Drafting a Restaurant Lease

When it comes to running a successful restaurant, there’s nothing more important than having a robust, well-drafted restaurant lease. A restaurant lease is a legal document that outlines the terms and conditions of a restaurant’s occupancy, and defines the rights and obligations of both the landlord and the tenant. It is essential for protecting both parties by clearly outlining their responsibilities and obligations with regard to rent, duration of the lease, improvements, repairs, modifications and more.

As an experienced commercial real estate expert at Genie AI - the world’s largest open source library for legal templates - I understand first-hand just how vital a well-crafted restaurant lease can be. Without it in place, landlords may be left exposed in terms of liabilities relating to repairs or damages caused during tenancy; while tenants may not have enough protection against rent increases or sudden changes in obligations midway through their agreement. All these issues can be avoided by drafting an effective restaurant lease that meets both parties’ needs equally.

For tenants looking to protect their interests when signing up for a new space, their key considerations include making sure they know how much rent they’ll need to pay; exactly how long they’ll hold tenure over the premises; any restrictions on use; who is responsible for maintenance or necessary alterations; as well as what recourse they have available should anything go wrong (such as being able to sublet should your business fail). As outlined above, these are all areas where having a detailed contract in place can ensure your interests are protected from any unexpected occurrences down the line.

From a landlord’s perspective too this peace-of-mind is invaluable – particularly if you’re looking forward into future dealings with potential tenants beyond this current agreement period. Being able to depend on clear terms being laid out from the start helps ensure that everyone knows exactly what is expected from them during tenancy: reducing misunderstandings which could lead to conflict further down the road – thereby helping foster an atmosphere of mutual trust between you both as business partners moving forwards together into success!

At Genie AI our mission has always been providing free resources such as legal templates so anyone can draft high quality documents without worrying about costly lawyer fees – making sure everyone gets fair treatment when entering into agreements with one another. With our community template library now boasting millions of datapoints showing exactly what constitutes market standard leases in different scenarios across various industries worldwide (including restaurants), our mission has never been clearer! So click below now if you want access step-by-step guidance on drafting your own perfect restaurant lease today - plus gain full access our template library absolutely free!

Definitions

Parties to the lease: Individuals or organizations involved in a legal agreement.
Term of the lease: The time period that a lease agreement lasts.
Rent: The amount of money paid by a tenant to a landlord in exchange for the use of a property.
Security deposit: A sum of money held by the landlord as collateral against any damages to the property caused by the tenant.
Purpose of the space: The specific use of a property as determined by the terms of a lease agreement.
Tenant’s obligations: The responsibilities of the tenant as described in a lease agreement.
Landlord’s obligations: The responsibilities of the landlord as described in a lease agreement.
Insurance requirements: The types of insurance coverage and the extent of coverage required by the terms of a lease agreement.
Termination provisions: The conditions under which a lease agreement can be ended by either party.
Dispute resolution provisions: The methods used to resolve disputes between the parties to a lease agreement.
Assignment and subletting provisions: The rules and conditions governing the assigning and subletting of a lease agreement.
Utilities: Services such as electricity, water, and gas used in a property.
Access and use of the space: Rules and restrictions on the use of a property as described in a lease agreement.
Indemnification: A legal protection against liability or responsibility for something.
Inspection provisions: Rules and conditions governing inspections of a property.

Contents

1. The parties to the lease
2. Who is responsible for the lease and who is renting the space?
3. The term of the lease
4. How long will the lease last?
5. The rent
6. How much is the rent and when is it due?
7. The security deposit
8. How much is the security deposit, when is it due, and what are the conditions for its return?
9. The purpose of the space
10. What type of restaurant will be operated in the space?
11. The tenant’s obligations
12. What are the tenant’s responsibilities with respect to the leased space, such as maintenance, repairs, and other duties?
13. The landlord’s obligations
14. What are the landlord’s responsibilities with respect to the leased space, such as making repairs and providing maintenance?
15. The insurance requirements
16. What type of insurance is required, and who is responsible for the costs?
17. The termination provisions
18. What happens if either party decides to terminate the lease, including the notice period, any penalties, and the return of the security deposit?
19. The dispute resolution provisions
20. How will disputes between the parties be resolved, including methods such as arbitration and mediation?
21. The assignment and subletting provisions
22. Are either party allowed to assign or sublet the lease, and are there any conditions or restrictions?
23. The utilities
24. Who is responsible for the costs of any utilities used in the leased space?
25. The access and use of the space
26. What restrictions are in place with regards to access and use of the leased space?
27. The indemnification
28. What is each party liable for in the event of a claim by a third party related to the lease?
29. The inspection provisions
30. Are either party allowed to inspect the leased space and when?

