A shopping mall usually represents a high concentration of active shoppers within a contained environment. As such the thought of buying a store in a mall can be very enticing. By the law of averages, a certain number of all those shoppers are bound to come into your store, right?
Before you move forward and consider your options, it’s prudent to explore a few crucial considerations.
To begin with, you should start by examining the demographics. Your ideal customers should be already shopping in the mall you are considering. Take a close look at the other tenants within the mall - are they dedicated to the same type of consumer and if so, how are these stores doing? You are unlikely to find much success if you are the only store in a mall catering to a particular demographic, for example upscale suburban women.
By and large, a mall is only as good as its anchor stores. While there may be some big box retailers in the mall, stop and think for a second what would happen if one of them went out of business. A locked, boarded store is a bad sign and it is not a harbinger of success for the other tenants. If possible, only consider malls that have several anchor stores. In times of economic downturn this can help a lot.
You must ensure that your potential landlord understands the meaning of the word “flexible”. Mall landlords are notorious for including inflexible clauses within their contracts.
You may come up against many problems including crazy requirements that may force you to move the location of your store at a moments notice. Question all of their crazy restrictions, including the requirement to use only their own specified construction companies and electricians. Don’t forget to ensure that you’re allowed to display “for sale” signs in your windows, and also check to see if you can place “special offer” items outside your main doors. Go through every detail of the lease agreement very carefully and ensure that you’re accepting to the fine print within its clauses.
Get your attorney or advisor to check up on the financial health of the mall itself. Find out about tenancy rates, gross revenues and projections. Almost certainly, the information will be available in annual reports and filing statements or you could get this information from the company’s website.
The best research you can do is to go in and speak to the other shop owners. You can state you are looking to buy a store in the mall (NEVER tell them which one) and ask about the landlord, retail business activity, and any other concerns you have.
Before you go too far conduct a complete physical inspection of the mall. This is a good way to assess its financial health, as when things are not going too well you could find that external maintenance is not being kept up. Sidewalks, masonry, landscaping, doors and roofing services should be clean and well-maintained. Parking lots should be functional and well kept and while you are at it, take a visit to the bathroom and food court. Poor restroom maintenance is one of the first signs of a mall in decline. Food court activity is an indication of mall activity.
Your visual tour may not be definitive when it comes to assessing the mall’s overall financial health, but it can be a quick way to eliminate some locations from your consideration.
Richard Parker is the President and founder of the prestigious Diomo Corporation - The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream of buying a business.
