Restaurant Turnaround Consultant Tips to Lower Rents in Bad Times

Face it, the cost of monthly rent is one of the biggest expenses next to labor costs to be reduced for both a tenant and a restaurant turnaround consultant charged with developing a strategy to save a food service operation. One of the key areas in order to save a failing restaurant business is to renegotiate the overall cost of rent per month, when the balance can be paid back as well as reducing certain related expenses, such as late fees and interest. In order to do this, it will take a willing landlord who can beRestaurant Lounge convinced of the benefits of making these concessions for both the short and long term. An important factor to begin these discussions is for the restaurant tenant to be completely transparent in opening up its accounting books for review as well as being honest and forthright about what the tenant will need in terms of its own income before rent payments to survive and keep the restaurant open. It is also critical that a restaurant tenant perform their due diligence and prepare a summary of what positive impact the restaurant has on the overall building and location from a landlord point of view. This impact analysis should include a list of benefits, both material and subliminal, such as future valuations of the lease tied to income and future rent and value that the whole building enjoys from a stand point of continued customer activity and neighborhood migration to and from the location because of the food service and atmosphere you provide. In terms of reducing the current monthly rent and establishing a future payback plan, landlords are often amenable to restructuring the rents owed as an interest-only loan payable in full as a balloon at a predetermined date, say the end of the first 5 years or before the next lease renewal option kicks in. The tenant proposal might also suggest in going forward for the remaining term, that the landlord will continue to be paid interest each month, while the total balance of the loan note may fluctuate up and down with a not to exceed amount that is agreeable on over time. In addition to a not-to-exceed loan amount over time, a restaurant turnaround consultant might suggest that there be a provision for the tenant to give up some of their ownership to the landlord in exchange for the temporary rent reprieve. This not only shows good faith but is an important commitment by the tenant to demonstrate they want to make it work for the landlord for the long term. However, a restaurant tenant should not look at giving up a piece of their business to the landlord in exchange for rent as necessarily loosing control of the business. In fact, from the prespective of a distinterested neutral party such as a restaurant turnaround consultant, this partial ownership can easily be returned back with the appropriate provisions in the loan note with the landlord. More on this subject later…