Get started

The parties to the lease

• Identify the landlord and tenant who will be entering into the lease agreement
• Note the full legal names of the parties and include titles if applicable
• Make sure all parties are in agreement to enter into the lease and have read and understood their rights and obligations
• When all parties have been identified and all have agreed to enter into the lease, you can check this off your list and move on to the next step.

Who is responsible for the lease and who is renting the space?

• Determine who is responsible for the lease. This could be the owner or lessee of the restaurant, a representative of a restaurant franchise, or another type of organization.
• Identify who is renting the space. This could be the owner of the restaurant, a representative of a restaurant franchise, or another type of organization.

You will know when you can check this off your list when you have identified both who is responsible for the lease and who is renting the space.

The term of the lease

• Decide if the lease should be a fixed-term lease or an open-ended lease
• Negotiate the term of the lease
• Determine when the lease will begin and end
• Agree on any renewal or termination options
• Ensure all parties sign the lease and the lease is properly notarized
• When the lease is signed and notarized, you can check this off your list and move on to the next step.

How long will the lease last?

• Research your local laws and regulations to determine the maximum allowable term for a commercial lease in your area
• Discuss with the landlord the ideal length of the lease that works for both parties
• Negotiate the term of the lease – consider options such as 1 year, 3 years, 5 years, or a month-to-month arrangement
• Set the end date of the lease, and specify what will happen at the end of the lease
• Include a clause outlining the option to renew the lease

You’ll know you can check this off your list and move on to the next step when you have reached an agreement with the landlord on the term of the lease, and have included all relevant clauses in the lease agreement.

The rent

• Understand the terms of a lease agreement, such as the tenant’s and landlord’s responsibilities and liabilities
• Negotiate the amount of rent, the frequency of payment, and the late fees associated with not paying on time
• Determine if the rent will increase over the duration of the lease
• Specify if the landlord will pay for any associated costs, such as taxes, insurance, or utilities
• Make sure to include the due date for rent payments and any grace period for making them

Once you have negotiated and agreed on the terms of the rent, you can check this step off your list and move on to the next step.

How much is the rent and when is it due?

• Determine the amount of rent that the tenant will be responsible for paying
• Set the due date for the rent, such as on the first of each month
• Specify any late fees that may be charged if rent is paid after the due date
• Include any other details of rent payments, such as a grace period or negotiated discounts

Once you have determined the amount of rent and when it is due, you can check this step off your list and move on to the next step: ## The security deposit.

The security deposit

• Determine the amount of the security deposit, typically a month’s rent
• Establish the due date for the security deposit
• Clarify any conditions for the refund of the security deposit
• Draft the language outlining the security deposit, due date and refund conditions into the lease
• Have all parties sign and date the lease
• Check off this step and move on to the next step in the guide

How much is the security deposit, when is it due, and what are the conditions for its return?

• Negotiate the amount of the security deposit with your landlord
• Decide when the security deposit is due and agree on a payment method
• Discuss conditions for the return of the security deposit (e.g. unfulfilled obligations or damage to the space)

You’ll know you can check this off your list and move on to the next step when you have negotiated the amount of the security deposit, agreed on when it’s due, and discussed conditions for the return of the security deposit.

The purpose of the space

• Understand the landlord’s expectations for how the leased space will be used
• Discuss the parameters of the tenant’s use of the space
• Determine any restrictions or limitations on the use of the space
• Set out any obligations the tenant will have to maintain the leased space
• Outline any obligations the tenant has to the landlord in terms of how the leased space will be used
• Include any specific clauses in the lease to ensure the tenant is in compliance with all applicable laws and regulations
• Check off this step when all parties are in agreement as to the purpose of the space and these clauses have been included in the lease.

What type of restaurant will be operated in the space?

