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Welcome to "Bean There, Done That!" your essential podcast for mastering the world of hospitality. Hosted by industry expert, Phillip Di Bella, we cut through the noise to deliver straightforward, actionable insights and strategies.
Each episode explores the powerful interplay of knowledge and connections, presenting real-life case studies from Australia's thriving hospitality scene. We feature thought leaders who share their experiences, ensuring you have the answers you need when facing a business challenge.
Whether you're a budding cafe owner or a seasoned hospitality professional, "Bean There, Done That!" is your hub for insights, inspiration, and industry connections. We're here to help you turn hurdles into opportunities for growth and success.
Join our growing community with the hashtags #BeanThereDoneThat, #HospitalityHub, #CafeInsights, and #CoffeeCommune. With "Bean There and Done That," your roadmap to hospitality success is just a listen away.
[TRANSCRIPT]
0:00:00 - (A): You.
0:00:04 - (B): Are listening to Been There, Done that, we present some of the smartest people connected to the business of coffee. People who've succeeded in the tough grind of hospitality by staying ahead of the rest. So join us as we explore the secrets to their success and help you accelerate your business. This show is brought to you by the Coffee Commune, where the coffee community comes to collaborate. Enjoy the show.
0:00:34 - (Phil): Hi listeners, this is Phil DeBella and we've got another episode of Been There and Done that where we bring amazing people doing amazing things to the show so that you can take some great takeaways to help you in your business. Today I have Philip Chapman from Lease One. Philip, welcome to the show.
0:00:49 - (Philip): Thanks Phil, great to be here.
0:00:50 - (Phil): An honor to have you man so much experience in leases, an area that a lot of people need to know more about. I know you're very generous with your thoughts and information, so I'm sure our listeners are going to get lots from this. So thank you for coming.
0:01:02 - (Philip): Pleasure.
0:01:03 - (Phil): So, a bit of background for the audience to understand. Lease One is the leader in its specialist field and is committed to providing personal, timely and cost effective services to save tenants time, money and stress in their lease negotiations. So securing or protecting the commercial terms of the client's lease is their core business and they're supported by a wide ranging tenant consultancy services encompassing lease information and research, site sourcing, selection, dispute resolution, retail franchising and portfolio administration. So there's not much that these guys don't know and are not experts at.
0:01:36 - (Phil): And our industry leading Lease One advice and support adds security and value to a retailer's business through professional lease negotiation and tenant representation. But it's on new leases, lease renewals, lease options, rental, research site selection dispute, and again, crisis management. An area that I've firsthand been involved as a tenant, but also as a landlord. And I can tell you that you always appreciate having the support of someone with the experience like yourself that doesn't charge by the six minute increments to.
0:02:04 - (A): My ad, Philip being our wonderful lawyer industry.
0:02:07 - (Phil): So, welcome to the show. You've got obviously a lot more experience than I do in this area, being specific and core specific. But let's kick off with tell us what's the current landscape in the lease market look like.
0:02:17 - (Philip): Oh, thanks Phil, pleasure to be here. Look, the current landscape is really this post COVID and I'm sorry to use the word COVID, but let's get out.
0:02:23 - (Phil): Of the way part of our lives now.
0:02:24 - (Philip): Right, but post COVID. Look, the funds managers and the more sophisticated landlords are in this mode of recapturing asset value. And what does that mean? Well, they're revaluing assets. They'revaluing your actual independent leases, lease by lease. And where they're seeing that leases weren't as resilient through COVID, they're putting reversionary factor on it. Bit of economics. 101 there. Sorry, but what they're looking for is finding rental growth and finding rental growth in this tough market right now with our generational inflationary issues, with wages issues, costs of goods issues, this is really half, this is the perfect storm we didn't need.
0:02:56 - (Phil): Yeah, very true. I'd say in the first time in.
0:02:58 - (A): 22 years of being a business owner.
0:03:00 - (Phil): That everything's gone up at the same time for expenses and of course, for the landlords as well.
0:03:04 - (A): Right.
0:03:04 - (Phil): And I say that wages have gone up, electricity has gone up, utilities, but you've got insurances have gone up, transport, everything has gone up at the same.
0:03:11 - (A): Time, which is putting pressure on everyone. And the last thing people need is.
0:03:15 - (Phil): Obviously, landlords are such getting greedy, but in some cases, they're not getting greedy, are they?
0:03:20 - (Philip): Well, look, that's true too. There are some landlords out there who appreciate what they've got in their portfolios. We find them, they're usually the smaller landlords, less sophisticated, who rely upon that income. Yes. They're not reported to a funds manager or shareholders.
0:03:31 - (Phil): Yeah.
0:03:31 - (Philip): So they are there as a partner, a partnership with their tenants, with their lessees. So they're important landlords and they're important landlords that probably need more information from people like ourselves as well, to make sure that they're giving the best service they can in that partnership to our clients or our members. And that's the lessees retailers who are doing it tough.
0:03:48 - (A): Yeah.
0:03:48 - (Phil): And can I say, from the onset, the key takeaway for me today, for the listeners, will be about be proactive in your lease negotiations. So we'll park that.
