Quick answer
Before signing a lease for a second site, check the disclosure statement, the term and options, how rent is reviewed, which outgoings you pay, the make-good clause, fit-out approvals, any incentives, the security required, permitted use and trading hours, assignment rights and demolition or relocation clauses. Each affects what the site costs over time — and therefore how long it takes to pay for itself.
Key points
- The lease locks in your biggest ongoing cost for years — read it as a financial document.
- Retail leases come with disclosure statements; read them before you sign.
- Rent reviews, outgoings and make-good can change the true cost substantially.
- Negotiate incentives before you finalise your fit-out budget and funding.
When you open a second site, you’ll sign plenty of documents. The lease is the one that matters most. It sets your biggest ongoing cost, often for five years or more, and it quietly decides how long the new site takes to pay for itself. Yet many owners spend weeks choosing tiles for the fit-out and an afternoon reading the lease.
Here’s a checklist to reverse that.
Why does the lease matter so much to payback?
Rent and outgoings start on the commencement date, usually well before the new site reaches full trading. They run through the ramp-up, when the site is earning least. They rise with each review. And at the end, the make-good clause can hand you one final bill. A lease that looks affordable in year one can look very different across its whole term.
That’s why the lease should be modelled, not just signed. Our second location funding playbook and the ramp-up guide show how rent interacts with a new site’s slow start.
The 12-point second-site lease checklist
1. The disclosure statement. For retail leases, each state’s legislation requires the landlord to provide a disclosure statement. In NSW, the NSW Small Business Commissioner explains that the lessor must provide it at least seven days before the lease is entered into, covering matters such as the term, rent and review method, outgoings, trading hours, fit-out details and known disruptions. The Victorian Small Business Commission publishes similar guidance for Victoria. Read it closely and check it matches the lease.
2. Retail or commercial? Whether the premises fall under your state’s retail leasing laws affects the protections you have. Check with your lawyer.
3. Term and options. How long is the initial term, and what options to renew are there? Does the term let you recover your fit-out and ramp-up costs?
4. Rent and rent reviews. Is rent reviewed by a fixed percentage, by an index, or to market? How often? Model the rent across the whole term, not just year one.
5. Outgoings. Which operating costs are passed on — rates, insurance, common-area cleaning, maintenance, management fees? Ask for a written estimate and the previous year’s actuals.
6. Make-good. What condition must the premises be returned in? A bare shell? The condition at the start? Get it defined, and consider a photographic record at handover.
7. Fit-out approvals and works. What landlord works are included? What approvals do you need for your fit-out, and how long do they take? Who pays for services upgrades?
8. Incentives. Rent-free periods, fit-out contributions or reduced rent in the early months directly reduce what you need to fund. Negotiate them before you finalise your budget.
9. Security. How large is the bank guarantee or bond? A bank guarantee ties up funds or credit capacity — include it in your funding plan.
10. Permitted use and trading hours. Does the permitted use cover everything you’ll do, including future services? Are core trading hours required?
11. Assignment and subletting. If you ever sell the business or need to exit, can you assign the lease? On what conditions?
12. Demolition and relocation clauses. Can the landlord end the lease or move you for redevelopment? What compensation applies?
A worked example (illustrative)
A hair and beauty salon owner is choosing between two sites for her second salon.
| Site A | Site B | |
|---|---|---|
| Base rent (year one) | $60,000 | $54,000 |
| Rent review | Fixed 4% each year | Market review every two years |
| Estimated outgoings | $8,000 a year | $16,000 a year |
| Incentive | Three months rent-free | None |
| Make-good | Remove owner’s fit-out only | Return to bare shell |
| Term | 5 years + 5-year option | 5 years, no option |
Site B looks cheaper on base rent, but its outgoings are double, its make-good is heavier, it has no option to renew and its market reviews are unpredictable. Site A’s rent-free period also shrinks the ramp-up cash gap — worth about $15,000 when the salon is least profitable.
Across five years, Site A’s rent and outgoings total roughly $365,000 less the $15,000 incentive — about $350,000. Site B’s total is harder to predict: at $70,000 a year before any market increase, it’s already about $350,000, before a bare-shell make-good that could cost tens of thousands more. And with no option, a successful salon could be forced to move after five years. She chooses Site A and models the ramp-up in the Growth ROI calculator. If you’re weighing up a second site of your own, you can see what funding could support it in about a minute.
