With so many restaurants struggling financially during the COVID-19 crisis, I’m sharing this advice for restaurant owners and landlords offered by MXSW sponsors Chuck Wells and Justin DiBiase of Kidder Mathews, the largest independent commercial real estate firm on the West Coast.
‘‘Everyone has a plan ‘til they get punched in the mouth.’’
– Mike Tyson
Industry clients and friends:
Iron Mike’s words couldn’t be truer given the current circumstances of your industry. Given the ongoing uncertainty of the COVID-19 economic impacts, we are reaching out with a helping hand to help navigate these uncertain times.
As a global pandemic is unprecedented in our time, there are no certain answers or guaranteed wins. What we’ve done is borrowed from our years of industry experience to put together a short list of key considerations for your “go forward” approach and hopeful solutions.
Key lease issues to be aware of and discuss with your landlord or property manager (aside from rent):
- Change of use: If you are part of a larger, multi-tenant development, many full-service restaurants are now operating as carryout and/or delivery only. Does this violate any exclusives given to QSR or fast-casual concepts within the development and, if so, will those tenants look to enforce their protective rights against this new “carryout competition” that would cause your landlord to act against your efforts to remain in business?
- Signage: Are you allowed to place temporary “To Go” orders sign without violating CCRs or city codes?
- Force majeure: What does a forced work stoppage mean for rent obligations?
- Lease clauses: Does your lease have continuous operation, go dark, or cessation clauses?
- Bylaws: What are the merchants association bylaws impact (if applicable)?
- Co-tenancy and occupancy clauses: For example, if your foot traffic is dependent upon an anchor tenant (such as a health club), are you allowed to close without penalty?
- Relief requests: Have you yet requested temporary relief from utility companies, trash removal schedules and payments, internet/data providers, and entertainment packages (sports, music, etc.)
Bottom line: This situation is uncomfortable for everyone – a punch in the mouth. Both landlords and tenants are losing sleep. Now more than ever they both realize they only coexist by working together.
As commercial real estate brokerage professionals that focus on your industry, we acknowledge there is no “one size fits all” solution. We strongly recommend you begin and/or continue active and consistent lines of communication with your landlord, as this may be the best and first tool to use during this time.
Be very specific (and reasonable) on what assistance you need, be appreciative for any relief, and as always put it in writing!
We recently created a one-page lease amendment for a client. Our recommendation to the landlord was to give the tenant a chance to survive the current circumstances, since replacing a tenant in today’s climate will be much more expensive than retaining an existing tenant through a temporary reduction of rent.
If you would like to discuss your specific circumstance with us, please contact us at your convenience. We are locally available and ready to help.
Chuck Wells
602-513-5141 (work)
602-405-8920 (cell)
Chuck.Wells@Kidder.com
Justin DiBiase
602-513-5143 (work)
480-828-7701 (cell)
Justin.Dibiase@kidder.com