0:03:56 - (A): But to me, the theme should really.
0:03:57 - (Phil): Be that listeners are going, right, self assessing, where am I with my lease right now? What does my lease look like? In a lot of cases, businesses haven't even read their lease properly from top to tail. So if you're listening to this, I encourage you to get across your lease, understand more about your lease and take a proactive approach with somebody like lease One, but be proactive in what you're doing with your lease. And we're going to unpack some nugget and some more information.
0:04:18 - (Phil): So we're seeing trends because of the given, like, for argument's sake, straight off the bat, we deal with over 850 cafes in our current business that we supply roast coffee for. We're seeing a smaller footprint in the cafe. So cafes were becoming restaurants at one stage and now they're coming back to be going more towards the espresso bars.
0:04:34 - (A): So we're seeing the traditional 120 to.
0:04:36 - (Phil): 150 square meter get cut back to, say, even smallest 20, 30 m². Is there any other trends like that that you're seeing?
0:04:42 - (Philip): Oh, look. Absolutely, Phil. And that trend was something that had to happen. We were overstepping our business. The land we had under lease wasn't matching the business volumes beforehand. And now so with costs coming up, it's come to the fore. Look, for 25 years we've been shrinking pharmacies and news agencies to see what you see. Now, the industry F and b industry needed to do that. Cafes had to start looking at covers. We look at people like who've been in recent magazines, the QSR magazines was Hogs Breath Cafe gone from 405 hundred down to that trend is live, it's real. It's about getting that foot plate, getting that base plate correct, get the size right so that we can build a proper lease and business security and asset value underneath it.
0:05:19 - (Phil): Yeah, great takeaway there is get the right size store for what you're offering.
0:05:23 - (A): Right.
0:05:23 - (Phil): Make sure that it matches the footprint.
0:05:25 - (Philip): Absolutely, Phil. Because it's not just the rent you save or the outgoings. You save us the capital expenditure in fitting it out. We overstretch ourselves. We want to fit them out. We've also then got to cover it.
0:05:34 - (A): With staff, we feel, et cetera, et cetera.
0:05:36 - (Philip): Even just buying the numbers of plates for the covers that you believe you're going to have because you've built such a large size and the cups, you really don't need it.
0:05:43 - (Phil): Yeah. And I say to people that revenue and profit are two different things. It's a bit like dry for show and putt for dough. They always said, why aren't you a professional golfer? When I hit the ball off a tee, when they see me putt, they.
0:05:52 - (A): Understand why I'm not a professional golfer.
0:05:54 - (Phil): Revenue and profit are very similar. You could be turning great revenue, but if you're not banking profit, then you're actually going backwards.
0:06:00 - (A): If you're lucky, you're treading water.
0:06:01 - (Phil): Fast forward to today. I've been in this industry now for 34 years.
0:06:04 - (A): I've been across leases in one way, shape or form.
0:06:06 - (Phil): How have things changed in the pace of, just, say, the last 20 years? The traditional don't sign a lease. More than 10% of your turnover ask for X amount of rent free. How has it changed and what does it look like today?
0:06:19 - (Philip): Well, first of all, the change is the amount of documentation and the amount of detail that's required in leases. Now, look, gone are the days, Phil, back 20 years with great old days. I was managing shopping centers and it was like shooting fish in a barrel. But it was all handshakes and easy. Most retailers lease these didn't even read their lease. They trusted their lawyer who put in a bottom drawer. If you ask them where their lease was, they couldn't find it. Nowadays, you've got to be pulling your lease out. We recommend looking at your lease twice a year at least. If not, talk to us. We'll do it for you and we'll give you that advice and support.
0:06:46 - (Philip): But it's a reminders it's leveraging time and we're going to talk about that today, Phil, because that's the big takeaway. It's leveraging time. And you've got to be proactive. That word you used before is so important, being proactive about your lease, because it's not just the lease you've got now, it's securing your business asset future to the next lease and the lease after.
0:07:03 - (Phil): Correct.
0:07:03 - (Philip): You need to be looking into crystal Ball a long way down the track. And don't be waiting for the landlord to come to you, you've got to be taking them out of their cycle and we'll talk about that.
0:07:11 - (Phil): Yeah. And as a landlord, I can tell you we've got a fair bit of property. And the tenants that came to me during COVID and said, look, I'm going to struggle. Can we strike a deal? We loved it. Of course we're going to strike a deal. I don't want to see you leave, I don't want to see you go under. We know there's issues and taking that proactive approach, to me, meant a lot. As a landlord, the tenants were coming to me and saying, hey, I'm not going to bullshit to you, I'm going to be authentic, I need some help and support. And we didn't have one of our tenants miss a day of trade in terms of they didn't have to close their business and all the rest of it. And some of them, we gave rent free straight up and tagged it on at the end. Some agreed to pay half rent, wanted.
0:07:44 - (A): To pay half rent, so we worked.
0:07:46 - (Phil): It through with them. So it's really, really good advice there, because people underestimate the two things there that you mentioned was being proactive and time, because time is money. Again, if you don't believe them, ask a lawyer, they'll tell you exactly what time is. So tell me some of the mistakes that people make that you've seen that are diabolical in all the diabolical ones.
