Article contributed by Kyle Inserra
With over 100,000 restaurants closing in the last six months, it certainly seems that independent restaurant owners are living a nightmare. But the reality is, this pandemic may have shifted the balance of power in the landlord-tenant relationship – making this an opportune time for operators to expand their concept.
Historically, landlords have held the upper hand when it comes to lease negotiations with a tenant – but what COVID 19 has done is shine a light on the fact that both sides really need each other to survive. Landlords can’t afford to play hardball with the restaurants that survive. They need to realize that these restaurants have just gone through a war. Forced changes to their operations (I mean, some of you even turned into grocery stores), see-sawing occupancy restrictions, and in some cases even had outdoor dining eliminated (talking to you LA). Those of you that do see it to the other side – should get an Oscars type award ceremony or a Medal of Honor at the very least.
And look I get it, landlords are in a tough spot too. They have families to feed and obligations of their own to meet. If they offer a lesser rent, they may be putting themselves in danger of having the bank coming and taking the property. In fact, most of their lenders won’t even allow landlords to amend their leases in any way, particularly as it pertains to lowering the rent. Sounds like an opportunity for restaurants if you ask me.
If you’re a strong operator, that has navigated this landscape and kept your business running throughout the pandemic, you have just gained a distinct advantage. You will have landlords across the country begging you to come to see their space. For most, this will be the first time that you will truly be in the driver’s seat.
There will also be an extraordinary number of fully built out second-generation spaces available and restaurant furniture and fixtures will be priced at all-time lows. Unfortunately, several restaurants may have just dumped a ton of money into their space at the wrong time – but this a tremendous opportunity. It’s possible you will be able to step into a space that just works for you – where the build-out will only cost a fraction of what it may have been earlier this year.
If you’re in this for the long haul, your strong track record will allow you to this is negotiate some favorable lease terms. And with rents are softening a bit, you have a pretty ideal situation on your hands. Advantage tenant.
It’s also time for you to really evaluate who your landlord is. Early this year, I heard the term “land-partner” – and I think that’s great. Both sides need to value what the other side is bringing to the table. COVID has put a mirror up against this relationship and made it crystal clear that both sides need each other equally. Now, what that means will vary from state to state and concept to concept, but there is no arguing the fact that no one side can survive without the other.
As we head into the new year, with the vaccine becoming available there seems to be a light at the end of the tunnel. Take this time to talk with your team, discuss where you’re at and where you want to go. Evaluate those opportunities you previously thought were out of reach. Focus on the details of your operation, taking the time to ensure that everything is buttoned up, and get your finances in order because the bottom line is, you will never have an opportunity like this again to scale your business.
A 18-year restaurant veteran, Kyle Inserra is now part of the national accounts team Sabre Advisors, specializing in the strategic growth and nurturing of emerging restaurant brands. A restaurateur himself (co-founder of Polpettina and LA LA Taqueria), his insider’s perspective of what it means to be a restaurant operator day-in and day-out, allow him to relate to his clients’ ever-changing needs. His expertise includes everything from site selection, lease negotiation, demographic and psychographic analysis, competitor analysis and zoning regulations. Kyle is also the host of The National Restaurant Owners Podcast, a show focused on bringing value to restaurant owners across the country by sharing his insight and experience, with a wide variety of guests. Contact him at https://taplink.cc/kyleinserra