Cruising the Corporate Obits
Taking over a major company’s former space
By Tony Ozelis

Have you ever heard of someone shopping for an apartment by looking through the obituaries? Although it kind of red-lines the old creep-o-meter, if you think of it in terms of finding office, retail and especially restaurant locations, many times it makes a ton of sense. After all, in the commercial business world, the previous tenant didn’t die, they just went out of business…to me at least, there’s a big difference.

One distinct advantage of taking over a previous corporate space lies in the usual upgrades that the former tenant may have done to the building, especially if it had been a company-built unit (since they usually don’t cut as many corners as your typical cash-strapped franchisee).

Of course, you may not want to utilize every single upgrade and finish, because you’ll probably want to develop your own identity, but the opportunity to walk into a space that already has grease traps, ventilation hoods and ADA equipped restrooms installed, can potentially save you real money in your construction budget.

The biggest question, of course, should always be; was it just this unit that closed or was it due to a mass- corporate extinction? There’s a big difference, you know.

If it’s available because some company went out of business or pulled back and closed every unit in a specific area, they usually leave a few good sites behind them (“It’s nothing personal, we just left Cincinnati”).

But be very careful, even the big boys make mistakes (even more so nowadays because many foolishly rely on statistically-driven site picking programs, but that’s another article). The point is, don’t make the mistake of thinking that just because Mr. Slushy built there, that it has to be a great location and the reason it closed was simply because of poor operations.

Although that does happen from time to time, most companies don’t like to quickly write-off their operating losses and quietly walk away from a site, unless there was a real compelling reason behind it.

Was it an under performing unit? If it was and you have a similar business, what are you going to do differently? (And please…don’t just say “Service”). If the place warranted closing, your job is to find out why and do so, way before you make any commitments (and please don’t ask the broker, this is your job).

Just because a site has some obvious advantages (location, infrastructure, etc) does not automatically mean it’s a great location for you. Responsible site selection rules still apply, you’ll need to do a bit of detective work.  

A good place to start would be by asking other local tenants; although they may not know the whole story, they may have had contact with former managers, employees or even the franchisee themselves.

If it was a restaurant, your next stop needs to be your local health department.  Many buildings have carried a negative stigma with them because of a prior use or tenant and those perceptions can be very hard to overcome (which is why one of our “Rules” is: “ASK!). You can run the greatest and cleanest restaurant in town, but if the guy before you had a well-publicized run in with the health department, chances are that it will take a lot of time and effort to convince the general public of your efforts and the site may not be worth the struggle.   

However, if the reason it’s vacant is due to a larger “extinction”, it may be a diamond in the rough. Saving money in business is the same as making it and that vacant site may be another case of Corporate America’s loss being your gain, but that does not mean you have less homework to do, you actually may have a little more.

One final word; although the facilities that most large companies build usually have been designed and built to comply with the building codes of the day, don’t be lulled into thinking that there aren’t any code changes, outstanding building violations or major upgrades required, for you to do business there. New rules and regulations are published every day and you may find your “bargain” site is actually a money pit. Check our National Resourse Map and give the municipality a visit or call.

Happy Hunting

 

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About the Author: Tony Ozelis is a real estate development consultant and frequent contributor to LocationIsland.com.  Mr. Ozelis' 23 year career has primarily been focused on restaurant and retail development throughout the United States where he has served as a Director of Real Estate for companies such as Pizza Hut, Inc., Boston Chicken, 7-Eleven and Wendy's International.

With well over 700 successful projects completed to date; he has been at the forefront of incorporating new technologies into corporate real estate development and regularly teaches on subjects such as; Strategic Market Development Planning, Contract Negotiations and incorporating Green Technologies into site design.

Mr. Ozelis is a member of both the International Council of Shopping Centers (ICSC) and the United States Green Building Council (USGBC).

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