0:08:02 - (Philip): We'Re seeing and look still to this day. And we've put measures inside and we've made changes to legislation around the country. People are still missing their lease options. And what I'm really annoyed about, and I'm speaking constantly to small business commissioners and government, is about more education around the amendments and changes to retail shop lease legislation in particularly the rights in Queensland, particularly Section 27 A, the early determination of market rent. It's such a powerful clause in there that no one knows about.
0:08:27 - (Philip): And it's a right that a lessee retailer has that a landlord doesn't. But they need to be proactive, they need to get in front of it. And having a critical path or a gantt chart for your lease and understanding that is so important, we can turn things around. It gives you two chops at the landlord on market rent. Very, very powerful, a great leverage. So that's just one area we could go on quite few, but the underlying thing is proactivity and timing.
0:08:51 - (Philip): We'll talk about timing in a minute.
0:08:52 - (Phil): Yeah, you make a good point there, because square meter rates change and market changes, right. It's not a loophole, it's a benefit to the lessee, then what are you doing? And that's what organizations like yourself do is not only make sure they're compliant and the lease reads rail and all the rest of it, but they're getting the best value out of their lease and agreement.
0:09:08 - (Philip): Oh, totally. Phil and don't get hung up on rate per square meter, rent per square meter. It's all about that's. A landlord's measure of their success and their investment return.
0:09:16 - (Phil): Good point.
0:09:17 - (Philip): Your measure is your occupancy cost ratio for your sector and your sales per square meter. One, we're going to get in a snapshot, we can get the size of your premises right. And two, we can see if you're actually making money or not. Just getting your occupancy cost ratio, the ratio of your gross rent as a percentage of your sales.
0:09:33 - (Phil): And what would that be is as a ballpark, like, give the listeners a range.
0:09:37 - (Philip): Oh, look, if you start look, just to give you an idea that that does vary, if you go to the big end supermarkets, the Coles and the Woolies, we're looking at sort of two and a half to 3.75%. Then we'll go the fruit shop is going to be sort of four to eight. You're going to go to News age is going to be nine to twelve. Okay. You're going to go to your pharmacy. Front of shop sales will be ten to twelve. Total sales, four to five.
0:09:55 - (Philip): But then you go up into the fashion, et cetera. In this sector, commune sector, you're probably looking somewhere you want to be perfectly around eight. You don't want any more than twelve.
0:10:02 - (Phil): Yeah, I always say seven to twelve is a range. I've been able to be part of some negotiations where we've negotiated 7% of.
0:10:09 - (A): Turnover to the landlord.
0:10:10 - (Phil): In most cases worked out beneficial to.
0:10:12 - (A): The landlord because they get paid more.
0:10:14 - (Phil): Than what they would have if they bring it back to their measure of success.
0:10:16 - (A): So listeners have really got to be.
0:10:17 - (Phil): Across that, that you do have a range to work with, and working with.
0:10:20 - (A): Organizations like yourself helps you get that.
0:10:22 - (Phil): Maximum value for your lease. So what part of the cycle should people be engaging a business like Lease One?
0:10:28 - (A): Now, immediately look at your lease.
0:10:30 - (Philip): Doesn't matter where they are in this cycle of the lease, talk to us now. It's free to have a chat to us. We'll do a benchmark review of how you're going.
0:10:37 - (A): We'll give you the dates that you.
0:10:39 - (Philip): Need to be proactive about, and we'll actually put you into our system, our lease concierge support system. It's free and we'll be able to put you in there and we'll send you actionable checklist reminders. 24 months, 20 months and 18 months before your lease event.
0:10:52 - (Phil): How awesome is that?
0:10:53 - (Philip): Well, what more can we do, Phil? We can do this for 25 years and still to this day, I'll get three or four phone calls this week where I've got to put the red flashing light on because someone's missed their option or they get a phone call and the lease expires next month and they're waiting for the landlord to do something.
0:11:06 - (Phil): Yeah. And I always say leases are a bit like prenuptial agreements and stuff like that. Do them when everyone's happy. You don't want to be doing prenuptials when the shit's hitting the fan. And you don't want to be negotiating dating with the landlord when the shit's hitting the fan. Right. As proactive as you can be. So you were going to mention about timing. Talk us through the timing aspect of leases.
0:11:23 - (Philip): Well, exactly. The clock's always ticking down. It's like an election. As soon as the election is won, the politicians are relobbying for the next one.
0:11:30 - (Phil): Correct.
0:11:31 - (Philip): That's what you should be doing with your lease. So the time is ticking down. It's a time bomb. It's a hand grenade in your hand the whole time, but certainly should not be allowing the landlord to dictate the time frame to you. Otherwise the pendulum goes, swings in their favor, not yours. They own the land. We're never going to take the Lord at a landlord. But what you can do is start leveraging your future.
0:11:52 - (Philip): Now, 24 months. We talked about before, so 24 months. We have an actionable checklist to start off, start researching what your brand's doing, what's your footprint doing? Are you doing your sales projections? Because you're doing a lease for the next few years, 5610 years. You're not doing it for tomorrow, but you start to get the mindset of the tools, resources, and market research you.
