4 Important Ways to Negotiate Your Rent During Covid-19

Restaurant & Hospitality

Photo credits: Cassidy Mills.

Do you own a restaurant?

If you do, then you must be familiar with two things in your business – high operating cost and slim profit.

Amongst many other factors eating at your profit, the biggest of them are rent, food, and labour. Lots of restaurants go out of business because they fail to properly manage these 3 factors.

But throw in a world-shattering pandemic in that mix, and you have yourself a nightmare.

Usually, restaurant managers cut down staffing and inventory to increase profits when the going gets tough.

However, rent is a different matter entirely. You can reduce inventory and get robots as staff, but you can’t get rid of your landlord.

And since you can’t do that, you need a way to go around one of the big 3 – Rent!

In this post, I’d be showing you 4 things to do that will help you negotiate your rent with your landlord.

But first…

The tips given in this post are in no way intended to help you deceive your landlord. It is also not legal advice and should not be considered so.

You are legally obligated to pay your rent.

That said, it is understandable that given the pandemic, you may not be able to fulfil this obligation. Some restaurants have been able to smoothly transition to the take-out and delivery model and do not have to deal with rent.

Others have not.

And so, this post will show how you can negotiate with your landlord if you find that you cannot pay your rent.

Let’s go!

Communicate With Your Landlord

As seemingly obvious as this might be, not many restaurateurs are doing it.

It’s simple, if you find you are unable to pay your rent, start a conversation with your landlord. They won’t bite, I promise.

Alternatively, you can have your lawyer speak with their lawyer to find common grounds. The only problem with working through lawyers is that it may send the wrong message to your landlord.

You want to approach this matter on a human-to-human basis. Make them see that you are reaching out to them for negotiations, not confrontation.

Tell them how the pandemic has impacted your business. I’m sure they know already. But try to make them understand how your efforts to follow local health regulations to reduce the spread of the virus have caused sales to plummet.

Explain that although there’s nothing you could have done to prevent it, you are currently exploring different solutions.

What’s more, ensure that you speak in a manner that shows collaboration. And also seek to understand your landlord’s financial needs so you both can find a middle ground.

Be Ready To Make Compromise

Not everybody gets everything they want in a negotiation. Therefore, you should be open to making a compromise or two. To better prepare you to make the best compromise, you need to be aware of all the options available to you.

Here are a few options to consider to help you restructure your rent/lease:

Rent abatement: this is a system in which payment of your rent (or a portion of it) is suspended for a certain stipulated period.
Rent deferral: this is a system in which your payment of your rent (or some part of it) is postponed to a later date.
Rent reduction: this is a system in which payment of your rent (or a portion of it) is reduced.

While these are pretty viable options, not all of them will be available to you.

And so, you could, in addition to any one of these, keep an open mind for compromises like:

Agreeing to a longer term lease but at a lower rate. Or…
Making a short-term lease arrangement which would expire as soon as regular business operation resumes.

Although compromises on your rent payment may provide temporary respite, you should be cautious. Beware of going into any long term agreement without first considering the possibility of life returning to normal sooner. Or getting worse.

The best way to do this is to negotiate every month as they roll by. This is way better (and safer) than committing yourself to something you may regret later.

Confirm That You Have A Deal

I’m not saying your landlord is sleazy. Why would I?

However, for safety reasons, it’s important that you get confirmation from your landlord that he/she is in full agreement to the new terms.

Whether you get a rent deferral or abatement deal with a compromise, you should make sure your landlord is ready to put it in writing.

Additionally, you want to also get confirmation that your landlord will not issue any notice or take legal action against you for rent payment default.

Have It In Black And White

They may not be the most dashing colours, but they sure are useful when it comes to making agreements. And in this case, they are.

It is crucial that the terms of the new rent/lease agreement be put in writing and signed by both parties. Ensure you include every single change in this new document and have it looked over by your lawyer.

Finally…

Being able to negotiate your rent as a restaurant is great and can help you get through this rough patch. As daunting as this might appear it may help to know that even landlords are looking forward to the process.

Why?

Because they need the money.

Your landlord needs your business to recover financially because if that doesn’t happen, then they won’t get paid, not even a little. And there’s no guarantee that when you go out of business another restaurant will rent the property anytime soon.

Sadly, not every landlord will be open to negotiations. Or may want to push you to make one-sided agreements.

You should also prepare for this to be the case and consider other alternatives.

Fortunately, some governments are putting systems in place to help protect tenants from such landlords. Thus, helping restaurants keep their properties and staffs who cannot pay rent where they live.