Starting a Brick and Mortar Business in Toronto
After months of hard work and red tape, three friends and I have finally launched our Virtual Reality Arcade at Yonge and Eglinton. Ask us anything!
Here’s an album of the launch if you want visuals.
We just officially opened last Monday. We’re trying to take a more family friendly approach to the whole VR arcade/lounge idea.
On top of the traditional challenges of starting a business (ex. idea, cofounders, capital, banking, hiring, marketing etc…), starting a brick and mortar business in Toronto came with a large number of additional challenges:
Location / Lease
The hardest and most excruciating part was actually finding a location that worked for us. We were looking for a 3000 square foot space, which is pretty rare in Toronto. The ones we did find were in need of some serious renovations that seemed like they would lead to even more issues. We finally found our space at 2711 Yonge Street, but had to wait a while for the old tenant to move out.
Commercial realtors are in no rush whatsoever, on both sides. Commercial property owners are very picky, they want to make sure the business that will be leasing their space is legitimate and will stick around. Between realtor fees, legal fees, and free rent, bringing in a new lessee is very expensive. They usually don’t see returns for several months.
Negotiating the lease was another long and arduous process. Since the recession in 2008, if you’re an independent business owner you can expect to have to sign a Personal Guarantee meaning that if you fail to pay your rent the landlord can come after your personal assets. Sometimes the personal guarantee can be negotiated down by offering a larger security deposit. Baseline commercial leases are usually 5 years, with an option to extend for another 5 years after that. This can be negotiated as well.
Renovations
Finding competent contractors is hard. Get multiple quotes. I can’t stress this enough. The quotes we got varried wildly from contractor to contractor. The best thing to do is get them to break down their quote into parts so that you can tell where your money is going. Don’t let them know what the other contractors quoted, until you are at the negotiation stage. Get references.
If the work you are doing is increasing the value of the building, you can usually get a portion of the costs back from the landlord as free rent. This should all be negotiated along with the lease.
Zoning Permit
You have to make sure your business falls under the permitted uses for the zone you plan to operate in and that you adhere to all the city zoning bylaws. In order do that you first need to get a Preliminary Project Review done that takes several weeks.
Building Permit
As part of the building permit process, Toronto Building staff must review your plans to ensure they comply with the Ontario Building Code, local Zoning Bylaws, and other Applicable Law. Everything you want to build or renovate needs to be drawn up by professional engineers and then okay’d by the city, and by your landlord (or landlord’s engineers) in most cases. As soon as you change the size of a room or move a wall you need a building permit (see When do you need a building permit?) Depending on the size of the reno, city inspectors will come in from time to time to sign off on different parts of the work. Having to wait around for them at each stage can really slow down your reno.
Sign Permit
The Toronto Sign Bylaw Unit is responsible for the issuance and inspection of sign permits and carries out proactive bylaw enforcement for permanent signs on private property. These guys make sure you follow all of the Sign Permit Regulations We are still dealing with sign variance issues with the transit authority since we’re hanging over the sidewalk. This can take a very long time and is why most businesses open with a temporary sign at first, since once you get the permit you still have to get your sign made.
Insurance
It’s hard to know what you need, but the landlord usually has a list of requirements including General Liability, Business Interruption, and sprinkler/Fire damage which are all no-brainers. We went through a local brokerage called Zensurance. It’s pretty cheap to add more coverages such as theft insurance.
Business License
A business license requires criminal background checks for each founder, articles of incorporation, proof of lease, proof of insurance, and your zoning permit. Make sure your paperwork is fully in order before heading to the The Licence & Permit Issuing Office, and go at 8:30am or else you could be there for a very, very long time.
Setting up services and handling billing
Services like hydro, internet, and payment terminals all have to be set up. The worst part about this is being given windows like 12-5pm so you have to sit in your store and wait around for the technicians to come by when you could be doing other things.
Sourcing
We worked with a great company here in Toronto called Ballance Display to build our stations. For everything else we sourced it or built it ourselves. Obviously, the closer you can get to the manufacturer the better. Ordering anything from the states is very expensive.