0:12:11 - (A): Need to start going.
0:12:12 - (Philip): Another reminder at 20 months, have you done these things?
0:12:15 - (Phil): Yes.
0:12:15 - (Philip): Here's some more to do. At 18 months, you should be guns on, ready to go. Now, most legislation will say that you have a right to approach the landlord, particularly in Queensland. We do. To approach the landlord. Twelve months out. And they must give you a response that you've got to give you a new lease and commercial terms within one month. Start before that. What we're also doing here, and Phil, you know, you get this, is we're taking the landlords out of their cycle.
0:12:37 - (Philip): They're setting their budgets. The funds managers and the sophisticated landlords are setting their budgets. And the target rents two and three years, five years in advance before they're locked in. We want to start conditioning that outcome. And there's also a lot of things we can do to manage your occupancy cost ratio along the way. We don't have to wait for the lease to end and we'll talk about those in a minute.
0:12:56 - (Phil): Yeah, man. It's a great segue, because I was going to talk about a question I always get asked is, if my landlord is charging outrageous outgoings, what can I do about it and how can I benchmark them or check them?
0:13:06 - (Philip): Great stuff. So I won't isolate outgoings, but I will get on top of that. But to manage your lease and look at those costs, we look at your gross rent. So we always add your rent and your outgoings together because that's what we're going to use for your occupancy cost ratio to benchmark. So we bundle those together. But what you should be doing is if your occupancy cost is too high or it's getting up to the high quartile or metric for your sector, then there's nothing wrong with three months, four months before your lease anniversary, not the lease expiry. The lease anniversary each year where you get an automatic rent review is to seek to have that rent review waived or halved.
0:13:39 - (Philip): We've had a lot of success, enormous success with this generational inflation at six and 7%. Nearly 8% of going to the landlord proactively and saying, we can't afford seven, but we can afford three and a half or four. And all that compounding savings goes straight to your bottom line into the future of your lease.
0:13:55 - (A): Correct.
0:13:55 - (Philip): But getting back to outgoings, another one here too is if you're in our Lease Concierge, full Lease concierge service, you'll get reminders and checklists in relation to the audited statements you'll receive in September and also the estimates of outgoings you'll receive on the 30 May each year. Don't put them in the bottom drawer in the bin. Stop lighting the barbecue with them, please. You need to have a look at them and compare them to last year and see where the increases are. Right now you're seeing increases, huge increases in as Phil put forward before insurance has gone through the roof because of COVID we've got security.
0:14:27 - (Philip): They're putting more people on the deck. Cleaning has gone through absolutely crazy. Okay, power bills. What's landlords doing with solar? What are they doing? Are they passing on savings? You can start to question and you have rights under the Shop Leases Act in Queensland, particularly, where you can go and question any of those totals that represent more than 5% and have them broken down. Start looking that you're actually paying for what you get. Are you paying for lifts and escalators when you don't?
0:14:51 - (Phil): Or bin services is a big one.
0:14:52 - (A): Right?
0:14:53 - (Philip): Bin services another one. Grease traps are another thing. Are you being double charged? We've got numerous amounts of people we go and see in the F and B sector who are paying for grease trap servicing in their outgoings and then doing it. They've got a separate contract themselves.
0:15:08 - (Phil): Doing it themselves, yeah, correct.
0:15:09 - (Philip): Straight away there's 2000, $3,000 a year we fly.
0:15:12 - (Phil): Great tip there. Yeah, really? Know your lease. Know what's that and so I know that Lease One offers a free lease review. Talk us through that. Would that be part of the things that you would pick up on that review or we're pretty proud of this.
0:15:21 - (Philip): We've been doing this for over 25 years now. And what we'll do is any retailer can contact act Lease One book in a strategy session with us first of all, we'll have a quick chat on the phone. From there we just find out what issues you have. Then we'll do a review. My angels. Chapo's angels, as we call them. None of them are called Bosley yet, but anyway, they will send you out a simple email. We'll ask for a copy of your lease, the last red invoice, and your last annual sales. Yes, we'll come back to you with another follow up call and say, this is what your Occupancy cost looks like. Here's what events are coming up, here's what recommendations we make for you.
0:15:52 - (Phil): Fantastic.
0:15:52 - (Philip): That's free, no obligation. We just want to get the message out. And I'm sick and tired, Phil, of getting those phone calls, hey, my lease expires next month, or I've missed my.
0:16:00 - (Phil): And you know, that's generous. And the listeners would really be appreciating that, especially being cafe and restaurant owners. Get a hold of the guys, at least one get that review. What have you got to lose? I always talk about worst case scenario. The worst case scenario is you're not.
0:16:11 - (A): Taking up the value in the positive.
0:16:14 - (Phil): Position you could be in under your lease.
0:16:15 - (A): So get a hold of the team.
