Most retail space leases address the venue for resolving disputes between the tenant and landlord. In most cases, the venue is state district court in either the location of the retail property or where the landlord is headquartered. The former is prevalent. There's a growing trend to require binding arbitration for disputes. The advantage it is a less expensive process to resolve differences of opinion. The disadvantage is forgoing some of your rights for a process which can be even more arbitrary than state district court.

Finally, tenants should consider providing themselves an escape clause. When starting a business, a high level of optimism and the excitement is typical and understandable. However, the actual business results sometimes fall far, far short of what was expected.

For example, assume you had expected sales of $20,000 per week for your retail store and thought the very lowest level that could possibly occur would be $5,000 per week. Even though the $5,000 per week seemed like a very pessimistic scenario, you were comforted that the business would be profitable at this level. At least you'd be all the pay your expenses and pay yourself a barely adequate salary.

Unfortunately, the pessimistic scenario turned out to be wildly optimistic. For whatever reason, the stores only generating sales of $1500 per week. This is inadequate to pay your cost of operations.

Should you have a right to terminate your five-year lease in this scenario? If you do terminate the lease, what is a reasonable amount to pay for expenses incurred by the landlord?

Although termination clauses and personal guarantees may seem like an arcane nuance when negotiating the lease for your new business, they are critical factors. If you personally guarantee the lease and do not have an option to terminate the lease if your business performs poorly, in a worst-case scenario you are faced with personal bankruptcy or funding an operating deficit for a long period of time.

This concludes the article on leasing retail space. By researching best practices for your competitors, carefully analyzing the demographics and psychographics of successful stores, identifying an appropriate submarket for your store, performing thorough due diligence regarding the retail space you are leasing and carefully negotiating the lease, you have substantially improved your chances of success. In addition, you will have mitigated your exposure in the event your retail establishment is not successful.