“The landlord is giving us $80,000 toward the build” is one of the most common things an operator says early on, and one of the least informative. The number is real. What it is worth depends entirely on terms that are usually still unwritten when it gets quoted.
The four forms it takes, and they are not equivalent
A cash allowance paid to you on defined conditions. Most flexible, and the one with the most gates attached.
Free or reduced rent for a period. Simple, certain, and worth less than the headline if rent starts before you can open.
Landlord’s work — the landlord performs and pays for defined scope directly. Often the most valuable of the four, and the most overlooked.
Amortised into rent — the landlord funds the work and recovers it through higher rent over the term, usually with interest. This is a loan. It is frequently presented as a contribution, and the total cost over a ten-year term can exceed the allowance substantially.
The first question to ask is which of these is on the table, because a $100,000 amortised allowance and a $60,000 cash allowance are not comparable and the smaller one may be better.
A cash allowance means you finance the whole build
This is the part that catches operators with otherwise sound plans.
An allowance is typically paid on completion, against conditions. Which means you pay every invoice — design, permits, construction, equipment deposits — out of your own capital first, and get reimbursed at the end. Your peak cash requirement is the full build cost, not the build cost minus the allowance.
If your funding plan assumed the allowance reduced what you needed to raise, it does not. It changes what you get back, not what you have to put in. See how food buildouts get paid for.
Read the conditions, because each one is a gate
Allowances are commonly conditional on some combination of:
- Construction complete in accordance with landlord-approved drawings
- An occupancy permit issued
- Evidence that all trades are paid and no construction liens are registered
- Rent commencement having started
- The tenant not being in default of any lease term
- Submission of paid invoices, sometimes with a general contractor’s statutory declaration
Each is reasonable on its own. Together they mean the money arrives after the most expensive phase, contingent on things you partly do not control — an inspector’s schedule, a subcontractor’s paperwork.
Two specifics worth negotiating:
Progress draws. Payment in stages against completed milestones rather than one payment at the end. This is normal and materially improves your cash position. Ask.
A deadline on the landlord’s side. An allowance payable “upon satisfaction of the foregoing” with no time limit can sit unpaid while a detail gets resolved. A stated number of days after conditions are met is a small ask with real value.
The fixturing period is the one to get right
The fixturing period is the rent-free window between getting possession and rent commencing, meant to cover construction.
Get this wrong and it undoes the allowance. If you have 90 days of fixturing and the project takes 140 — because the permit review took six weeks rather than three, or the walk-in arrived late — you are paying full rent for the last 50 days on a space that earns nothing.
Two things to push for:
Length matched to the actual scope, not to a standard retail assumption. A food buildout with mechanical, gas and health approval is not a clothing store fit-out.
A start tied to something real. Fixturing that begins when the landlord delivers the premises in the agreed condition, with permits obtainable — not on a calendar date that runs whether or not you can actually start work.
The schedule of landlord’s work is worth more than the allowance
If you negotiate one thing properly, make it this.
The base building scope — often set out in a work letter or schedule attached to the lease — defines what the landlord provides. For a food business the items that matter are the expensive, slow ones:
- Electrical service capacity to the unit, at a stated amperage, voltage and phase
- Gas service and meter capacity, at a stated size
- Roof rights and a route for exhaust, make-up air and remote refrigeration, including who pays for penetrations and who carries the roof warranty
- Sanitary drain location, size and invert depth
- Water service size
- Washrooms, and whether they meet current barrier-free requirements
- Demised walls, base floor condition and the unit’s HVAC
- Waste and grease storage location, and permission to use it
Every one of those is a line item that becomes yours if the schedule is silent. And the utility items are not just money — a service upgrade runs on the utility’s schedule, not yours, which is why they belong in the lease rather than in a change order. See power and gas for a commercial kitchen.
Specify capacities as numbers. “Adequate electrical service” is not a commitment. “600 amp, 208Y/120 V three-phase service terminating in the premises” is.
The cost at the far end
Leases commonly require the tenant to remove improvements and restore the premises at end of term, at the tenant’s expense. For a food business that can mean removing the hood, the ductwork, the rooftop equipment, the walk-in and the interceptor, and repairing the roof and floor.
That is a real liability sitting at the end of your term, and it is negotiable at the start — either excluded, capped, or limited to defined items. It is almost never negotiable later.
The short version
- Establish which of the four forms the contribution takes before comparing numbers. Amortised is a loan.
- A cash allowance does not reduce the capital you need to raise, only what you recover.
- Ask for progress draws and a payment deadline.
- Match the fixturing period to a food buildout, and tie its start to delivery of the premises rather than a date.
- Negotiate the landlord’s work schedule hardest, with capacities stated as numbers.
- Look at the restoration obligation now, because it is not negotiable at the end.
None of this is legal advice and a commercial lease deserves a lawyer who reads them for a living. What we can tell you is which of the technical items in that schedule will cost you most if they are missing — usually the electrical service, the gas capacity and the roof route, in that order.
For the rest of the pre-lease checklist, see choosing a space for a food business.