0:16:16 - (Phil): At least one, and let these guys do a review for you free of charge, especially the coffee commune. We're going to be working closer, hopefully with Lease One and the team and Chapman's Angels, because again, for us, it's all about helping accelerate the potential of business owners. It's about making a sustainable and efficient industry because we have had it good for a long time. But there are tough times now and there'll be tough times still to come. Next thing I want to talk to you about is terms of a cafe, because this is something that comes up a lot.
0:16:42 - (A): Terms of a lease, because years ago.
0:16:43 - (Phil): If you didn't get know, I noticed that it went from people wanting the longer lease because it was worth a lot of money to the business to then a stage where people wanted a shorter lease because the risk was more important than the possible. What does the lease concepts of terms of timing now look like? Is it three years with options? Is it five years plus five? What are you seeing in the F.
0:17:02 - (Philip): B sector right now, Phil? It's a mixed bag. You're right. It was going longer leases because we're securing asset value when times are good, when times are unsure, uncertainty, and we've got high inflation, et cetera. They're looking for a shorter term, they're looking for flexibilities, they're looking for shorter terms with options which aren't necessarily available. The time we're starting to mix and match, we're trying to put some elasticity into it with regards to some of these, where it might be a three plus two plus three plus two.
0:17:26 - (Philip): There's all sorts of different areas people are going for. It really depends on where you're going, what your asset base is in relation to securing the lease and also what's your risk profile. Another big issue here, Phil, and this is where Lease One can sort of guide you. We don't give financial legal advice that allows us to go and swear and kick the desk on behalf of you guys. But what we will guide you towards is drilling down how you hold a lease and how you ring fence your assets and ring fence directors, et cetera, in relation to holding leases, so that if the shit does hit the fan, excuse me for swearing, go for it.
0:18:00 - (Philip): You've got flexibility and then you've got so many more rights and obligations and be able to negotiate a way out, a way in, or a reduced outcome.
0:18:08 - (Phil): Yeah. And definitely don't go all in. Right. We see that all the time where people, everyone's planning, thinking they're going to start up the next amazing business. They don't realize that 70% of businesses are failing. We don't want doom and gloom, but you've got to, I always say, work to your worst possible scenario. So signing those personal guarantees and going all in and selling houses and taking up leases, something to be very, very careful of. So you hear the message clear, be proactive. Be proactive, be proactive. Get experienced people across it, and I can't say it enough, you are not alone. We explored that with the small Business commissioner when Dominic Lamb was on the show. He said, you are not alone, you are supported. The themes come through with other people I've had on the show.
0:18:45 - (Phil): Sometimes cafe owners and restaurant owners believe they are alone. They're not. There is a lot of stuff out there to help them, but they've got to do the work. You can't sit behind your desk and you can't be sitting there listening to this and saying, oh, yeah, but you got to pick up the phone, you got to get proactive, you got to get on your bike and you got to pedal. If you don't do the work, no one else will.
0:19:02 - (Phil): So it's something that I keep talking about. So what would your advice be in today's circumstance? What's a good term of lease? A three year with a three year option or a five year with a five year option?
0:19:13 - (Philip): Right now, phil I take the three plus three plus three?
0:19:16 - (Phil): Yeah.
0:19:16 - (Philip): Okay. Sylvester I think it gives that more flexibility. There are some risks there, but as.
0:19:20 - (A): I talked about before, we've got to.
0:19:23 - (Philip): Get everyone across these changes to legislation, which are some many years old. Now in relation to earlier, there's a.
0:19:29 - (Phil): Review coming, I believe.
0:19:30 - (Philip): Yes, Dominic's talking about a review at the end of this year. It's due, I must admit, I'm trying to talk with Dominic. I'm talking with Dominic to hold off a bit because they're still waiting a pending New South Wales review. So with regards to changes there, there is a pending review. But speak with Dom McLam, the Small Business Commission, and by the way, take Phil's advice. You're not alone. If you don't call Lease one, call the commissioner's office.
0:19:51 - (Philip): The Office of Small Business Commissioner has.
0:19:53 - (A): Got a ton of resources there as well.
0:19:55 - (Philip): But also, too, there's a pending review which is due towards the end of this year. I have asked that they don't do it at Christmas time again, so I do get a break what they usually do. But we've also got outstanding reviews in New South Wales and one that's well overdue now in WA. We're wanting to get those over the line first because we're getting very close to a harmonized minimum lease standards across the nation.
0:20:15 - (Philip): I'm working very hard with all the peak industry bodies to say that we can go out to the market, talk with shopping center council, et cetera, and push towards getting a set of minimum lease standards. We'll never harmonize legislation. There's 641 pages out there. The states hold it fairly dear to them and it's also got the dispute resolution processes are state based, but we can start looking at national disclosure statements and national minimum lease standards with your help and the commune's help, we're going to need that support to kit that through.
0:20:43 - (Phil): Yeah, look, and our community is building day by day. We're about to roll out 500 more.
0:20:47 - (A): Cafe members soon and all sorts of.
0:20:49 - (Phil): Stuff, because we say the more people that we can reach out and pass information and we do it through the.
0:20:54 - (A): Podcast, we do it through blogs, we.
