Signing Exclusive Deals for NYC Office Space
Signing exclusive deals when you find an office space in NYC is one of the most strategic decisions you can make as a firm. Most landlords tend to be queasy about signing such a deal. For you, as a tenant, an exclusive deal gives you an opportunity to define the market in the particular building or market. Exclusive deals are only as useful as their capacity to be enforced in case of a breach. Before such a contract can be signed, make sure you list all the businesses that you consider direct competitors. This will protect the landlord from erroneously signing another contract with a competitor.
Cuts off Competition
Business competition and rivalry is good, but only for the consumer. By signing an exclusive deal, you’ve essentially eliminated any prospects of a competitor coming within the vicinity of your premises. This gives you a significant level of monopolistic power over the market or the clients who flock to your office building. This is quite critical, especially if you are just beginning to gain a foothold in the market. Most firms sign exclusive deals when they are dealing with powerful competitors. Therefore, an exclusive deal becomes a form of protection.
Amplifies Your Brand
Being the only business of its kind in a building complex tends to significantly improve the brand value. It frees up a firm to advertise itself and attract clients easily.
There are lots of instances where the popularity of the business eventually outpaces the popularity of the building block, and the block eventually becomes synonymous with that office brand.
Rarely would you achieve that level of brand publicity and awareness if you’re surrounded by competitors. Brand value, in turn, translates to a larger market and greater sales.
The Right to Terminate the Lease
Most often an exclusive use clause is as good as it can be enforced. In the case of a breach of exclusive use clause, it becomes complicated if the remedies were not discussed. Therefore, it’s critical that the tenant-landlord agreement stipulates the possibility of nullifying the contract in case of a breach by the landlord. Otherwise, if the consequences are vague, then the tenant might not get better compensation terms from the landlord. The best remedy for breach of an exclusive use clause should be the right to terminate the lease, as well as financial compensation due to loss of business. However, all this will be dependent on your lease.
Acts as A Pricing Mechanism
One of the primary benefits of an exclusive use clause is that it grants you a certain measure of monopolistic traits in the region. This gives you greater leeway in setting up prices. The best part about it is that you can explore any of the basic pricing mechanisms to figure out which one delivers the highest sales with the highest revenue possible. Whether you want to carry out psychology pricing, bundle pricing, price skimming, economy pricing or pricing for market penetration, the choice is yours.
Protect Markets
An exclusive use clause is a form of protectionism for your firm. This is rather critical if you are in an industry with a small market in the region. The restrictive clause allows you to limit the number of suppliers or producers, which in turn helps to balance supply and demand. The issue of protecting markets through restrictive clause is quite important if the firm is still young and it’s trying to establish its feet in the local market. This often becomes critical when the market is small and can’t support a rival office in the same building block.
Offers Massive Profits
Limiting clients to your outlet means you can significantly boost your sales and drive profit margins upwards. The exclusivity clause also allows you to experiment with different pricing models to find the most efficient mechanism that delivers the highest rates possible.
The clause combined with good products and excellent client service gives you great opportunity to multiply your income many times over. For a startup in NYC, the chance to generate maximum revenue from the get-go can prove to be a lifeline that will quickly wean the firm from venture capital and other sources of funding.
Tenant Remedies
A significant advantage that an exclusive use clause gives you is that it provides room for remedies. Besides the possibility of nullifying the contract, you can also negotiate for lower rental charges as a remedy for having your exclusive use clause breached. This will, in turn, keep your overhead costs low and boost your margins. In the case of a breach, always weigh your options carefully. Whether you choose to terminate or seek lesser rental charges, make sure it’s the option that will best service your office work. Any of the above reasons would make for a strategic reason on why you should pursue a restrictive use clause from your landlord.
Incidental Sales
Given that your exclusive use clause locks out competitors, it may as well attract complementary firms. However, this is very dicey, since the boundaries aren’t often that clear. That’s why the exclusive use clause ought to be very specific on who is a competitor and who isn’t. Incidental sales can quickly improve your client’s overall experience and free you up to concentrate on your core business.
