I live in a state that has yet to sanction in home baking which has placed me in a position of renting/leasing licensed kitchen space. A really good friend of my sister has opened a Cake shop and Cafe with her sister after being in business for about 2 years. They started by leasing the kitchen of a restaurant that had closed but never had a storefront...now they have a store front/cafe that will be opening in April. They carry a rather hefty lease on the property (more than what they have grossed actually) but are stepping out on faith with hope and prayer that they will be successful. I have been looking for kitchen space to rent/lease and they are willing to work something out with me...kitchen usage in exchange for cupcakes/cakes (they only do various types of cheesecakes and would like to have more of a variety) and cake decorating classes for kitchen usage and the right to operate some of my business from their facility as much as the department of health etc will allow (just basics like tastings, pick-ups, consultations).
Here's what I would like to know:
1.) Does this seem like a sound agreement to enter?
2.) What is a fair exchange of goods for kitchen use?
3.) If you were in my position would you take the offer? Why or why not?
4.) What are some things I should consider prior to accepting the offer?
I know there is a wealth of knowledge here on CC and I just wanted some input from my fellow CCers who are looking at this from a different perspective than I am. I don't want to make the wron decision but I'm sooooo looking forward to finding new kitchen space.
This doesn't seem like a bad deal to me. They need extra income, you need the kitchen space. As long as it is legal within the jurisdiction, why not?
That being said, a fair exchange of goods would be based on market price in your area. How much would you get charged to rent a licensed kitchen space? How does that translate into the sales cost of your goods?
Make sure you get a contract, and have an attorney review it.
When entering any barter type situation the golden rule is swap retail price for retail price. So if they are wanting $400 a month in product you barter your retail price of $400 worth of product, then they sell it at whatever price they want to make their $400 worth of rent and maybe some profit too. You are actually only out your cost of ingredients and time away from your projects. If the time works out well that you can still get your products done and sold it should be an amicable arrangement. But like cookie said...get a contract in writing! But a word of warning...if their rent overhead alone is more than they grossed last year with sales, I would be a bit gun shy that they might fold sooner than later. The only way they will be able to stay afloat is if they have a bunch of money to live off of and every dime they make gets put back into the business. If they are hoping their business will also give them a salary to live off of, 99 times out of 100 the business will fail due to cash flow issues. I would find out first what their financial strength is. It would suck to have your equipment up there and one day you come up and they are locked out due to non payment of rent and you lose your equipment.
Edited to add, that from my own experience, opening a store front does not always equate to more business, and many cakers fall into that trap thinking that if I can just have that store front people will be lining up at the door. I wish that were true, but that is very rarely what happens.