Your Most Important Negotiation: Choosing Your Martial Arts School

No single element has to be more right than your rent. Getting locked into an expensive lease straps a school's cash flow every 30 days.

Rent is presented either monthly or annually. In Florida, a 3,000-square-foot space at $10 per square foot annually may rent for $2,500 per month; 3,000 x $10 = $30,000 ÷ 12 months = $2,500. A similar space in California may be presented at .83 per month per square foot.; .83 x 3,000 square foot = $2,499.99. As my dad always said, “It’s the same thing, only different.”

Rent is very much like a hotel room or a 30-second TV spot. Every day that goes by and the space is not rented is money that can’t be recovered. That makes rent very negotiable. Make sure you are ready when you negotiate your rent. This section is designed to do just that.

First, an important note: You will never be paid more in your life than when you negotiate. For instance, you are buying a widget. Instead of paying the sticker price of $100, you say, “Will you take $80?” He says, “I’ll take $90.” In the few seconds it took to do this, you made $10. Let’s say it was a 15-second exchange; $10 for 15 seconds is the equivalent of $2,400 an hour. So let me repeat, you will never be paid as much as when you negotiate a price down.

How do you negotiate rent? After the initial walk-through, get an offer sheet from the landlord with his offer to you. Keep the entire negotiation process in writing. If, in phone conversation, you agree to a new point, confirm it in writing immediately to the landlord. It doesn’t exist if it’s not in writing. Don’t assume anything; get it in writing.

The most important two words in business are “just ask”. You will never earn more money in a shorter period of time than when you just ask. In the leasing business, everything is negotiable, but only if you just ask. The answer is always no until you just ask.

The Flinch

Learn to physically react to any price. It takes some acting and some practice, but it’s actually kind of fun and boy, does it pay well. Ask someone what the widget costs. Whatever they say, your response is, “What? You’re kidding me! That’s twice as much as I expected.” Often, that’s all it takes. The guy will drop his price or throw in something extra. At the worst, he knows you are “sensitive” to price. Warning: Tell your spouse what is going to happen. Once I flinched at a price, and my girlfriend at the time said, “I got so nervous when you did that. I could never do that.” I had to explain it was all an act. Practice your flinch.

Walk-Away Power

This is the most important aspect of negotiation. You must convey to the salesperson that you are perfectly willing not to purchase, and you will walk out unless you get a good deal. Without this, any decent negotiator will hold his position, because it’s clear you are going to buy anyway. In the car business, if the frustrated buyer storms out of the sales office to get in his car and go home, the salesman will chase him down. I even had one salesman step between my car and me to keep me from opening the door. I had to either laugh or choke him out. Either way, the deal always gets better at that point. If they let you go, the deal was as good as it was going to get that day. Either way, never get emotionally attached to a potential purchase. Even if you do, don’t show it.

Higher Authority

This charade has been done to death in the car business. You make an offer to the salesman, and he says, “OK. I’ll take it to my manager.” The manager is the higher authority. It’s the good cop, bad cop scenario. The salesman role is the good cop. He wants to find out what you like and see how emotionally attached you or your spouse are to the car. He will take that information back to the manager, the bad cop. You can be sure the salesman is not saying, “They are a nice couple, and this is a fair price offer.” What he and the manager are doing is figuring how to get the highest price possible. The salesman comes back with a smile and a counter offer.

When you are negotiating a lease, be the good cop. Tell the seller you have to run everything by your people or your association. This gives you time to figure out your next move and keeps any emotional attachment out of the game. It also works to remind the salesperson that you are not the final decision maker and that the deal could get shot down at any moment by the association or your business partners.

Be Negative

It’s never a good idea to walk into a space and say out loud, “This is perfect! We can put the changing rooms here, the pro shop here. This is ideal for my office....” By doing so, you expose your emotional attachment to the property. I am a very positive person, so let me say this: I am positive you want to be negative, or at least neutral, when negotiating a lease or even viewing a space.

Simply walk around, take some notes, do a rough floor plan of the shape, and tell the salesperson, “Gee, I don’t know. This could be a lot of work.” A good salesperson will start asking you questions then. Be sure to convey a very neutral position. “I guess I could make it work, but it’s not going to be easy.”

I said don’t show emotion while looking at a space. Actually, you can do a little play-acting and show some negative emotion. It’s an extended flinch. Communicate to the salesperson that if she wants you to go ahead with this, it’s going to take some work on her part, starting with price and terms. Don’t make it easy for her and hard for yourself; you’re the one who has to make the monthly rent payments.

The martial arts industry is haunted with the ghosts of good schools that had everything going for them but ended up posting a “For Lease” sign in their window and closing their doors. One of the most common failures is a poorly negotiated lease that straps the owner with an exorbitant rent. A bad lease deal is not just high rent, either. Your start-up costs and your ability to expand can be drastically affected when you have a bad lease.

Signing a lease is like going into business partnership with a location and landlord for a period of time. Partnerships are seldom easy. Our goal is to help you turn this partner into a friend and not a foe of your future.

All leases have a basic framework that outlines how long you will occupy the space and how much it will cost you to stay there. Beyond that, there is a wide spectrum of lease structure. Don’t think just because a term or condition is in the landlord’s lease that it is carved in stone. Virtually every aspect of that lease is negotiable, and we’ve talked to many school owners who have received concessions they never thought possible by using our strategies. But they would never have received them – and you won’t either – unless you just ask.

Be Prepared

Unless you know the current leasing conditions in your area, it’s a good idea to get some expert help. Invest $100 for a commercial real estate attorney and/or commercial real estate broker known as a tenant rep. Their job is to help you get the best deal possible.

Landlords typically have their own attorneys, so it’s smart to put your own team together. Tenant brokers can help you find a good location as well as offer ideas, insights, and experience on the current market, rental rates, and other conditions that may work in your favor.

Once a potential location is found, the rep can help you and the landlord come to terms on the key points of the lease.

Match the School with the Location

For a hard-core kickboxing gym, it would not make sense to rent a space in the middle of a neighborhood of kids and elementary schools. Conversely, for a family-oriented martial arts program with an emphasis on children, you wouldn’t want to be in the downtown district.

Match your school with the demographics of the area. Before signing a lease, learn as much as possible about tenant history and why the other operations failed or moved. Speak with the current tenants about their experience with the landlord and the area. What is the make-up of the typical customer? Find out if any new building or road construction is planned that might affect your school’s growth.

When researching a location, get demographic information on the area from your broker or the Chamber of Commerce. Know your Pull Radius and your Potential Ratio. Schools typically draw from a 15-minute driving radius, so start with that but don’t limit yourself. You need to know the demographics for your immediate area as well. The farther away the demographic group, the less potential they have as students. Make sure you are surrounded with the right potential student base.

Finally, be sure the zoning in the area allows for a martial arts school. Know what limits you have on signage, parking, fire codes, etc.