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View Full Version : Location Contract Signing ~ HELP!



Empressnightshade
05-20-2007, 01:39 PM
Well, Everyone....

After looking long and hard, it looks as though my dreams of moving my haunt indoors may become a reality. I spoke with a realitor on Friday and she and the property owner have agreed to us having our charity haunt in their 8,000 sq. ft location. It use to be a pool hall and is just perfect for our haunt! Me will all be meeting together sometime this week (May 22 - 25) to discuss the contract. Our Fire Marshall who is such a complete sweetheart, is taking time out of his busy schedule to meet me at the location to give his professional opinion on whether the building is a good choice. I figured it's better to get his advice now, than to sign the contract and find out the building is a bust later.

Now, here is where I need all of your expert advice. Since I have never had to sign a contract such as this, here are my questions:

In exchange for usage of the building, we are willing to give a certain percentage of the door. (Not anything else we may decide to sell such as Virgil's CDs, Glow Necklaces, etc.) So....

1) What is considered a fair percentage?
I was thinking 20 - 30%

We want control of the ticket booth. Therefore....

2) How do we gain the trust of the property owner so that he will not be concerned if we are cheating him or not?

3) Do we give the property owner's % to him on a weekly basis or the total at the end of the haunt's run?

4) Should we have the contract drawn up or leave that to the property owner?

Since rent does not fall under the laws of "Charitable Contributions" and therefore cannot be written off, I've been trying to find another way that we could sweeten the pot for the property owner. I noticed that there is a lot of wood, cabinets and even counters with sinks left in the back of the location that we could use for the haunt. With that said....

5) Would it be a nice gesture to ask him for those items and write him a tax-purpose reciept for them?

I know there will be other questions that may crop up in this head of mine, but if you can help me with the questions above and throw any other advice in the mix, I sure would appreciate it.

THANKS!

Empressnightshade
05-21-2007, 08:53 AM
This thread had been looked at over 40 times and nobody has any answers?

SpFXChic
05-21-2007, 11:30 AM
Emp, check your PM's.

brad
05-21-2007, 03:45 PM
Gwen, I'll throw in my 2 cents for you.

1) For me, it's hard to say what a good percentage should be. To me it all depends on what your overall cost will be to put it on this year. You need to get your money thats invested back. Whatever is left after you get back what you pit into it this year, then yall can split up the profits.

2) Start with a roll of numbered tickets($3.00 at Wal-Mart), let the owner see the first number on the ticket so he/she knows where to start counting froom. Write down every night, your total # of people each night. At the end of it all, present them with the total number of tickets sold and you can show them what the next numbered ticket is that hadnt sold. The numberes should match up for them. The only way to mess this up, is that you would be cheating yourself, and not them.

3) There really shouldnt be a problem either way. I would suggest that you do it every week, or even every night if they are there. If you were to do it at the end of the run, then if there is a discrepancy for the very first night, it might not be so easy to go back to that night and try to figure it out. At the end of each week, you can remember things a lot better than at the end of the month.

4) Y'all should draw it up together, and discuss things in-depth as you are drawing it up. Just to make sure that both parties agree on everything.

5) In some ways, an owner will take every chance they can get, to get a tax write off for anything.



Gwen, I hoope this helps you, and I'll try to post a more timely answer next time.

Greg Chrise
05-21-2007, 11:15 PM
Rather than be just paying so much flat fee rent which might be requiring a sponsor, you are expecting the landlord IS a sponsor of your event or not. I like brad's ticket number idea for say $2 per ticket tops. It is a charity event. Just because it is now going to be 8,000 SF it might not convert to bigger turn out at the ticket booth. Same general geographic area, same season and so on.

He must realize it would take years to dramaticly increase in numbers and his lower income in the begining years would justify his taking large amounts in later years at the same rate which would be far more than the space would rent for.

The $2 comes off the top and he can account for his own income, yours is the rest. For some reason we do a split at the end of every night so everything and the numbers of what went down are over and done with right now. The next day starts fresh with no baggage or insecurity of if you will get paid. Focus on making it a good nights event.

MDKing
05-22-2007, 08:43 AM
An idea would be to pay a lesser % of the door until you hit a certain dollar amount, then pay a higher percentage on all sales after this number.

For example, pay 10% of your door until you hit $75,000, or whatever you feel you will hit. After that, you would pay them like 20% of your sales over natural.

Something to think about I hope.....


Allan

Jim Warfield
05-22-2007, 09:58 AM
So then after $75,000,...you can send most of your workers home?
(Just Joe King)

MDKing
05-22-2007, 02:49 PM
Yes, you could! :P

drfrightner
05-24-2007, 05:32 AM
Are you planning to open a store or a full blown attraction???

