How to qualify a commercial tenant before you spend a tour on them

A tour costs an hour. A tenant who signs and then cannot open costs a year, because the unit comes back to you dark, often with a half-finished fit-out and a rent-free period already spent. The screening that prevents that takes about ten minutes on a phone call, and most landlords skip it because enquiries feel too scarce to risk losing one.

They are not scarce once you are sourcing properly. And a tenant who cannot answer these questions was never going to be the one.

The six questions

1. What size is your current unit, and what do you wish it was? The gap between those two numbers is the single best predictor that someone will actually move. An operator squeezed into 900 sq ft who wants 1,400 has a reason to sign that has nothing to do with your marketing.
2. How many locations do you run today? One means the personal guarantee conversation is coming. Three to ten usually means a proven format and a real appetite. Fifty means you are talking to a property team with a template lease and a slower clock.
3. Who signs? If the person in front of you is not that person, everything they tell you is a preference rather than a commitment. For a franchise this is the crux, and it is worth its own read: the franchisee usually signs, not the brand.
4. How is the fit-out funded? Cash, a bank facility, a brand contribution, or an assumption that you will pay for it. The last answer is fine if it is said out loud now, and expensive if it surfaces at heads of terms.
5. When do you need to be trading? A date they can defend, tied to something real such as a lease expiry or a season, is a good sign. “As soon as possible” usually means no deadline exists, and deals without deadlines drift.
6. Have you closed a location, and what happened? The answer matters less than the willingness to give it. An operator who explains a closure candidly is telling you they have run the numbers before.

Format fit, which is the one people skip

Covenant strength gets the attention because it is the one that sounds financial. Format fit is what actually kills more deals, later and more expensively.

A business has a shape: the square footage it trades well in, the frontage it needs, the services it cannot operate without. A cafe without a grease interceptor or an exhaust route is not a cafe, whatever anyone signs. A clinic without accessible parking will fail its own compliance review after you have taken the unit off the market for six weeks.

So before the tour, know two numbers about their format and two about your unit, and compare them honestly. If the answer is no, saying so early buys you back the six weeks.

What their category tells you about the street

A qualified tenant is not just solvent, they are additive. A third nail bar on a parade with two is a tenant who will struggle, and a struggling tenant is your problem for the length of the term and a drag on what the neighbours will pay at renewal. The reasoning is in our guide to tenant mix, and it is the reason a slightly weaker covenant in a missing category often beats a stronger one in a crowded one.

Doing the screen before the enquiry

The best version of this process runs in reverse. Rather than qualifying whoever arrives, you approach businesses you have already checked: operators visibly outgrowing their current unit, with a location count that suits your risk, in a category the street is missing.

That is what a tenant search returns. Atlas surfaces each candidate with the size it typically takes, how many locations it runs, whether it is expanding, and the person who signs, which is four of the six questions answered before you pick up the phone. It costs $200 a month, and the tenant database page sets out what each match carries. The other two questions still need the call, and they always will.

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