A retailer’s guide to leases, licenses and permits

Alexandra Sheehan

There are a ton of elements involved in launching a retail store that make the process extremely exciting.. New space, new products, new customers — it’s all the culmination of months (sometimes years) of your hard work.

Although majority of the launch process is an enjoyable experience, there is one specific area that is intimidating to many, but is a necessary and critical piece to the retail puzzle. , This part of the journey involves permits, licenses and leases. During this phase it's important to understand what’s required and what’s at risk. Consulting the right professionals who can point you in the proper direction can make all the difference.

Let’s distill the ins and outs of everything you need to know about leases, licenses, permits and insurance in retail. Taking the right steps can be the differentiating factor that leads to a seamless store opening.

While daunting, spending the time to consult the proper professionals and file the required paperwork is highly worth it if you want to achieve sustainable, long term success.

Leases

Your first step? Finding a space for your retail store. It’s important to consider what your absolute requirements are and include this in your location-vetting process.

What exactly are those considerations?

You’ll want to determine availability. Perhaps the space is currently occupied with a tenant who needs X days notice, or the permits (more on that next) aren’t available until next year.

During this phase of the process it is important to understand if the space approved for your intended use? There are restrictions that exist based on area and locations. Maybe you need a sink and there’s no plumbing. It could also be located in a school zone or other area which prohibits alcohol, and could pose an issue for your grand opening for example.

Insurance

Business insurance (or commercial insurance) is a lot different from personal coverage. Without the proper insurance policies in place, you’re not only putting your business at risk, but also employees and customers.

We have a more comprehensive guide you can refer to when determining your commercial insurance. Matthew A. Struck, partner at Treadstone Risk Management, recommends retail store owners take out the following policies, at a bare minimum:

  • Commercial general liability insurance with at least $5 million in limits
  • Crime coverage for both third-party and employee theft (base this on maximum possible loss, keeping in mind that employee theft such as embezzlement can go undetected for months or even years)
  • Property insurance for the replacement cost of the building (if you own it)
  • Business interruption coverage for lost net revenues in the event that a fire, storm, etc. makes it impossible to resume full operations for a period of time (base this on the maximum loss that could result from a prolonged, complete shutdown)
  • Cyber liability coverage for both first- and third-party losses (even if a retailer uses a third party to process online transactions, many fines and penalties are payable by the store owner under many states’ laws)

Other policies you may want to look into include:

  • Boiler and machinery insurance (includes computers, POS systems, etc.)
  • Debris removal insurance
  • Builder’s risk insurance (necessary if you’re performing construction on your new store)
  • Glass insurance
  • Inland marine insurance
  • Ordinance or law insurance
  • Tenant’s insurance (if you’re renting)
  • Fidelity bonds
  • Errors and omissions (E&Os) insurance
  • Automobile insurance (if your business owns or operates a vehicle)
  • Workers’ compensation insurance
  • Commercial umbrella insurance
We lay the foundation for your brand's next big thing with a tech-enabled retail space.

Permits and Licenses

Permits and licenses are another element to take into consideration prior to your store opening. The exact permits and licenses you’ll need for your retail store depend on your business and on your location.

Generally speaking, you may need the following permits and licenses to operate legally:

  • Local business license/permit
  • Resale license
  • Sales tax license
  • “Doing Business As” (DBA) registration
  • Certificate of occupancy
  • Fire department permit
  • Sign permit
  • Health department license
  • Alcohol and food licenses/permits (especially if you plan to serve these at your grand opening)
  • Alarm system permit
  • Air and water pollution control permit
  • Zoning and land use permits

There are additional permits required dependent on your store execution. Some specialized industries require niche certifications, permits and licenses, such as a hair salon. Remember to check with both your state and local municipality, as you might need separate licenses or permits for each.

If you want to alter your space, you may also need specific permits to be able to make the changes you desire. Remember to account for these in the beginning of the planning process.

To mitigate any complications, outline a clear plan of the exact construction you want to make BEFORE entering into a lease or licensing agreement. Prior to signing the lease get an idea of how quickly the owner of the space will approve these types of plans, both for your launch and beyond that.

With upgrades and construction, you’ll likely have to go through a request and approval process. This often entails a proposal, drawings and sometimes the estimated cost of the upgrades. Typically, if changes to the physical space are valued under $10,000, it doesn’t require approval, but it’s always best to check for your unique situation.

Conclusion: Everything you need to know about leases, licenses, permits and insurance

Remember, getting your legal ducks in a row is absolutely essential to a smooth and seamless store launch. Without having the proper paperwork in place, you run the risk of interrupting your business operations — which could make you appear unprofessional and unreliable in the eyes of potential customers.

While daunting, spending the time to consult the proper professionals and file the required paperwork is highly worth it if you want to achieve sustainable, long term success.

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