BUSI 455 Week 6 Negotiation 2: Planning Example

Negotiation 2 Planning Document: Renewing Juniper Table's Restaurant Lease

Situation and Lessons Carried Forward

Juniper Table is a 90-seat restaurant that has leased 3,200 square feet in Riverbend Commons for seven years at $24 per square foot a year, or $76,800. The lease ends in six months. The center's owner has proposed a five-year renewal at $28 with 3 percent annual increases and no improvement allowance. Juniper Table needs about $60,000 of kitchen ventilation work within two years and would like to expand onto the center's unused patio.

Negotiation 1 taught us three lessons, which shape this plan: ask about the other side's priorities before making any concession; make every concession conditional on something in return; and prepare package offers in advance rather than arguing one issue at a time.

Issues, Targets and Limits

Alternatives and Dependence

If talks fail, Juniper Table's fallback is an empty 3,000-square-foot unit four blocks away, offered at $23 a foot. Moving, however, would cost about $140,000 to build a new kitchen and dining room and close the restaurant for roughly three months, costing about $210,000 in sales. Our alternative is weak, which is why our resistance point on rent sits above the current rate.

The landlord's alternative is also weak. Retail space in the center has taken nine to twelve months to lease, and a new restaurant tenant would expect an improvement allowance of its own and a broker's commission. At $28 a foot, nine months of vacancy would cost the landlord about $67,000 in rent before any other expense. Lewicki et al. (2015) describe power in negotiation as arising partly from the quality of each side's alternatives. Pinkley et al. (1994) found that negotiators with attractive alternatives achieved better outcomes, but here neither side has one. Mutual dependence favors a creative agreement over a contest of threats.

Analysis of the Landlord

The landlord's likely interests are steady income, a long-term anchor tenant that draws evening traffic to the center, low vacancy that supports the property's value and lender requirements, and predictable maintenance costs. The landlord probably cares more about term length and the rent's long-run growth than about the improvement allowance, which is a one-time cost that a longer term repays. We, by contrast, care most about term length, which protects our investment in the space, and about cash for the kitchen. Both sides value a longer term, which creates a shared interest rather than a trade.

Strategy

Two Opening Packages

We will open with two packages, each equally acceptable to us:

• Package A: $25 rent, 2.5 percent increases, a 7-year term with a 5-year option, $20 per square foot allowance, a 4 percent maintenance cap and patio use at $3.
• Package B: $26.50 rent, 2 percent increases, a 10-year term, $30 per square foot allowance, a 5 percent cap and patio use included.

Leonardelli et al. (2019) found that making multiple equivalent simultaneous offers led to better economic outcomes and better relational outcomes than single offers, partly because the other side's choice reveals its priorities and because offering a choice seems more flexible. If the landlord prefers Package B, we learn that term and rent growth matter more than the upfront allowance.

Revealing Our Deadline

We will tell the landlord that we must decide within 60 days to plan either the kitchen work or a move. Moore (2004) found that negotiators expected their deadlines to weaken their position and therefore kept them secret, but that revealing a deadline helped, because the deadline also limited the other side's time to reach agreement and prompted faster concessions.

Conditional Concessions

Every concession will be tied to a return: if the landlord raises the allowance, we will accept a higher increase; if the landlord grants the option, we will accept a higher base rent. Our concessions on rent will shrink in size: $25 to $25.75, then $26.10, then $26.30.

Questions to Ask

• How long have other spaces in the center been vacant, and what did leasing them cost?
• What are the lender's requirements on lease length for anchor tenants?
• Which matters more to you, a higher starting rent or steady increases over a longer term?

Roles, Constituents and Protocol

One partner will present the packages and lead on rent and term; the other will track every offer against the table, ask the planned questions and call a break if any issue approaches its resistance point. Unlike Negotiation 1, we have agreed in advance that neither of us will concede on any issue without a matching concession from the landlord, and that any change to term or allowance needs both of us. Our constituent is Juniper Table's owner, who has approved the limits above and wants to see any agreement before it is signed. On protocol, we will ask that all six issues stay open until the end, that each session close with a written summary in the thread, and that both pairs share their interests on term and improvements before discussing rent, since those are the issues where a creative solution is most likely.

After the Agreement

We will be neighbors with the landlord for years, so the negotiation must leave the relationship stronger. Proverbs 3:29 warns against planning harm against a neighbor who dwells trustingly beside you (English Standard Version Bible, 2001/2016). We will make our case firmly, but we will not threaten a move we do not intend or misstate our alternative.

References

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Leonardelli, G. J., Gu, J., McRuer, G., Medvec, V. H., & Galinsky, A. D. (2019). Multiple equivalent simultaneous offers (MESOs) reduce the negotiator dilemma: How a choice of first offers increases economic and relational outcomes. Organizational Behavior and Human Decision Processes, 152, 64-83. https://doi.org/10.1016/j.obhdp.2019.01.007

Lewicki, R. J., Barry, B., & Saunders, D. M. (2015). Negotiation: Readings, exercises, and cases (7th ed.). McGraw-Hill Education.

Moore, D. A. (2004). Myopic prediction, self-destructive secrecy, and the unexpected benefits of revealing final deadlines in negotiation. Organizational Behavior and Human Decision Processes, 94(2), 125-139. https://doi.org/10.1016/j.obhdp.2004.04.001

Pinkley, R. L., Neale, M. A., & Bennett, R. J. (1994). The impact of alternatives to settlement in dyadic negotiation. Organizational Behavior and Human Decision Processes, 57(1), 97-116. https://doi.org/10.1006/obhd.1994.1006