Here’s why restaurant leases negotiations like Young Joni’s can go wrong

Vellee Deli. Saint Dinette. And, now, Young Joni in Minneapolis.

They’re among the high-profile restaurants that have announced closures in the past year after reaching a crossroads with their leases. How is it fathomable that places with waiting lists and lines out the door come to an end?

It turns out that many things can happen during five- or 10-year lease terms, common in the industry. And even the buzziest restaurants around aren’t immune to those issues.

“It really is true what they say that restaurants are three months away from closing at all times,” restaurateur Tim Niver said, referencing a popular industry quote from Montreal chef David McMillan.

Niver closed two of his St. Paul restaurants that were among the hottest reservations in town, Strip Club Meat & Fish in 2017 and Saint Dinette in March, both as their 10-year lease renewal dates approached. Niver wanted to end the restaurants on a good note, while market uncertainty and the inability to predict the future also factored into the decision.

“Ten years ago, the restaurant world was going well. A lot of people were expanding, including myself,” he said. Niver said costs of running a restaurant have since continued to rise, COVID and civil unrest happened and diners are tightening their spending dollars.

“It’s never been harder to run a restaurant, it’s never been more expensive. And you have to decide if you’re gonna stick with it.”

Unforeseen factors do happen, and they can make or break a restaurant. Vellee Deli, the popular Mexican and Asian fusion restaurant, stated business challenges as the reason its northeast Minneapolis location closed, which then triggered the closure of its downtown Minneapolis spot and and Brooklyn Park pop-up.

Vellee Deli announced its closure the way many do, on social media. “Our streets have been plagued by two years of relentless construction, which has eliminated street parking and caused major disruptions to our retail parking lot, making it incredibly hard for many of you to reach us,” the restaurant posted on Instagram at the time. The company also stated that the building where the restaurant was located was sold, and rent-relief negotiations were underway when an eviction notice was served.

In other scenarios, restaurants can close for other reasons tied to their lease.

Earlier this week, award-winning restaurateur Ann Kim announced her Young Joni restaurant in northeast Minneapolis will close this fall after negotiations over renewing a lease did not move forward.

Jeffrey Herman, president of Urban Anthology real estate in Minneapolis, represents restaurateurs looking for property and landlords searching for commercial tenants and sees things from many sides. Ideally, he said, all parties walk away happy.

Herman, who was not involved on either side of Young Joni’s lease negotiations, has negotiated dozens of restaurant lease deals. In general, he said restaurateurs more often want to enter into a shorter-term lease, such as five years, while a landlord is looking for a longer term commitment such as seven to 10 years.

“You’re entering into a marriage,” he said. “You’re trying to put a recipe together for success for people on both sides, because a divorce can be costly.”

Herman said lease negotiations can fall apart, and the most common scenarios he sees are economic or zoning and liquor licensing issues. In other cases, it may come down to the landlord and tenant not being a great match.

“Or, the parties just end up not necessarily feeling good about each other. The economics may be working, but you get to the point where you’re arguing about replacing the door and realize, ‘I don’t like this person.’”