Here's how most commercial lease signings happen in Australian hospitality. Founder finds a space they like. Solicitor reviews the lease document, flags the major legally problematic clauses, recommends a few changes. Landlord's solicitor responds. Some clauses get amended. The rent incentive gets tweaked. Founder signs, pays the bond and first month's rent, and gets handed the keys. What happened in that process? Legal risk was partially addressed. Commercial risk — the actual question of whether this location can ever generate a profitable business for this operator — was almost never asked, let alone answered. The solicitor isn't at fault. That's not what solicitors do. They review the document for legal compliance and risk. They do not model whether the location can generate enough revenue to justify the rent. They do not assess whether the foot traffic profile matches the format. They do not check the development pipeline or the competitive landscape. Those are commercial questions, and commercial due diligence is the founder's job. This checklist is that job, done properly.
How to use this checklist
Work through every section before you enter lease negotiations — not during them, not after falling in love with a space. If you hit a critical fail on any item, do not rationalise it away. These signals exist because they have caused preventable, expensive failures for Australian hospitality operators. Take each one seriously.
Section 1: Revenue Viability — The Foundation That Everything Else Sits On
This section cannot be skipped or deferred. It must be completed before you visit the space, before you have a conversation with the property manager, and certainly before you allow yourself to develop any emotional attachment to the location. The question is simple: can this format, at this address, at this rent, ever generate a profitable business? The answer requires three calculations.
The Revenue Ceiling Calculation
Your revenue ceiling is the maximum your business can generate at 100% occupancy across all services. Seat count × average table turns per service × average spend per head × number of services per week. Be honest with your assumptions. If you're opening a 60-seat restaurant with 1.6 lunch turns at $28 and 1.0 dinner turns at $45, running 14 services a week, your ceiling is approximately $46,000 per week. Not $60,000. Not "once we build the customer base." $46,000 at 100% capacity, which you will never consistently achieve.
The Realistic Revenue Calculation
Multiply your ceiling by 0.70. This is your realistic trading figure — what a well-run, established operator in a good location typically generates as a percentage of theoretical maximum. For the example above: $32,200 per week. This is the number your rent must be assessed against. Not the ceiling. The realistic figure.
The Maximum Viable Rent
Realistic revenue × 0.10 = your maximum viable weekly rent, including all outgoings. For the example above: $3,220 per week all-in. If the quoted rent is above this figure, the math does not work. You can negotiate, but the gap between where the landlord is and where the math works defines your negotiating position clearly.
Revenue viability checkboxes:
- 1
Have you calculated your revenue ceiling at 100% capacity with honest assumptions about turn rates and average spend?
- 2
Have you calculated your realistic trading figure at 70% of ceiling?
- 3
Have you confirmed your all-in rent (including outgoings — not just base rent) is below 10% of your realistic trading figure?
- 4
Have you modelled trading at 50% of your realistic figure? Can the business survive two consecutive months at that level without structural damage?
Section 2: Location Intelligence — What the Site Visit Won't Tell You
A site visit is necessary but insufficient. It shows you the space at its best, in the moment the property manager has chosen for you to see it. It tells you almost nothing about Tuesday morning trading, January trading, or what happens when the office building next door relocates its 400 workers in year two of your lease.
Foot Traffic — Volume and Profile
Count foot traffic yourself. Stand outside the location for two hours during your primary trading occasion — not during a weekend when the area looks its best, but during the actual time slot that will determine your weekly revenue. Count the pedestrians. Then honestly assess: what proportion of these people are plausibly your target customer? This means demographic profile, apparent purpose, and time available. A stream of commuters at 8:15am is very different from office workers at 12:30pm, which is very different from tourists on a Sunday afternoon. Each translates to a different conversion rate, a different spend profile, and a different format viability.
Do this across at least three different time periods and two different days of the week. Seasonal variation matters too — if you're scouting in December, visit again in late February when the novelty of the area might look different. The gap between your best trading period and your worst trading period is often the most important commercial characteristic of a location, and it's invisible on a single site visit.
Anchor Business Mapping
Map every business within 200 metres. For each one, classify: is it a traffic generator (brings people to the area as a destination — large employer, transport hub, entertainment venue), complementary (adds dwell time without directly competing — boutique retail, café adjacent to your dinner format), extractor (competes for the same wallet — another restaurant in your price point and meal occasion), or neutral (has no meaningful impact on your trade).
