How to Renegotiate Your Rent on Your Restaurant
What are the three magic words that can change your life? No, it's not "I love you." Instead, it's "lower my rent!"
If you lease a restaurant, then you understand that there are good months and bad months. You don't always make as much profit as you need, and that may translate to difficulties in paying your restaurant lease each month.
However, you don't have to throw in the towel. Instead, try renegotiating the rent for your restaurant. If you're not sure how to get started, our comprehensive guide will walk you through each step!
Communication Is Key
Sometimes, getting warnings and notices from your landlord sends you into a kind of "fight or flight" mode. And when this happens, you may be tempted to ignore those messages in an attempt to ignore the problem.
Of course, this isn't a problem you can simply run away from. And if you are ignoring messages from your landlord, you may be causing him to think you are unreliable. If the landlord believes this, it will make it that much harder to renegotiate your restaurant lease.
That's why it's important to respond to all messages in a timely manner and keep the lines of communication open. When a landlord sees you are willing to talk, they will be much likelier to consider a dialogue about your rent.
In the Same Boat
Sometimes, landlords are wary of renegotiating rent because they worry about the viability of your business. In other words, if your restaurant isn't making enough money now, they may not have much reason to believe that it will be profitable in another year or so.
However, many restaurants are financially struggling now due to COVID-19 and various state restrictions throughout the year. It may help to underscore this point to your landlord to show that plenty of other restaurants are in the same boat when it comes to financial struggles. In fact, a staggering 110,000 restaurants have had to close due to COVID-19.
Obviously, there is more to negotiations than just bringing up COVID-19. But bringing the virus up can help underscore that your business is struggling through no fault of your own. And when the landlord understands these extraordinary circumstances, they may be willing to cut you some slack.
Consider Their Needs
Want to hear the real secret of negotiating rent with your landlord? It's simple: you need to consider their needs at all times.
When you are suffering financially, it is easy to demonize your landlord as a greedy person who doesn't understand your struggles. But you must remember that the two of you are part of a financial ecosystem. When you're not getting paid, he's not getting paid either.
Our guide will help you explore a few negotiation strategies and options to keep your restaurant afloat. But never forget that your landlord is likeliest to go for solutions that address their needs and help solve those needs in some way.
Short-Term and Long-Term Solutions
There is no "one size fits all" when it comes to financial struggles and rent negotiation. This is why it is best to present your landlord with both short-term and long-term solutions to your current financial dilemma.
Short-term solutions are pretty straightforward. You may be able to negotiate rent deferral or even rent forgiveness (more on these later) as a short-term way to get your restaurant back on its feet. Meanwhile, you can make adjustments to your sales and marketing techniques to generate more profit, which is something your landlord definitely wants to hear.
However, the landlord will be equally invested in your long-term ideas. Do you have a plan to pay back previous rent that you owe? Do you have reason to believe you will have a financial upturn in the next year (for example, once everyone has access to the COVID-19 vaccine)?
Offering up a combination of both short-term and long-term solutions is one of your strongest moves when it comes to negotiating a better rent.
Rent Deferral vs Rent Forgiveness
If you're having trouble making your normal restaurant lease payments, there are two basic options your landlord may offer. These options are rent deferral and rent forgiveness.
Most landlords prefer rent deferral, which means that you will eventually pay back any money you owe from missing payments. And you can negotiate how that money will be paid back. For example, you could pay it back in a lump sum or negotiate to pay it back in smaller installments over a longer period of time.
Rent forgiveness is much rarer. As the name implies, this means that the landlord will forgive a certain amount of rent that you owe, and you will have no further obligations to pay that rent back.
Generally speaking, rent deferral is a good negotiation strategy. You can negotiate terms to give yourself temporary relief from impending rental payments. Meanwhile, the landlord has the peace of mind of knowing they will ultimately get the money they are owed.
Be Willing to Compromise
You don't have to reinvent the wheel when it comes to rental negotiation strategies. In fact, one of the best moves you can make is the cornerstone of all financial negotiations, and that's showing a willingness to compromise.
Without compromise, no one "wins" in these negotiations. If you can't make rent, your restaurant will go under. And if your restaurant goes under, your landlord will no longer enjoy making a relatively easy profit.
Therefore, both of you have much to gain from these negotiations. But chances are that you're not going to get the exact rental agreement you want. It's important to focus on the long-term: if you don't reach an agreement now, there may be no future for your restaurant.
Don't forget that the landlord is making compromises simply by agreeing to any kind of rent modification. If you go into negotiations with an open mind and willingness to compromise, then both of you can walk away happy.
Renegotiating Your Restaurant Lease: What's Next?
Now you know how to renegotiate a restaurant lease. But do you know how to reinvigorate your restaurant?
We specialize in providing affordable, high-quality chairs and barstools for restaurants just like yours. To see what we can do to help make your next year more profitable, contact us today!