2nd half of Podcast Episode # 8
Since a March 15th Shut-Down Order – Restaurants have been fighting for Survival and attempting to adapt to this NEW NORMAL. Some have closed their doors, but others have Pivoted – moving to On-line ordering, and curbside take-out.
Everyone has been holding their breaths to see how long this would last and yesterday we learned that it will at least last until May 1st.
Executive Order 2020-08D – Governor DeWine has REQUESTED leniency by landlords when dealing with small businesses.
- Requested that Landlord suspend Rent payments for At Least 90 days,
- Landlords refrain from evicting tenants for At Least 90 days.
You have got to be able to ensure the successful re-entry of your businesses in a post-quarantine, post-COVID-19 world.
First thing you should do is Consult your Attorney and Review your Lease
- Understand your Risks and Liabilities– “Their attorney should explain the specific language in their lease regarding default, curing default and any other applicable clauses. Any attorney fees you pay now are nominal compared to potential legal pitfalls within your lease.”
- Terms of Default
- Force Majeure Clause
- Notice and Cure Periods
- Personal Guarantees
- Insurance Policies – Business Interruption Insurance
- Reach out to your Landlord and request Rent Abatement/Reduction/Deferral/Forgiveness:
- Explain Details of financial hardship
- Express that they are Temporary
- Express Plan for Re-opening
- Reflect on History of
Relationship as a Valuable Tenant
- Timely Payment History
- Tenant Improvements
- History of successful Business/Asset to Shopping Center/Attract Foot Traffic
- Make an ASK – 90 Days at a Minimum – Be realistic – what will you need
- Rent Forgiveness (Zero Rent during Shutdown and for a period of re-opening)
- Rent Deferral – Until Shutdown is Over
- Extend the Term for the period Rent Abated
- Extend Term with greater Rent increase %
- Add amount deferred/reduced to the prorata to the end of Term
- Remove Option to Renew or Increase % on Renewal Option
- Use this time for Tenant improvements – use Sweat Equity to fund improvements – fresh coat of paint, deep cleaning
- Add Percentage of future Revenue to Rent (using prior revenue as a baseline)
- Keep the communications Cooperative, Polite and Sympathetic (written) – they could be read aloud in Court someday.
- Document any Agreement with a Written Lease Amendment
- Work with your Attorney and CPA to provide financial documentation and make applications for Financial Assistance.
Landlords will request and need this information for two reasons:
First, they are trying to determine who actually needs help and who is trying to take advantage of the situation.
Second, they will likely need lender approval of any modification and the documentation you provide will help with the approval process. Each tenant will be evaluated on a case-by-case basis.
- Review your Business Model and Be Honest
- Were you Successful Prior to Shut Down
- Are you Margins putting you in position to succeed
- Did Delivery/Take-out/On-line work (how do they fit moving forward)
- Was your Marketing effective
- What Needed to Change
- Prepare to Re-Open
- Cash is King, but Credit is necessary (Working Capital)
- Labor Force Loyalty
- Vendor Relationships
- Make changes to Business Model
Call or e-mail with any questions: 216-367-1330 email@example.com