• Gather any relevant information about the type of restaurant that will be operated
• Consider the type of cuisine, whether it will be a full-service restaurant or a fast-food establishment, the size of the restaurant, and any other relevant details
• Make sure that the type of restaurant is specified in the lease in order to avoid any misunderstandings about the tenant’s obligations
• Once the type of restaurant is specified in the lease, you can move on to the next step of outlining the tenant’s obligations.

The tenant’s obligations

• Negotiate the tenant’s obligations with the landlord, such as obligations on payment, insurance, and maintenance
• Outline the tenant’s obligations in the lease agreement
• Make sure that the tenant is aware of their obligations and has accepted them
• Ensure that the tenant is aware of their right to damages if the landlord fails to uphold their side of the agreement

Once all of the obligations have been negotiated and detailed in the lease agreement, and both parties have accepted them, you can check this step off your list and move on to the next step.

What are the tenant’s responsibilities with respect to the leased space, such as maintenance, repairs, and other duties?

• Review the lease to determine the tenant’s responsibilities
• List out all the necessary duties that the tenant must perform in order to meet their obligations
• Some examples of tenant duties may include:
• Maintaining the leased space to the standards set by the landlord
• Paying for all repairs and maintenance that are needed in the leased space
• Complying with all applicable laws and regulations regarding the leased space
• When you have a full list of the tenant’s duties, you can check this step off your list and move on to the next one.

The landlord’s obligations

• Identify the landlord’s responsibilities for the leased space, such as making repairs, providing maintenance, and any other duties
• Include language that specifies the landlord is responsible for any repairs due to normal wear and tear
• Include language that specifies the landlord must ensure the space is fit for the restaurant’s purpose
• Set out who is responsible for utilities, such as electricity, water, and gas
• Set out who will be responsible for insurance
• Specify the amount of rent, when it is due, and when it will be adjusted
• Include language that outlines the landlord’s rights to enter the leased space, and the notification requirements
• Set out the consequences for non-payment of rent

You can check this step off your list when all of the landlord’s obligations have been specified and included in the lease document.

What are the landlord’s responsibilities with respect to the leased space, such as making repairs and providing maintenance?

• Understand the landlord’s responsibilities for repairs and maintenance for the leased space.
• Specify in the lease agreement who is responsible for making repairs and providing maintenance.
• Include specific language regarding the landlord’s responsibility for making repairs and providing maintenance to the leased space.
• Make sure the agreement is clear on any requirement for the tenant to cover the cost of repairs or maintenance.
• Check that the agreement specifies the timeframe for the landlord to respond to any repair requests.
• When you’ve included the required language in the lease agreement, you can check this step off your list and move on to the insurance requirements.

The insurance requirements

• Research applicable state and local laws regarding insurance requirements
• Understand what type of insurance is required and how much coverage is necessary
• Determine who is responsible for the costs of the insurance required
• Insert the terms and conditions of the insurance requirements into the lease
• Check with your insurance provider to make sure the coverage in the lease is sufficient
• Once all of the above is complete, check this off your list and move on to the next step.

What type of insurance is required, and who is responsible for the costs?

• Identify the type of insurance that is required for the lease (e.g. property, general liability, business liability, etc.)
• Decide who will be responsible for the costs of the insurance (landlord or tenant)
• Include a clause in the lease that outlines these details
• Check off this step once the insurance requirements have been included in the lease.

The termination provisions

• Understand the terms of the lease agreement and the conditions for terminating it
• Identify the notice period that must be given for termination of the lease
• Consider any penalties for terminating the lease before its end date
• Establish how the security deposit is handled if either party terminates the lease
• Decide on the procedures for assigning or subletting the leased premises
• Document the termination provisions in the lease agreement

Once these points have been addressed and documented, you can check this step off your list and move on to the next step.

What happens if either party decides to terminate the lease, including the notice period, any penalties, and the return of the security deposit?

• Determine the length of notice that must be given to terminate the lease.
• Specify whether the notice period is the same for both parties or if it differs.
• Agree on any penalty that must be paid if the lease is terminated early.
• Outline the conditions under which the security deposit must be returned, such as when all of the terms of the lease have been met.
• Make sure that the notice period, penalty, and return of the security deposit are all clearly outlined in the lease.

You can check this off your list once you have included the notice period, penalty, and return of the security deposit in the lease.

