5 Tips for Restaurateurs to Negotiate Rent During Covid-19
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Negotiations are tough. Negotiating during tough times, like the current COVID times, is a skill only a few have mastered. So many restaurant owners had to wrap up business because they couldn’ afford the rent and didn’t know how to begin the negotiation process with their landlord. This article will help you understand your options better.
Belonging to one of the worst-hit industries during the pandemic, high operating costs and slim profits have become a bigger problem than ever before for restaurateurs. Labour Lay-offs and decrease in kitchen inventories are just a few cost-cutting strategies adopted by restauranteurs to stay afloat, but the biggest chunk of the little revenue that restaurants are barely managing to earn goes into RENT! 30% of the revenue to be precise.
The widespread business closure has led to many states like San Francisco to put a freeze on evictions for small- and medium-sized businesses. But, on the ground level, orders like these seem to be an outlier. Hence, tenants and landlords are left to negotiate with each other to achieve their common interests.
It’s a volatile landscape for both the parties involved, but having an effective survival strategy and revenue projections can help weather the storm.
Get these simple steps right, and be in a prime position to get the relief you need.
Know your numbers right
Before you strike up the conversation with your landlord, become fully aware of your numbers. To find a solution that suits your needs, you must understand where you stand financially. Work out your numbers and have a precise idea of what your asks are with your landlord. Whatever terms you negotiate, you should be assured that you can realistically afford it and stick to the new plan. Vague ideas don't work here, look closely at your financials - cash-ins and cash-outs, alike.
Start the conversation with your landlord
Don't wait until the end of the month to strike up a conversation. Or worse, don't wait for your landlord to come to you. You need to open up the conversation early and let your landlord know that you wish to discuss your rent or lease terms in the light of COVID-19.
Preface your conversations with the term 'without prejudices', to ensure that you're setting the stage for conversation, and not confrontation. It's a good idea to begin your conversation by explaining how COVID-19 has impacted your business, and carry the conversation further from thereon.
Be willing to make compromises
After you have opened up a conversation, the next step is to come to terms with which both parties can agree on. Your landlord may be in full or partial agreement with your terms and have a couple of their own in their mind.
Have an open dialogue where you put forward your demands and requests, while also being considerate of your landlord's situation. Remember that you've signed a legal contract, and are now trying to tweak it - thus, be sensitive to the needs of both parties.
Some trade-offs your landlord might expect you to make in exchange for a rent relief could include:
Commitment to an extended-term
Hike in rent payments for a while, once things are settled
Trading a few shares of your business
Interest to future rent payments
Prepare your evidence of hardship
You can be absolutely convinced of your COVID-19 challenges to your landlord, but it doesn't hurt to have it all on paper. Having supporting documentation of your Coronavirus financial challenges might come handy in the future.
Some landlords may even request you to submit the proof of loss or low-profit. Here are a few documents you can prepare or gather to prove your evidence of hardship:
Comparative financial statements of the year 2019 and 2020
Financial projections for the year 2020
Description of COVID-19 impact on your business
Updated projected business plan for the next 10 to 18 months
Confirm the terms and document it
Once you've talked the terms out, and are on the same side of the page - the next step is to confirm, sign, and document the newly drafted deed/agreement/lease.
Double-check and ensure that the deed outlines all the changes made, no information is left out, and there's no room for any ambiguity. If needed, it is recommended to have an attorney look over the agreement, and review it before you sign updated agreements.
Negotiating rent might feel a tad bit awkward, but a little preparation beforehand can make a huge difference, and get you the rent waiver you want.
These quick tips will help you minimize your costs, and keep your business afloat until things return to 'business as usual.' Remember that your landlords want you as a tenant too, and that's your big leverage! Go ahead and get negotiating for the best terms.