0:20:55 - (Phil): Do it through our glue up chat portal. For us, it's all about pushing out information and making sure, making connections for people so that we're actually connecting people together to get things done to, as we say, accelerate their potential. And I commend you because a lot of people that are in business, like yourself, don't always get involved in leading legislation change or being, as I say, Gandhi's words, my benchmark. Be part of the change you want to see in the world. And you've been around this for a long, long time. You've seen a lot of successful stories, you've seen a lot of heartache. So I can understand that the motivation there is. Singer so what advice would you give to a Cafe that's listening right now.
0:21:28 - (A): In financial distress in terms of lease?
0:21:30 - (Phil): Obviously you can't solve them with other problems. And like I said to somebody the other day, I can't help you with your marriage problems, but I can certainly help you with your coffee roasting issues.
0:21:37 - (A): And we were able to help him.
0:21:38 - (Phil): But again, we couldn't save his marriage, unfortunately, but we can help him with his stuff. So, Cafe and financial stress in terms of lease, what options are available, what sort of support?
0:21:46 - (Philip): Absolutely. Well, first of all, if you're behind in rent, get in front of that, get on the phone and don't just put your head in the sand, get. Your head out of the sand, look around, go for those support bases that Phil's just talked about, whether it be us, someone else, Phil himself, small Business Commissioner's office, and have that communication. Be very open with communication. Don't sit there and not pay nothing.
0:22:05 - (Philip): Pay something and show good intent, show good faith, but by all means, we get this every day. Happy for you to call us. We're going to do a review there. And if it takes us to get on the phone to the landlord because you don't have the confidence, we'll make a call for you and say, hey, we're speaking with Bill, he's struggling here, we're having a chat to him. We're going to come back to you with a payment plan or we're going to have to sit down and do something. Here something else.
0:22:26 - (Philip): Reach out, put your hand up. You're not alone, you're joining the commune. You're in a great community. I'm really excited for this group. I'm really excited to start working with doing some high end stuff with Phil here in the commune in relation to benchmarking, support services, et cetera. So that the commune, phil mentioned it before. Running a small business is a lonely task. Doesn't matter who you are, Phil, you've experienced it, I experienced it. You've got to put your hand up, you've got to get support, we all do. So make sure you're doing that. But by all means, if you're struggling, put your hand up, reach out to us. We're going to give you some support, we're going to give you some recommendations, some direction, and if we have to pick up the phone and do something on your behalf, it's not going to cost you anything. We're happy to jump.
0:23:04 - (Phil): Yeah, no, and I appreciate that, Philip, because, again, the common mistake I see is people do nothing.
0:23:08 - (A): And I just keep saying, and I'm.
0:23:10 - (Phil): Being a marketer and a strategist, I always talk in analogies and I say.
0:23:12 - (A): Get on that bike and pedal and.
0:23:14 - (Phil): Make sure it's not a stationary bike. You've got to get on your bike and you've got to pedal, because it is unprecedented times. I mean, I was in a four.
0:23:20 - (A): Room a couple of weeks ago and.
0:23:21 - (Phil): No one in the room had been in business longer than eight years. And I said, if you haven't been in business for longer than eight years, is the first time you've had hardship. Because we did have a good run. Cafes had a good run for about ten years.
0:23:31 - (A): Yeah. No.
0:23:32 - (Phil): Did they make the profits they used to make?
0:23:33 - (A): No.
0:23:34 - (Phil): But I tell you what, the last four years have been completely challenging and now it's just gone next level challenging. I recently had Ivan on the show from Pesos, which is an It company that read your software and it tells you right up to the minute, every.
0:23:46 - (A): Two minutes, gives you an uptake on your wages.
0:23:49 - (Phil): So similar to what you do with leases, but he specializes in wages and data, real time, so you can make decisions. And he said it's about preseason training. You're getting fit beforehand so that you can actually go into the training. Or he says, it's a bit like boot camp. You've got to exercise and get things better. You can't just sit there and do nothing. So do this in terms of leases, because the other thing is that there's so many moving parts to an F.
0:24:09 - (A): And business to a cafe and restaurant.
0:24:11 - (Phil): And people don't realize you're working damn hard. Take a cup of coffee, for instance, and people whinge about $5.50. And I say, well, it's not expensive when you pay $12 for a Corona, right? And we all know that Corona costs $2.50 in a bottle shop, and it touches one set of hands for them to serve it to you, whereas coffee touches so many hands, and we whinge about 550. There's so many moving parts that you got to be across. You need to surround yourself with the right community, the right environment, and people that can help. So again, this is not just a plug for lease one. This is saying lease one can really help you, and in some cases could actually be the difference of people falling over or not falling over. Let's talk about CBD versus suburbs, because this is another area. When I had DeBella coffee and they were all over the country, one of the biggest in the country. And what we did, like for like I saw and I anticipated the big change from CBD.
0:24:56 - (Phil): We were too heavy in CBDs. Whether it Melbourne, Sydney, brisbane. And I started to make sure that our growth strategy went to regionals. And what I found in regionals was quite phenomenal. And now we're going back 1213 years.
0:25:08 - (A): Ago, is that the regionals were making.