The dispute resolution provisions

• Review the lease to determine the dispute resolution provisions that will apply
• Consider including methods such as arbitration and mediation for resolving any disputes between the parties
• Make sure that any dispute resolution provisions are well-defined and clearly stated in the lease
• When you’ve completed the dispute resolution provisions, you can check this off your list and move on to the next step.

How will disputes between the parties be resolved, including methods such as arbitration and mediation?

• Research and select the best arbitration and mediation services available in the area
• Outline and agree upon the terms of the dispute resolution process in the contract
• List the costs associated with either process and how those costs should be divided between the parties
• Assign the responsibility for filing disputes to one of the parties
• Include the agreed-upon dispute resolution process in the lease

You’ll know that you can check this off your list when you’ve included the agreed-upon dispute resolution process in the lease.

The assignment and subletting provisions

• Understand the parties’ rights and duties with respect to assignment and subletting - the landlord and tenant should both know who is responsible for what.
• Determine if either party is allowed to assign or sublet the lease, and if so, what the conditions or restrictions are.
• Make sure the tenant is not allowed to assign or sublet the lease without the landlord’s prior written consent.
• Consider including a clause that allows the tenant to assign or sublet the lease in certain circumstances, such as when the tenant is in default or the landlord has agreed to a sale of the leased premises.
• Consider including a clause that requires the tenant to provide the landlord with a list of all prospective assignees or sublessees, along with the financial information for each prospective party.
• Specify whether the landlord is entitled to a fee for consenting to an assignment or subletting.
• Consider including a clause that requires the tenant to provide the landlord with a copy of any assignment or sublease agreement.
• Include a clause that requires the tenant to notify the landlord of any assignment or sublease.
• Include a clause that requires the tenant to remain liable for the obligations of the lease even after the assignment or sublease.

When you can check this off your list and move on to the next step:
When you have included all necessary clauses in the lease agreement related to assignment and subletting, you can move on to the next step.

Are either party allowed to assign or sublet the lease, and are there any conditions or restrictions?

• Specify if either party is allowed to assign or sublet the lease
• Set out any conditions or restrictions on assignment or subletting
• Include provisions that require the landlord’s written consent before the tenant can assign or sublet
• Include provisions that the landlord’s written consent must not be unreasonably withheld
• Specify the circumstances in which the landlord can withhold consent
• Include provisions that the tenant is liable to pay any costs the landlord incurs in connection with the assignment or subletting

When you can check this off your list and move on to the next step:

• When the assignment and subletting provisions have been fully specified, added to the lease and agreed upon by both parties.

The utilities

• Check to see if the landlord or the tenant will be responsible for the costs of any utilities used in the leased space
• Make sure to specify on the lease who will be responsible for utilities and whether there is a cap on the amount that can be paid
• If both parties are responsible for certain utilities, make sure to clearly specify how the costs will be divided
• Once you have determined who will be responsible for utilities and the cost division, make sure to include this information in the lease

You can check this off your list and move on to the next step once the utilities have been clearly specified in the lease.

Who is responsible for the costs of any utilities used in the leased space?

• Review the lease agreement to determine who is responsible for the costs of any utilities used in the leased space.
• Make sure that the lease agreement clearly states who is responsible for the costs of any utilities used in the leased space.
• You should also specify any restrictions on how the utilities can be used.
• Confirm that both parties have agreed to the terms of the lease agreement and sign it.

Once you have reviewed the lease agreement and confirmed that both parties have agreed to the terms, you can check this off your list and move on to the next step.

The access and use of the space

• Determine what types of activities are allowed in the leased space
• Decide if the tenant is allowed to make improvements or alterations to the leased space
• Specify the hours of operation for the leased space
• Establish rules for the tenant regarding noise level and other elements of public safety
• Include restrictions on the number of people allowed in the space
• Outline any requirements for the tenant to obtain a permit to operate in the space

When you have finished drafting the section on the access and use of the leased space, you can check it off your list and move on to the next step.

What restrictions are in place with regards to access and use of the leased space?

• Understand the restrictions that are in place with regards to the use and access of the leased space.
• Review the restrictions that have been proposed by the landlord.
• Negotiate any restrictions with the landlord which are not acceptable.
• Draft a clause which outlines the restrictions that have been agreed upon.
• Include this clause in the final lease agreement.
• Once the clause has been included in the final lease agreement, you can check this off your list and move on to the next step.

