How do I evaluate the lease?

Abstract the lease before you fall in love with the vestibule. Remaining term, options, assignment, exclusive use, co-tenancy, CAM, and who pays taxes and insurance decide whether a financed buyer can stay. Grocery Store Business Broker — the grocery practice of HedgeStone Business Advisors, led by Jason Taken — prices occupancy before the second tour. Book a confidential intro with the scariest lease page and last week’s sales if you want that abstract started on your file.

FMI’s 2.1 percent average net profit for food retailers in 2025 is why occupancy is not a rounding error. Thin net plus a rent surprise is how a “healthy” independent misses payroll. The longer guide is lease due diligence. The structure twin is selling with a lease versus real estate. This page is how you read the paper.

Abstract occupancy before you tour again

Write a one-page abstract: commencement, expiration, remaining term, options and how they are exercised, base rent and bumps, triple net and CAM, taxes and insurance, assignment and consent, recapture, exclusive use, co-tenancy, radius, hours, and who owns the refrigeration pads and the roof over the box. A CIM that omits that abstract is a brochure. How to read a CIM is the buyer annotation method. Your job is to refuse a book that skipped the occupancy page.

Remaining term under 24 months without options is a price cut, not a footnote. A five-year remainder with two five-year options is a different asset than fourteen months and a shrug. Options that require a personal guarantee you will not sign are not options. Options that expire if you miss a notice window are a calendar, not a vibe.

FMI’s $1 trillion in 2025 supermarket sales and 45,575 U.S. supermarkets in 2024 describe the channel. Your box is a lease or a deed. Do not paste channel volume onto a strip pad and call the rent “fine.”

Assignment is the landlord’s underwriting

Lease assignment is landlord consent to move the tenancy to the buyer. In grocery it is often the critical path. Personal guarantees, assignment fees, and whether the landlord can recast rent at assignment are the clauses that surprise civilians. Asking for consent before you have a name the landlord can underwrite is how rent gets reopened while you still have no buyer. Asking too late is how a Tuesday dies.

SBA 7(a) can finance a change of ownership; the published maximum is $5 million. Lenders still want term they can live inside. A short remainder with a shrug is how a loan committee passes. Read SBA 7(a) for grocery. DSCR is recast cash flow over debt service after occupancy, not before it.

If the seller is also the landlord, related-party rent juiced the earnings. Plug market occupancy into SDE before you talk a grocery multiple. A sweetheart lease will reverse on Monday for any buyer who cannot inherit the family deal. Recurring shrink stays in. Owner pay comes out.

Exclusive use, co-tenancy, and the empty pad

An exclusive-use clause bars the landlord from putting a competing grocer — or a listed food category — in the same center. Valuable when it is enforceable. Worthless when it carves out dollar stores, pharmacies, and every modern format. An exclusive that allows a dollar store with a grocery aisle may not protect the independent you think it does. Read the carve-outs. Then walk the center.

A co-tenancy clause cuts rent or allows termination if a named anchor goes dark. A grocery can be the remaining tenant who suffers, or the named anchor whose closing triggers other tenants’ rights. Read which side you are on. If the grocery is the only reason the strip stays leased, the landlord may fight assignment. That is a diligence item, not a surprise in week ten.

Empty pads, a dark drugstore, and a parking lot that lost its evening traffic belong in the abstract. They are not “the neighborhood.” They are occupancy risk. USDA FNS: SNAP authorization does not transfer. Budget downtime in the story you tell the landlord. A landlord who hears “we’ll transfer EBT” is hearing a rumor, not a plan.

NNN, CAM, and the recon that eats SDE

Triple net means the tenant pays real-estate taxes, insurance, and maintenance on top of base rent. Grocery NNN math can make a “cheap” rent expensive once CAM, roof reserves, and parking-lot work are included. Always underwrite occupancy as rent plus NNN plus CAM, then as a share of sales you can prove. Do not invent a national grocery rent percent as a law. This research pack leaves metro rent ranges null on purpose. Compute this file. The rent-as-percent-of-sales checker is a sketch: (annual rent + CAM) ÷ annual sales. It does not declare a healthy percent.

A CAM reconciliation that jumped after a co-tenant left is a diligence item, not a surprise at year two. CAM true-ups can erase a year of “extra” SDE. Ask for two years of recon statements, the CAM budget, and who controls the roof. A grocery tenant often pays a large share because they are the traffic anchor. Confirm the share, not the slogan.

BizBuySell’s 3.38 average earnings multiple in 2025 is an operations sample. Occupancy that will reset at assignment moves the recast more than a hallway argument about a tenth of a turn. Revenue multiples hide rent. Return to SDE.

Occupancy versus the week this store actually rings

Occupancy only means something against sales you can prove. Scan data is the adult conversation. A weekly-sales spreadsheet without department mix is a rumor you are about to hand a landlord. FMI’s $668,377 average weekly sales per supermarket in 2025 is not your week. Use the tape.

Alcohol hours, loading-dock rights, and overnight receiving are grocery clauses. A radius that blocks a second store you already own is a portfolio problem. Hours that forbid a 5 a.m. produce drop are an operating problem. Write them into the abstract.

Jason Taken and HedgeStone are not licensed business brokers in every state. Check the rule that applies to your deal. Selling or buying the building always requires a real-estate licensee in that state. This page does not invent a local cap rate or a CBP store count.

Print the closing and license checklist and mark the occupancy lines. Book a confidential intro when you have the lease PDF, even if it is messy. Bring the page with the scariest clause and last week’s sales. That is enough to start the abstract.

An illustrative recast on How do I evaluate the lease?

Use this napkin recast on How do I evaluate the lease? when you book the call. It is labeled illustrative. BizBuySell's 2025 grocery sold-business earnings multiple averaged 3.38, with a 2021-2025 IQR of 1.60-3.15.

Input or output	Illustrative figure
Weekly sales (illustrative)	$78,000
Annual sales	$4,056,000
Recast SDE	$166,296 (4.1% of sales)
Inventory at cost	$289,714 (~14 turns)
Occupancy check	$89,232 / year (2.2% of sales)
Low going-concern	$597,362 at 1.85x SDE + inventory
High going-concern	$763,658 at 2.85x SDE + inventory
Sketch DSCR on a note	1.37

If weekly sales or shrink move 8 percent, the SDE and the note move with them. That is why Jason Taken starts with scan data and the lease, not with a neighbor's rumor multiple.

Book the intro call with your side of the table ready: seller files or buyer capital. The calendar is the only next step.