0:25:10 - (Phil): Lots more profit because their rents were cheaper and people were paying more for a cup of coffee. What are the trends now? Obviously, post COVID, and there's that dirty word again, but it is what it is. What are we seeing in terms of CBD cafes?
0:25:22 - (Philip): Phil, the word COVID just changed those words to a ten year accelerator trends that were already there.
0:25:27 - (Phil): It's good.
0:25:27 - (Philip): That's what COVID is and what it did to us. And those trends you just talked about 13 years ago have now accelerated. CBDs are not coming back. I hate this new normal. I hate that one, too. But it's changed. Yes, the dynamics changed. The marketplace has changed. So if the marketplace has changed, land values have changed, rents have to change, occupancy cost ratios change, your business models changed.
0:25:51 - (Philip): So going out or not, investing the CBD is my advice. Yes, it is too tough, it's too hard. And limited hours. Now, that's changed as well. Was it Friday nights before? No, it's not anymore?
0:26:03 - (A): No.
0:26:03 - (Phil): Well, last week it was Tuesday for us was the busiest day of the week.
0:26:05 - (Philip): Crazy there you go. So it's completely shifted. So planning has become too difficult. How in a small business can you plan? So you're mismatching wages, you're mismatching a product, you're mismatching effort, there's too much waste coming in. You've got to get to where you can plan, you can build a solid business. And what you're doing in this small business is building an asset. Remember, at the end of the day, it's got value.
0:26:26 - (Philip): It's not a lifestyle decision in the day. You want to flip this at some stage. Flip is not probably the word, but you want to get out, you want to get your break and then reinvest and reassess. It's got to be building asset. If you're not building asset base with your retail shop lease and looking at security, then get out of the race.
0:26:42 - (Phil): Yeah, no good messaging there. And I get asked a lot about what I think CBDs, they'll become lifestyle centers. So I think we'll see a lot more of aged care, and they have to, because in order to support the retail, obviously, and that's both sides, the landlords and the tenants, they're going to need to have more traffic flow. And the traffic flow is going to come from, to me, I believe, vertical living, whether it's students, whether it's aged care, I believe you'll see more universities in CBDs, even hospitals, anything that can be vertical and bring more people through and traffic flow. But it has done, obviously.
0:27:10 - (Phil): And one of the things, and we're not going to talk about it, but mentioning, is that's one of the biggest bugbears and problems with this work from home, if you're looking at it through your own eyes, you might think, yeah, work from home is amazing. But if you're looking at through the eyes of, just, say, somebody that holds a CBD shop lease, well, then, geez, you feel for them. Because if you've got 50% of the CBD population working from home, that's one fifth of their business not happening on a Monday to Friday. The listeners will understand that. But if you're a listener that's not a cafe or restaurant owner and you're really a fan of the work from home, I just ask you to look at it through another set of eyes, wouldn't you agree?
0:27:42 - (Philip): Absolutely. You've really got to go get the blinkers off CBD looks glamorous. Was glamorous. It's not anymore. It's a specialist area. You've got to have a good base behind you. I really recommend anyone's going to go in the CBD should be very well, multi sided. They should have a fantastic asset base, very risk adverse, and certainly how they hold their lease and how they manage that risk going forward because at the turn of a dime you could lose the lot.
0:28:05 - (Phil): I've seen a lot of the new restaurants going to CBD are doing just a turnover rent, which is a smart.
0:28:09 - (A): Way to do it.
0:28:10 - (Phil): If you can negotiate that, then that's a good tip is to go turnover only because then you've got a set fee on your lease. But not all landlords are going to take that, especially as, you know, in your area of expertise is superannuation funds and stuff like that would rather bank on what they think is secure. But I think they're coming around that nothing's secure either, because if somebody's not making money, they can't pay rent.
0:28:28 - (Philip): That's right.
0:28:28 - (Phil): So paper is one thing and then what actually happens is another. So tell us top three tips that you would give somebody who is about to sign a lease. And I say that because in the last three months someone said, tell me a win in the last three months. And I said, I've stopped about ten people from opening a cafe. And they said, Why would you do that? You should be promoting the industry. Because I don't want them coming back in twelve months saying I lost half a million dollars if it's not right and it's not. Everything you spoke about, whether it's the lease or whether the appetite for risk is there and they're not cashed up, and everything you just mentioned, I'm going to tell somebody to think again because it's not right.
0:29:00 - (Phil): So what three pieces of advice? So it doesn't have to be three, but what pieces of advice would you give somebody who's saying, should I should I not sign a lease or another lease?
0:29:07 - (Philip): Great, phil and look, you're so right there, turning people away from getting into retail shop lease. It's such a complex business. It's so tough. If you think you're going to get in there and you're going to open the kebab shop with your wife and your daughter running it, you're going to play golf on a Wednesday, go and sell your clubs, don't do it. And I get Christmas cards every year from good business people who went to go into retail. And I turned them away from it.
0:29:26 - (A): And they've thanked us for years gone by.