The indemnification

• Check your state laws to ensure that your indemnification clause is compliant
• Review the insurance requirements for all parties involved in the lease
• Decide who is responsible for covering injury or property damage claims and how those costs will be handled
• Include the details of the indemnification clause in the lease
• Have both parties sign the lease and keep a copy for your records

Once you have reviewed the state laws, reviewed the insurance requirements, decided who is responsible for covering injury or property damage claims and included the details of the indemnification clause in the lease, you can move on to the next step.

What is each party liable for in the event of a claim by a third party related to the lease?

• Negotiate the terms of liability for each party in the event of a third-party claim related to the lease
• Include provisions in the lease agreement that outlines what each party is responsible for in the event of a third party claim
• Consider the potential legal implications of a third-party claim and include terms that protect both parties from any legal action
• Make sure that both parties are in agreement on the terms of liability and that the lease agreement is signed by both parties
• Once all of these steps are completed, you can check this off your list and move on to the next step.

The inspection provisions

• Make sure to include exact instructions in the lease agreement about when and how either party may inspect the leased space.
• Consider the following when creating the inspection provisions:
• What type of notice must be given before an inspection?
• Who pays for the inspection?
• How often will the inspection occur?
• Once the inspection provisions have been added to the lease agreement, you can move on to the next step.

Are either party allowed to inspect the leased space and when?

• Establish the rights of both parties to inspect the leased space.
• Specify the conditions and limitations of the inspections, including who pays for any inspections and who can be present during the inspections.
• Include a provision that allows the landlord to enter the leased space with reasonable notice and during reasonable hours to inspect the condition of the leased space.
• Include a provision that allows the tenant to enter the leased space with reasonable notice and during reasonable hours to inspect the condition of the leased space.
• Specify how many days in advance the landlord or tenant needs to give notice for entering the leased space.
• Specify what types of inspections the tenant is allowed to do, including any maintenance or repairs that need to be done.
• Once all the above points are addressed, the step can be checked off the list and you can move on to the next step.

FAQ

Q: What are the differences between US and UK lease agreements?

Asked by Emma on October 4th 2022.
A: Lease agreements in the US and UK can differ in numerous ways, most notably in the extent of control a landlord is able to exercise over their tenant. In the US, landlords are able to impose more stringent regulations and restrictions than their UK counterparts, including the ability to specify meal times and who is allowed to live in the property. Additionally, in the US, rental agreements are usually more detailed than those in the UK, which may be more generalised in nature.

Q: Are there any special considerations for businesses operating in different sectors?

Asked by Liam on January 10th 2022.
A: Absolutely - depending on the sector a business operates in, different considerations may need to be taken into account when drafting a restaurant lease. For example, if a business is operating in the hospitality sector, they may need to factor in additional clauses related to health and safety regulations or food and beverage management. Similarly, if a business operates in a technology sector, there may be specific clauses related to the usage of technology or data protection that need to be included within their lease agreement.

Q: Are there any additional restrictions for restaurants that serve alcohol?

Asked by Olivia on August 5th 2022.
A: Yes - depending on the jurisdiction where the restaurant is based, additional restrictions may need to be placed onto the restaurant’s lease agreement if they are serving alcohol. In many jurisdictions, there may be specific regulations related to age-verification processes or responsible service of alcohol that must be adhered to. It is also important to check with local authorities as some jurisdictions have specific licensing requirements or zoning restrictions that must be taken into account when setting up a premises that serves alcohol.

Q: Is it possible to arrange rent payments over time?

Asked by Noah on March 15th 2022.
A: Yes - it is possible to arrange rent payments over time as part of a restaurant lease agreement. However, it is important that both parties agree on an arrangement for rent payments before signing the lease agreement as this cannot be renegotiated once it has been signed. Depending on the arrangement agreed upon, it may also be necessary to include clauses related to late payment fees or penalties for non-payment within the lease agreement.

Q: What should I consider when looking for a suitable location for my restaurant?

Asked by Ava on July 17th 2022.
A: When looking for a suitable location for your restaurant, it’s important to consider factors such as accessibility from main roads or public transport links, parking availability nearby and any local zoning restrictions that could impact your business operations. Additionally, it’s important to research foot traffic patterns in the area as this will provide an indication of how much business you can expect from walk-in customers and whether there are competitors nearby who could potentially impact your sales figures. It’s also beneficial to assess whether any major events or activities are taking place nearby that could potentially draw people into your restaurant during peak times of year.