Many times people can make deals with the building owner and get them to invest money into the business. When they know the business is in their building they usually feel alot more comfortable.

If you think you're going to be very successful at this location you might be better off just paying more rent and not offering him anything. Who wants to share your hard earned work/money with someone who didn't do anything but rent you a buidling.

Personally you strike me as the person who will be successful at anything you do... people like you, you're a nice person, and a smart person as well. Coming on here like you do asking advice, seeking information, is smart... its always food for thought anyway the advice you recieve.

If you have more specific info post it and I will give you my opinion.

Take care.

Larry

Empressnightshade
05-24-2007, 02:03 PM
Are you planning to open a store or a full blown attraction???


Larry, we are planning on a small little store with Virgil's CDs and maybe a few other things. Nothing elaborate. I was also speaking with our treasurer on perhaps having a small vendor sell hot beverages and paying us for the spot. Subway is right next door, so food is out. (Were in a small strip mall) But, we will be seeking a type of sponsorship from them (Exchanging coupons and flyers). Otherwise, it's all haunt.

**I spoke with the realtor yesterday. Our meeting for the fire marshall to inspect was canceled and she explained to me why. (Previous tenants are not out -- they owe them rent -- others are entering property to repossess items -- she could be blamed for taking items if she enters property.) She said the property will be turned over to them in June and told me not to worry -- She has saved the building for us! No contract as of yet, but I'm still happy.**

Thank you everyone for your ideas! I like MDKing's suggestion of starting at lower percentage and raising it to a higher one when we hit a certain benchmark.

UNFORTUNATELY, when I sent out the proposal to them, I put *kringing in a corner* ....25% of the door! However, if I approach them with MDKing's way of thinking, I can say that the 25% is the maximum amount.

What do you think? LARRY CHIME IN AGAIN, PLEASE!!
This is my dream, Everyone! You've been with me from the very beginning of my journey three years ago. I needed you then, but I DEFINITELY need ya now. So....

Speak o' expert ones!

Duke of Darkness
05-24-2007, 03:17 PM
Sorry that it took me so long to answer this. For some reason, I didn't see your post earlier. The truth is, we don't have enough facts to give you a good answer, but perhaps I can help you figure it out for itself.

The key factors are:

-- The normal rental rate or this space and similar spaces in the vicinity.
-- Your expected attendance.
-- You ticket price.
-- The amount of time that you will occupy the space (including building and tear down).

This is not an exact science, but consider the following. If the owner would have a hard time renting the space, they may be willing to rent it to you for less than the full rate. It is better than having it sit empty. The fact that you are a charity haunt can carry some weight here as well. They must, however, make enough to make it worth their while.

On-the-other-hand, the owner might expect a higher than normal return because they can't lease the property to a long term tenant while you are there. In addition, the wear and tear from a haunt is greater than with most businesses.

There are three nice things about paying the owner part of the gate. You have lower risk, don't have to pay until after the money is earned, and the owner really wants you to be successful.

Okay, here is how I would suggest figuring your percentage. Bear with me, because while I am pretty good at math, I am not so good at explaining it....


First divide the normal rent by your expected attendance. This will give you the dollar amount per ticket that the owner might expect to receive. Now divide that number by your ticket price, and you will have a percentage.

An example with hypothetical numbers.....

Rental value = $5000 per month * 2 months ($10,000)
Expected attendance 7500
Expected price per ticket = 1.33
Ticket price = $7
That would equal about 19%

If you have a great year, the owner makes more than expected. If not, they make less.

The key is to determine if these numbers work for you and the charity. If you punch your figures in and it comes out to 40%, for example, you won't want to offer that amount. Adjust your offer to a level that makes sense for you, this is, after all, a negotiation.

As far as getting the haunt owner to trust you, I wouldn't be too worried, unless they have expressed concern. This kind of arrangement is not that unusual and I doubt that it will be an obstacle. If it is a big concern, numbered tickets are a reasonable solutions.

As far as paying the owner, there is no right or wrong here. It all depends on what is easiest for you in terms of keeping the books and for them in terms of collecting the rent. There really are no big pluses or minuses to either approach.

As far as having the contract drawn up, it depends. The owner will probably want to draw it up as they are most likely experienced in drafting rental contracts and have standard clauses that they use. In addition, ambiguous clauses are construed against the drafter, so it is often nice to have them be the drafter. Read it carefully and don't be afraid to ask for modifications. You might consider having it reviewed by an attorney.

As far as the other items, it never hurts to ask. The idea may appeal to him.

Sorry for the long rambling post. I am afraid that I don't have the gift of brevity.

Sounds like an exciting opportunity. I hope it all comes together for you.

