A commercial kitchen lease is a commercial property lease with a kitchen's problems attached: the hood, the fire suppression, the grease interceptor, the gas and the electrical service, and a health permit that has to be yours. The last tenant's permit doesn't come with the space: under the FDA Food Code, which most states adopt in some version, a permit can't be transferred to another person or another establishment, and converting a space for food, or remodeling one when the health department asks, means plans submitted for review before the work starts. That's why the terms worth negotiating are the kitchen ones: what the lease lets you make and sell, a way out if the permit isn't approved, who repairs and cleans the hood and pumps the interceptor, an allowance toward the build-out, and when rent starts. Whether to lease at all is a question of hours: a shared kitchen charges by the hour, a lease is the same every month, and somewhere the lines cross. In the example below, a Jersey City empanada maker works out where.
The short version
- A kitchen lease is a property lease plus the hood, interceptor, utilities and permit.
- The last tenant's health permit doesn't transfer; you apply for your own.
- Converting a space, or remodeling one when the health department asks, means plan review first.
- Negotiate the use, a permit contingency, hood and interceptor upkeep, the build-out allowance and the rent start.
- Lease when your monthly hours pass the point where a shared kitchen costs more.
- Have a lawyer read the lease before you sign.
- TaroStack keeps stock in the shared kitchen and the new one apart during the move. More below.
The terms to negotiate
| Term | What to ask |
|---|---|
| Use | Does the lease allow food production, wholesale and retail sales, and your hours? |
| Permit contingency | Can you walk away if plan review or the permit isn't approved by a set date? |
| Hood and fire suppression | Condition at handover, last inspection, who repairs, who pays for cleaning |
| Grease interceptor | Is there one, what size, who pumps it, who repairs it? |
| Utilities | Gas line size, electrical service, water heater capacity, separate meters |
| Build-out allowance | What the landlord pays toward the build-out, and who owns the improvements at the end |
| Rent start | On signing, or when the kitchen opens? |
| Term and renewal | Length, and an option to renew at a set or capped rent |
| Subletting | Can you sublet hours to other makers? |
| Personal guarantee | Required, and capped or shrinking over time? |
What the space itself needs is in commercial kitchen requirements, and the plumbing in grease trap requirements.
The rules
| Rule | Where |
|---|---|
| Plan review | Plans go to the regulatory authority for approval before constructing a food establishment, converting a space to one, or remodeling one when it asks (Food Code 2022, 8-201.11) |
| What the plans show | The menu, volumes, layout, mechanical schematics, finishes and equipment (8-201.12) |
| Permits don't transfer | Not to another person, another establishment, or a different type of operation without approval (8-304.20) |
| Grease | Fixtures with grease-laden waste drain to a grease interceptor or an automatic grease removal device (IPC 2021, 1003.3) |
States and cities adopt the Food Code and the plumbing code in their own versions. This is general information, not legal advice.
An example: an empanada maker leaves the co-op
Palisades Empanada Co., the made-up empanada maker in Jersey City, New Jersey, I use in these examples, rents hours at a kitchen co-op. A grocery account has pushed it to 200 hours a month, more than the co-op can book it, and a 1,100 square foot former bakery is for lease in Greenville:
| Shared kitchen, at 200 hours | Amount | Leased kitchen | Amount |
|---|---|---|---|
| Membership | $250 | Base rent, $32 a square foot a year | $2,933.33 |
| 200 hours at $22 | $4,400 | Taxes, insurance and common areas, $7 a square foot | $641.67 |
| Storage: 1 dry, 3 cold, 4 freezer | $720 | Utilities | $850 |
| Build-out $54,000, less $16,500 allowance, over 60 months | $625 | ||
| A month | $5,370 | A month | $5,050 |
At 200 hours the lease costs $320 a month less, and the two cross at about 185 hours. Palisades asked for the kitchen terms before the rent: a way out if the permit isn't approved within 150 days, the landlord repairing the hood before handover, three months' free rent during the build-out, and the right to sublet hours to other makers. The bakery's old permit didn't carry over, so the walk-in freezer and the new sinks went to the city in a plan review first. What the co-op cost at fewer hours is in how to rent a commercial kitchen, and subletting hours later in how to start a shared kitchen.
Get the calculator
Download the kitchen lease calculator. Two sheets: lease or rent, with a shared kitchen's membership, hourly rate and storage at your hours against a lease's rent, NNN, utilities and build-out spread over the term, what leasing saves and the hours where the two cross; and the lease terms, with what to ask and what was agreed. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The move itself is the hard part. For a few weeks the empanadas sit in two places: the co-op's freezer racks and the new walk-in, with the grocery's orders shipping from both. A notebook can't say how many six-packs are in which freezer.
How TaroStack does it
TaroStack keeps stock in the shared kitchen and the new one apart, and moves it between them.
Sites. The co-op and the new kitchen can each be a site, and six-packs moved between them show in transit until they arrive.
Batches and lots. Each production run is a batch from its recipe, with its lot, wherever it was made.
Reorders. The reorder list shows flour, cheese and packaging in days of cover, so the first week in the new kitchen doesn't start short.
| The job | Notebook | In TaroStack |
|---|---|---|
| Six-packs in each freezer | A guess | Stock by site |
| Stock moved during the move | Not recorded | A transfer between sites |
| Flour for the first week | A trip to the supplier | The reorder list |
Batches, lots and the reorder list are on every plan, from $49 a month; more than one site is on Standard, at $99 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.