Q: Are there any special clauses that should be included if I’m renting from an existing premises?

Asked by Elijah on April 20th 2022.
A: If you are renting from an existing premises then it’s important to include clauses related to maintenance and repairs within your lease agreement. This should include details about who is responsible for any necessary repairs or maintenance work and who will bear the cost of these works during the course of your tenancy agreement. Additionally, if you are planning any renovations or alterations then you should include specific clauses about who has responsibility for any works carried out during your tenancy period as well as how these costs will be allocated between both parties at the end of your tenancy agreement.

Q: Can I sublet my premises if I’m unable to operate my business due to COVID-19?

Asked by Emily on November 24th 2022.
A: Depending on whether you are renting from a private landlord or a commercial landlord will determine whether you are able to sublet your premises if you are unable to operate due to COVID-19 restrictions. Generally speaking, private landlords will not allow tenants to sublet their premises without their prior written consent whereas commercial landlords may allow tenants some degree of flexibility with regards to subletting their premises without prior written consent provided certain conditions have been met (such as notifying them in advance). It’s therefore important that you check with your landlord prior to attempting any form of subletting arrangement during these unprecedented times.

Q: What provisions should I make for force majeure events?

Asked by Logan on June 3rd 2022.
A: Force majeure events refer to extraordinary events beyond either party’s control which can render performance of obligations under their contract impossible or impractical such as pandemics or natural disasters. When drafting a restaurant lease it is important that provision is made for force majeure events so that both parties understand what action needs to be taken in such circumstances (such as suspending obligations temporarily or terminating the contract). It is also beneficial for both parties if provisions surrounding dispute resolution (such as mediation or arbitration) are included within their agreement in order to minimise potential disruption caused by such events and ensure both parties have access to timely resolution mechanisms should a dispute arise during these difficult times.

Q: How do I handle disputes relating to my restaurant lease?

Asked by Mason on December 4th 2022.
A: It is always advisable that both parties attempt an amicable resolution of any disputes arising from their restaurant lease before involving third-party mediation or arbitration services however this isn’t always possible in certain circumstances (such as where one party refuses to negotiate). In this instance it may be necessary for either party (or both)to seek legal advice and/or involve third party mediators/arbitrators so that an impartial resolution of their dispute can be reached quickly and efficiently without requiring court action (which can often take months). It’s therefore important that both parties have an understanding of what dispute resolution mechanisms they have access too prior signing their restaurant lease agreement so they understand how a dispute can be resolved should one arise during their tenancy period

Example dispute

Possible Lawsuits Involving Restaurant Lease

• Plaintiff could sue for breach of contract if the restaurant failed to uphold the terms of the lease such as paying rent or adhering to other contractual obligations.
• Plaintiff could sue for breach of covenant if the restaurant failed to comply with the covenants of the lease such as keeping the premises in good condition or failing to keep the premises open for business.
• Plaintiff could claim that the restaurant failed to adequately maintain the premises in accordance with the lease, resulting in damages or losses to the plaintiff.
• Plaintiff could sue for negligence if the restaurant failed to exercise reasonable care in making sure that their premises were safe for customers and employees.
• Plaintiff could sue for misrepresentation if the restaurant made false or misleading statements about the terms of the lease.
• Plaintiff could sue for unjust enrichment if the restaurant received any benefits from the lease despite not performing their duties.
• Plaintiff could sue for breach of good faith and fair dealing if the restaurant acted in bad faith in negotiating or performing the lease.
• Plaintiff could sue for violation of the implied covenant of quiet enjoyment if the restaurant interfered with the plaintiff’s enjoyment of the leased premises.
• Plaintiff could sue for violation of state and/or local laws if the restaurant failed to comply with relevant laws governing the lease.
• Plaintiff could sue for violation of civil rights if the restaurant discriminated against the plaintiff on the basis of race, gender, age, or other protected characteristics.
• Plaintiff could sue for damages if the restaurant failed to meet its contractual obligations and caused economic harm to the plaintiff.
• Plaintiff could sue for specific performance if the restaurant failed to fulfill its obligations under the lease, and a court order may be necessary to compel the restaurant to comply.

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