The Commercial Lease That Kept Me Up at Night

Published on Wednesday, 12 March 2014 01:42:10    Written by Marc
In the early nineties, I owned and operated a popular video game retail store in the Montreal area. We called the store OZ and just like Dorothy down under, it was a magical place and time.

OZ VIDEO GAMES 2003We sold, rented, and repaired any video game related item under the sun. At one point, we had over 8,000 active members. The store was Jam Packed with video games, consoles, specialized magazines, anime, cards, figurines, posters… Name it, Nintendo 8-bit, Sega Genesis, Game Boy Color, PC Games, Sony PlayStation, Nintendo Virtual Boy, Super Nintendo, even some old Coleco classics for the less fortunate.

We also had in place a state of the art gaming network with 24 high end pc’s and the first with a commercial high speed internet feed to better serve our growing Counterstrike community and internautes’*

I remember those evenings when rival game tribes would converge, headsets on, caps low, lots of attitude, and ready to prove they were the best. Nervous energy ran through the room until a winner was declared many hours later. It was a great time to be a gamer!

It was always a challenge to keep the staff and me aware and informed on the latest trends and upcoming winners so I would I would bring one or key employees to the E3 trade shows in Los Angeles... the Epicenter of Gaming!

As a small business owner, you have no choice but to be versatile and learn to wear many hats. Buying, selling, training employees, managing schedules, negotiating with the banks and suppliers, then there is the damn ATM machine to worry about, and the list goes on.

In the late nineties, we needed to negotiate our commercial lease as it was coming due. A decision had to be made to either stay or expand elsewhere. It would soon be 10 years in the same mall and I had my eye on a space in strip mall close by. It offered excellent exposure and the right parking set up BUT there were four walls and I would have to build a new store from scratch… I pondered.

NETWORK GAMING AREA
Business was still growing and everything indicated towards expansion. The owner gave me a copy of his standard lease and told me, "You must hurry there are others who want the spot."

Their lease seemed complex and left me perplexed. Filled with foreign terms and twisted concepts, I felt like every clause was in the landlords favor trying to lock me in one way or the other. I quickly realized that I needed help from an expert. Therefore, I asked a lawyer to revise the contract and to prepare a draft agreeable to both parties. I was invited to come sign the lease and leave a series of postdated checks including deposit checks. I arrived late, in a rush, quickly looked over the lease, everything looked fine so I signed... let the construction chaos begin!

OK, I busted my construction budget, but hell, I opened on time and by the customer response, I had made the right decision to expand. This store was now the reference in video games in my "neck of the woods."

E3 Trade Show circa 2003
A few years later 9-11 rocked the world and markets softened, coinciding with the large chains such as Walmart, Best Buy, and Costco expanding their video game divisions and unilaterally deciding to use video games as a lost leader concept. Now I had to compete with these monsters selling my core product under cost. How lovely was that?

To make things worse the arrival of "Street Dates" had taken away the few day advantage I had over the less efficient large chains. Oh yeah, I forgot to mention growing online competitors, out of control copying of games by the kids, and the arrival of the great enemy of the rental industry ... the CD (always coming back scratched).

Sales were down, rentals were down, and I was spinning my wheels with high overhead. The whole market was in transition and I needed to readjust to this new reality. Therefore, I pulled out my commercial lease and began to see how I could get out of this jam by renegotiating the rent and reducing my square footage. I took the time read in detail the lease and this is where it hit me, "BANG!"

This lease was not the same lease agreed upon years before. The owners gave the original lease to me with minor changes. I was led to believe that I had signed the negotiated lease. This lease locked me in for 10 years with full rent adjusted to inflation. Furthermore, the timing was bad since I was occupying half of the strip mall, and of the remaining four locals (two were vacant). I was not in a strong position to negotiate and the Chinese owners suddenly did not understand my English and were not answering my calls of distress.

Help!

This commercial lease was keeping me up at night and I only had myself to blame. NEVER sign a lease alone and in a rush. Make sure your lawyer is present and revise each clause repeatedly before signing. Clauses such as No Set-Off, Non-Responsibility of Landlord, Deposit ($10,000 stuck there until end of lease), Measurements (I couldn’t ask for adjustments when I found out I was paying based on wrong measurements), length of contract, etc.

It took me another two years and many sleepless nights before I was able to renegotiate an expensive downsize of my store and reduction in rent.

Fast forward a few years. I did succeed in downsizing my store twice in three years and eventually closing at the end of 2006. The great Pokémon and Bay Blade phenomena kept me alive for the last years, but it just was not the same anymore and was looking forward to my new challenge as a real estate broker.

*Internautes: A French word for avid internet users.