend double triple money unexpectedly, especially in getting supplies and equipment in Hawaii are huge challenges too. So know what type of business you want and understand the cost that comes with the concept and definitely contact professional advisors who you can trust and they can give you the best support and advice. Nice. Janice, any final words before we close the show? It's been a pleasure to see you again, my friend. We haven't seen each other in so long. Yes, always a pleasure, Cheryl. Your energy is infectious. But thank you for having me on and all of my clients here on it's just it's been a pleasure. I think everything that I would just echo what we've talked about today just, you know, understanding that you wanted to make informed decisions for your business by really understanding what you're getting into with Elise. You can negotiate things. If you work with me, you're always going to know I'm encouraging you to do due diligence to run numbers to just, you know, really understand everything. And then that will serve you well throughout your lease term. That was great. Thank you so much and thank you everyone for being on the show today. Janice, I think we have to do a sequel, because I see here that we didn't touch on a few of the topics that we wanted to touch on, but we ran out of time. So again, my name is Cheryl Matsuoka, the executive director of the Hawaii Resh Fron Association. And I just wanted to mention to everyone that Ziva Law is an HRA member. And if you have, you know, contact her through her website. And if you can't contact her through a website and you can't find her, give me a call, because I definitely have her in my cell phone. Hawaii Resh Fron Association is the organization unifying, representing and supporting Hawaii's restaurant and food service industry. Thank you so much and we'll see you again in two weeks. Thank you.