The optimal anchor composition for most restaurant formats: at least one large traffic generator within 150 metres, a complementary retail or service cluster that drives dwell time, and no more than two direct extractors within 200 metres. If the 200-metre radius contains three or more direct extractors and no meaningful traffic generators, you are relying entirely on destination-driven demand — which is much harder and slower to build than intercepting traffic that's already there.
The Development Pipeline Check
This is the step almost nobody takes and the one that most consistently contains information that would change commercial decisions. Council DA registers are publicly available, legally required to be maintained, and searchable by address. Spend two hours checking the pipeline for every approved and pending application within a one-kilometre radius of your candidate location.
What you're looking for: construction projects that will begin in years one or two of your lease and that will reduce access or foot traffic to your location. New residential developments (positive — more potential customers) or new food-and-beverage precincts in those developments (potentially negative — more competition at the time you're trying to establish your business). Infrastructure projects, road closures, utility works. These are not hypothetical risks. They are scheduled, approved, and publicly documented. You just have to look.
Location intelligence checkboxes:
- 1
Have you counted foot traffic during your primary trading period on at least two separate occasions?
- 2
Have you profiled the pedestrian demographic and assessed their match to your format and price point?
- 3
Have you mapped anchor businesses within 200 metres and classified each as generator, complementary, extractor, or neutral?
- 4
Have you checked the council DA register for applications within one kilometre?
- 5
Have you visited the location on a weekday morning at 7:30am and a Sunday evening at 8pm to understand the full range of trading conditions?
Section 3: Competitive Landscape — Honest Assessment Required
Competition assessment requires intellectual honesty that is genuinely difficult when you're excited about a concept. The temptation is to identify differences between your offer and the existing operators and conclude that those differences make the competition irrelevant. "They're Italian, we're Japanese" or "their service is inconsistent, ours will be better" are not competitive analyses. They're optimistic assumptions.
The 1km Meal Occasion Map
Map every food and beverage operator within a one-kilometre walkable radius. Group them not by cuisine but by meal occasion type: weekday lunch, casual weeknight dinner, special occasion dinner, weekend brunch, quick breakfast, late night. For each of your core meal occasions, count how many established, operationally solid operators are already competing for that specific occasion within your catchment. "Established and operationally solid" means open for more than 18 months with visible consistent patronage — not every business in the area, but the ones that have already built occasion loyalty.
If your core meal occasion (say, mid-range casual dinner for two, $80–$100 all-in) is already served by three well-established, popular operators within a 10-minute walk, you are entering a saturated segment. That doesn't make success impossible, but it means you need a genuinely distinctive proposition and the patience and capital to build occasion loyalty from zero against established competition. Most operators don't have both.
The Why-Is-There-No-Competition Assessment
When you identify a location that appears to have no direct competition in your segment, your immediate response should not be "I've found an opportunity." It should be "why is there no competition here?" There are two possible answers. The first: the market genuinely has unmet demand in your segment and you've found a gap. The second: other operators have assessed this corridor and concluded that the demographic doesn't support your format at your price point. The second is more common than the first. Spend time determining which you're looking at before committing.
Competitive landscape checkboxes:
- 1
Have you mapped every food and beverage operator within 1km and grouped them by meal occasion type?
- 2
For each of your core meal occasions, how many established, loyal operators are already serving it?
- 3
If there is no direct competition, have you investigated why and confirmed it's an opportunity rather than a signal?
- 4
Have you assessed the strength of established competitors (years in operation, visible patronage, apparent loyalty) not just their number?
Section 4: The Lease Clauses That Have Commercial Consequences
Your solicitor will review these clauses for legal compliance. That is not the same as modelling their commercial implications in dollar terms over the life of your lease. You need to understand both.
Rent Review Mechanism
How does your rent change over the life of the lease? The most common mechanisms are: fixed annual increase (e.g., 3% per year — predictable, easy to model), CPI-linked (tracks the Consumer Price Index — was the standard for many years, became very expensive in 2022–2024 when CPI ran at 5–8%), and market review at intervals (rent is reset to current market rate at specified dates — can go up or down depending on market conditions). Know which mechanism applies to your lease. Have your solicitor model the dollar impact of each scenario over your full lease term. Reject "that's standard" as an answer — standard still has dollar consequences you should understand.
The ratchet clause is a specific variation that deserves particular attention: some leases specify that at a market review, the rent can only be adjusted upward to market rate, never downward. In a softening rental market, this clause prevents you from benefiting from market movements. It is not inevitable. Many landlords will remove it if pushed by a prepared tenant who knows to ask.