Dave

Empressnightshade
05-24-2007, 06:37 PM
Thank goodness you weren't blessed with the "gift" of brevity, Dave. Because every single word you wrote was of importance.

I must say after reading your post, I get it now. I get how to calculate the percentage.

THANK YOU!!!

This is valuable stuff I plan to use this year and beyond.

Peace, Brotha! :D

Greg Chrise
05-24-2007, 07:27 PM
Setting the terms of the building will get 25% is in my opinion the way to go. It totally eliminates a whole bunch of factors that can effect the outcome of a temporary event.

The price it is leasing for could be higher than is reasonable for the area specific, one of those clues would be a business not making it right now, owing rent and having things liquidated on them. So this percentage does not put you into the same situation of having to pay $8,000 per rent if it only sees 800 people because of so many location oriented limitations.

Conversely, the landlord will be giving you a space because it is a charity and is hoping to see 8,000 customers and make $20,000 when he would normally get $8,000. However he must enter the pay as you go agreement to reach this outcome. He either knows the area will bring him a profit or he feels good helping out a charity and it looks good for his community reputation when things aren't necessarily kicking right now anyhow.

If everyone make a wild amount of money, it becomes the thing to do seasonally and everyone is happy. If it brings in much lower than expected it is a real strain of doing the location for the landlord over wether a better paying tenant is really available.

Duke is right, we don't have enough information but, neither can you necessarily commision a $25,000 current marketing analysis like you were about to commit half a million in inventory and need to know the amount of reall customers could be drawn to this location. Plus even these studies are often flawed as a competitor sets up right next door or some fundamental customer trend was over looked.

The way I look at it you are saving a whole lot of stress not "oweing" or potentially owing some flat sum of money. They are indeed extending you a resource, essentially credit by being a partner and this is worth them making more if it happens. This arrangment of fixed percentage makes it all smooth from every angle.

If the landlord was to make $12,000 more than expected, you certainly know a good charity that can use that money or further commitment to offer space in the future. In the future if he knows there is a lame leasor and he can make more they will get bumped out for this deal to seasonally take president.

If it comes out lower than what the space would rent for it might be a one time location but, even at a loss he was nice enough to help out a charity so he is still a great guy. The real deciding point will be on who is paying the utilities. An 8,000 SF space can ring up $1000 per month easy if you turn things on. If it is part of the 25%, he is paying real money as you set up, not just offering something that otherwise would cost nothing to leave locked up. Usually big strip malls are never really completely paid for as well and some portion of the over all mortgage is ticking on this space too.

Percentages just make all things that cost real money irrelevant. That is a winning formula. Other wise you would after the fact be counting the money and only hoping that the space only cost 25% of the net. There is so much that you are not able to control or dictate that it is better to play it safe.

If the haunt is such a rip roaring high throughput experience then other things come into play like damage to surrounding business and cleaning up a larger parking lot, potential loitering and noise complaints from crowds outside after 9 PM, real wear and tear on your space and so on. More things can go wrong and cost real money but, a percentage and an experiment in the form of a charity has nothing to do but win for everyone.

Typically all around the country you hear that a good strip mall location will not do short term leases or specifically will not engage a haunted house. Generally it is two trends. One the landlords were desperate for any thing to pay the rent in that space and perform, the location itself is on a down swing over newer malls and larger independent store construction. Two the haunts did not make sufficient money, tore the place up like it was a condemned building that required substatial post renovation and generally those asking for the space didn't come off as respectable or a match for paying what might be worth $8,000 per month.

You have to remember, Larry has 5 locations and is in a high population are where haunts are considered cool. He must spend big bucks to exceed the customers expectations. This also means succesful marketing and having sufficient people to market to. There is also a slight difference is what the experience will in a charity to a pro haunt. From a customer enthusiasm level. I know I have said this before and upset people but, frankly the charities even with great passion and technical capabilities are not spending like what a pro haunt would. A pro haunt will reinvest every bcu it gets into making a better show for years while a charity gives all the proceeds away. The show ends up being different and the customers that are attracted to each kind of show have this in the back of their head so as not to be disappointed. Hence the over all draw is a bit less for some charity locations not necessarily your doing but the overall pre judgement perception of what a charity haunt is like from the customers point of view.

There are some great charity house bit they are 100 year round equally passionate volunteers building that took years to engage such a sense of accomplishment. In year one in a large location, the location alone will not guarentee greater numbers. Certainly it will draw far more than a residential offering but, I have also see long time loacted 22,000 SF haunts for charity see 800 customers. It still isn't necessarily a loss as it IS for charity but, generally they are under the expectations of what it would be like if you went in and paid all the bills in advance.