The restaurant lease agreement – Part 2

The second part of our restaurant lease series explains how value protection via the Consumer Price Index works, what deposit amounts are customary, when redemption makes sense, and why the business purpose clause should be precisely formulated.

5. Value protection (indexation)

A solid index clause is essential – particularly for long-term leases. It ensures that the lease rate is automatically adjusted for inflation or deflation with reference to the Consumer Price Index (CPI) on a defined date. This protects both parties against unexpected economic fluctuations.

A typical formulation ties the lease to the official German CPI published by Destatis, with annual adjustment triggered once a defined threshold (e.g. ±5 %) has been exceeded. Both parties should ensure the base index date and adjustment mechanism are clearly stated.

6. Deposit

A deposit of two to six months' lease is customary in the gastronomy sector. The exact amount depends on the tenant's financial strength, the value of any handed-over inventory, and the location risk. A higher deposit may allow for a lower key money requirement, and vice versa.

7. Redemption (Ablöse)

Redemption payments compensate the outgoing tenant for investments or goodwill that benefit the incoming operator. In high-value locations – especially in Munich – redemption amounts can be substantial. Critically: redemption must be documented carefully. It should cover only verifiable, remaining-value items; an inflated redemption demand is the most common cause of lease negotiations collapsing.

8. Business purpose clause

The lease agreement must precisely define the permitted use of the premises. A vague definition ("gastronomy use") can lead to disputes if the tenant changes concept significantly. We recommend specifying the type of operation (restaurant, café, bar, hotel, etc.) and any restrictions (e.g. no fast food, no nightclub operation) clearly.

A precisely drafted business purpose clause also protects the landlord against reputational risk and ensures the property is operated in a manner consistent with the surrounding area.