When should you walk away?
Sometimes the right move is to keep looking. Consider walking away if the landlord won’t provide a disclosure statement or outgoings history, if the make-good obligation can’t be defined, if the rent only works at a trading level your first site took years to reach, or if the term is too short to recover your fit-out. Another site will come along; a bad lease stays with you for years.
Questions to ask the landlord or agent
- What have outgoings actually been over the past two years?
- Why did the previous tenant leave?
- Are any works, redevelopments or major tenancy changes planned nearby?
- What incentives are available for a longer term?
- Will you contribute to services upgrades such as power, plumbing or exhaust?
- What make-good was required of the previous tenant?
How does the lease connect to your funding?
Your funding plan for a second site should cover:
- Fit-out and equipment — see fit-out finance.
- The bank guarantee or bond.
- The ramp-up gap — rent, outgoings and wages before the site matures.
- A contingency for delays in approvals or works.
Match the funding term to the lease. Ideally the fit-out is paid off well before the lease (including options you’re confident of taking) ends. For larger second-site plans, a property-secured loan can fund the lot over a longer term — see using property equity to expand.
What’s different about shopping-centre leases?
Leases in shopping centres often carry extra obligations worth checking closely: marketing or promotion levies, required fit-out standards set by the centre, stricter core trading hours, turnover reporting and sometimes turnover-based rent components. Centre redevelopment and relocation clauses also tend to be more common. None of these is necessarily a deal-breaker — centres bring foot traffic that a strip site can’t — but each adds cost or reduces flexibility, so put them into your numbers.
What mistakes do owners make with second-site leases?
- Signing before the numbers. Model the full lease cost across the term, including reviews and outgoings, before committing.
- Ignoring the ramp-up. Rent starts on day one; customers take longer.
- Accepting the first offer. Incentives and terms are often negotiable, especially for vacant premises.
- Overlooking personal guarantees. Many leases require directors to guarantee the tenant’s obligations. Understand what you’re signing.
- Leaving make-good vague. Undefined obligations become expensive arguments at the end.
Get advice before you sign
A commercial lease is a significant legal and financial commitment. Have a lawyer experienced in commercial or retail leasing review it, and talk to your accountant about how the costs affect your cash flow and tax. State small business commissioners also offer guidance and, in some cases, dispute resolution services for retail tenants.
Found the right site? Let’s fund the opening
A well-negotiated lease is the foundation of a second site that pays for itself. Once you’ve got it right, the next step is funding the fit-out, the bond and the ramp-up so the new site has the runway it needs.
Tell us about the site, the lease terms and your budget. The form is brief, there’s no credit enquiry when you first submit it, and your plans aren’t handed to a stack of lenders. A specialist reviews them and gives you a call. Include the lease details and any property you own so we can shape the right structure from the start.
Frequently asked questions
What should I check before signing a commercial lease?
Read the disclosure statement (for retail leases), then check the term and options, rent review method, outgoings, make-good obligations, fit-out approvals, incentives, the bank guarantee or bond required, permitted use, trading hours, assignment rights and any demolition or relocation clauses. Get independent legal advice before signing.
What is a lessor's disclosure statement?
For retail leases, state laws require the landlord to give the tenant a disclosure statement setting out key lease information such as the term, rent, rent review method and outgoings. In New South Wales, for example, the lessor must provide it at least seven days before the lease is entered into.
What are outgoings in a commercial lease?
Outgoings are the building's operating costs that the landlord passes on to tenants, such as council rates, water rates, insurance, cleaning of common areas, maintenance and management fees. They can add substantially to the base rent, so ask for an estimate in writing.
What is a make-good clause?
A make-good clause requires the tenant to return the premises to a specified condition at the end of the lease — sometimes to a bare shell. Removing a fit-out can be expensive, so understand the obligation and factor it into your long-term costs.
How long should a lease be for a second location?
Long enough to recover the fit-out and ramp-up costs, with options that give you security if the site succeeds, but not so long that you're locked in if it doesn't. Many owners prefer a shorter initial term with options to renew.