Make-Good Obligations
Read the make-good clause carefully and have your solicitor translate it into specific obligations for your planned fit-out. Then get a quote from a fit-out contractor for what those obligations would cost to fulfil. Add this number to your total lease cost. For a $150,000 kitchen and dining room fit-out in most Australian commercial tenancies, make-good costs typically range from $40,000 to $85,000, depending on the scope of works and the specificity of the clause. This is a liability that exists from day one of the lease. It should be in your financial model from day one of your planning.
Personal Guarantee
Model your worst-case personal exposure in explicit dollar terms before you sign. Take your weekly rent. Multiply by 52. Multiply by the years remaining on your lease at the point you estimate the highest risk of business failure (if the business doesn't make it, when is that most likely? Month 24? Month 36?). Subtract whatever portion of the remaining liability you think your business assets could cover. The remainder is your personal financial exposure. Look at that number. Decide whether the business opportunity justifies it. That decision should be made clearly and consciously, not discovered retrospectively.
Permitted Use and Assignment Rights
What does your lease permit you to do? If you add a delivery operation to your restaurant, or a catering business, or a retail offering, or a liquor licence you don't currently hold — does the permitted use clause allow it? If your business evolves in any direction over five years (and it will), does your lease keep pace or constrain you? And critically: if you want to sell the business at some point, can the lease be assigned to a new owner? An assignable lease is a material commercial asset when you're selling. A non-assignable lease limits your exit options significantly and reduces the business's value to a potential buyer.
Lease clause checkboxes:
- 1
Have you had your solicitor model the dollar impact of the rent review mechanism over the full lease term in each scenario?
- 2
Have you confirmed whether a ratchet clause exists and whether it's removable?
- 3
Have you got a contractor estimate for make-good costs on your planned fit-out and added it to your total lease cost?
- 4
Have you modelled your worst-case personal guarantee exposure in explicit dollar terms?
- 5
Have you confirmed the permitted use clause covers everything you plan to do now and might do in the next five years?
- 6
Have you confirmed assignment rights and understood what constraints apply to any future business sale?
Section 5: Operational Reality — What Enthusiasm Skips
The operational section of the checklist covers the things that feel too basic to worry about when you're evaluating a space conceptually but that have significant commercial consequences when you're trying to operate from it daily.
Operational checkboxes:
- 1
Have you visited the space at the precise time of day you plan to operate? A café space that feels vibrant at 10am on a Saturday might be cold, dark, and dead at 7am on a Tuesday when you actually need it to generate revenue.
- 2
Have you had a contractor assess the kitchen infrastructure — exhaust and ventilation capacity, three-phase power availability, gas connection, existing equipment serviceability? Infrastructure surprises are the most common cause of fit-out cost overruns, and they're almost always visible before you sign if you look properly.
- 3
Have you spoken directly to neighbouring tenants — not the landlord's property manager, but the actual business owners or managers in adjacent tenancies? Ask specifically: what's the landlord like to deal with on maintenance and repairs? Have there been any building issues? What do they know now that they wish they'd known before signing?
- 4
Have you found out why the previous tenant left? If a food and beverage operator previously occupied the space, call them. Find them on LinkedIn. Send a direct message. Most former operators will tell you the truth about why they left, and that information is frequently decisive.
The Negotiation Posture This Checklist Creates
Here is the practical benefit of completing this checklist before entering lease negotiation: you walk into the conversation from a structurally different position. You know your maximum viable rent before the landlord quotes you a figure. You know the competitive context of the location. You know what's in the development pipeline. You know the infrastructure risks. You know what make-good will cost.
This means you have genuine, data-backed walk-away capacity. Not bluffing. Not negotiating tactics. Actual clarity about the point at which this location stops making commercial sense for your business. That clarity is rare in commercial lease negotiations, where most tenants are anchored to the landlord's asking price and negotiate downward from it. The operator who has done this analysis negotiates from a known position to a known maximum. The operator who hasn't done it negotiates from enthusiasm to wherever the landlord decides to stop.
The landlord has done this analysis on their side. They know what the space rents for on comparable streets. They know their minimum acceptable return. They know which clauses are genuinely non-negotiable and which ones are concessions they're prepared to make. You should have the equivalent data on your side. This checklist is how you get it.
Locatalyze compresses Sections 1 and 2 of this checklist into a 2-minute location analysis for any Australian address — revenue scenario modelling, foot traffic assessment, competitive mapping, and rent benchmarking.
Start your location analysis → →About the author
Prashant Guleria
Founder, Locatalyze
Prashant built Locatalyze to give every Australian restaurant operator the analytical tools that institutional investors apply to commercial real estate decisions.
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