0:29:29 - (Philip): So top three tips here. First and foremost, before you sign a lease, get it over to us, have a review. Let's do the proper benchmark. Right now you're probably looking at rent per square meter and think it's fair what's your occupancy cost. I'm going to drill into you about what your projections on sales are and what work you've done to do the research, to look at those sales projections because that's going to be your kicker. What we do is reverse engineer the deal down to cross check it. So whatever's on paper now, we'd cross check it against your sales projection, put the occupancy cost in there, ratio, and we go down and we see if the size was right. We'll see if the gross rent is right. We'll see if your sales projections are reasonable and fair.
0:30:05 - (Philip): That's the first one. Two. The second one is I want to make sure you're surrounded by good people who can advise you what's your supply chain look like? How are you going to hold this lease? Here are the questions to go to your CPA and your lawyer about how you hold a lease and your assets.
0:30:19 - (Phil): Yeah.
0:30:19 - (Philip): Okay. That's number two is don't risk. Take the risk out of it. And number three, I'll be looking at the future of that lease and what that would look like into the next one. So I'm going to do a bit of crystal balling for you and say, right, this is a three year lease, three year options. Did you realize that in sort of 18 months, we're going to be talking again about your option and getting ready for that? A lease is a living document. Phil touched on it before. I've done workshops where the lease is actually a marriage certificate.
0:30:46 - (Philip): Just so happens to got the divorce package in. I know who gets the house and the dog.
0:30:50 - (Phil): There's no guesswork.
0:30:51 - (Philip): There no that's right. So take this seriously. Phil's advice is great. He's been around a long time. It's a pleasure to be with him today and talk about these things from someone who's so experienced as well. But you've got to take this leasing seriously. Get it out of your heart and get it into your head.
0:31:06 - (Phil): Cut the ego and emotion.
0:31:07 - (Philip): Absolutely. Get the hard stuff done. Get it right. Don't leave your lease in the bottom drawer. Read the bloody thing.
0:31:13 - (A): Yeah.
0:31:13 - (Phil): Great advice there. And that's my wish for people is to whether you're thinking of signing a lease or renewing your lease or even opening multiple sites, we love expansion. We want to see people grow. I want to see people be better tomorrow than what they are today. But the one thing that I really stress is it's got to fit your lifestyle. And when I say lifestyle, it's got to fit into your health paradigm, it's got to fit into your wealth paradigm and it's got to fit into your time paradigm, because there's no use having plenty of money, but no time and no health. There's no use having your health if.
0:31:39 - (A): You'Ve got no money and vice versa.
0:31:40 - (Phil): You can see how that all works, right? And so we want to make sure you do that. And again, I keep stressing you're not alone. One of the best things that I love about the commune is the community building that keep telling people you're not know. There's people out there thinking, going through the same thing, but more importantly, there's people there that can help you, whether it's experience, whether they've been there before, or whether it's proactive.
0:32:00 - (Phil): I really thank you for your time. Philip, I'm going to give you the last say. Tell us anything you want to share.
0:32:05 - (A): That we haven't covered or that I haven't unpacked.
0:32:08 - (Philip): I feel just looking forward to the future of the commune, but I'm sort of an outsider looking in. I'm getting more involved with you guys. But what I'm looking forward to, and this is a bit of nirvana for us is that the sharing of data and information among your peers? Don't think that they're competitors. Their peers.
0:32:22 - (Phil): Correct.
0:32:23 - (Philip): It would be great in 1218 months time that the commune could actually publish and send out. There a list of occupancy cost ratios and metrics that you can rely upon when you're doing your budgeting and planning, when you're going to negotiate with the landlord and give you that more confidence to go and do it yourself and have those numbers behind you. We can do this. But it takes everyone in a commune to work together, provide data and be sharing and caring.
0:32:46 - (A): Yeah.
0:32:46 - (Phil): No, and we look forward to it. There's also a series of workshops we run. I'm having one around sales and development. In August, got Alan, who's one of the country's best branding strategists, is going to be running a six week workshop over standing up from a crowd and being a game changer. And I think early in the new year, we should get someone like yourself along. And we have a leasing workshop where we actually bring people in and do that. Live with your experience and your expertise and do a bit of a live scenario of what it looks like and what they should be looking for.
0:33:10 - (Philip): Phil let's call it the Coffee Commune leasing bootcamp and let's make it happen.
0:33:14 - (Phil): Yeah, I love the sound of that. Well, Philip, it's been an honor. Thank you for sharing those nuggets. And to the listeners, you can do two things. You can listen and do nothing, or you can listen and get on that bike and pedal, and we're here to help. And just like Lease One's here to help, other people are here to help. The commune's here to help. It's all about bringing you amazing people like Philip Chapman from Lease One who have been there and done that. And I can't stress that enough, they have been there and they are doing that, and they still do that, and they're helping people accelerate their potential. Philip, thank you.
0:33:41 - (Philip): Pleasure is mine. Phil all the best.
0:33:43 - (Phil): That's a wrap for today. Keep listening for more episodes of Been There and Done that. The Coffee Commune is here to help accelerate your potential. We want you to be better tomorrow than today. Until next time, you've been listening. Phil DeBella. I'm the founder and managing director of the Coffee Commune, a place where the coffee community comes to collaborate.