With all the uncertainty in the market surrounding the coronavirus pandemic, you may be wondering, “What does this mean for my business?”
Perhaps you just opened your business and wonder what steps come next. Or maybe you’ve built a reliable brand and are beginning to see massive challenges in just these past couple weeks.
As you face all of the incoming struggles, you know it’s vital to consider ways to cut costs while making sure your business remains productive. Companies will face adversity from top to bottom, and as this virus spreads, you still have to pay the rent.
But it turns out that there may be a silver lining in lowering one of your most significant expenses: your lease terms. You could try to renegotiate them during these times.
A Study in Success
The power of acquiring new space and expanding is undeniable. And, curiously, some of the best opportunities to expand, happen to come by when times are tough.
One example is Panera Bread Company.
The company made the best out of all the challenges of the last Great Recession, but they didn’t compromise their standards.
Back in 2008, when everyone else was offering discounts to lure customers into their stores, Panera Bread maintained their prices and focused on making their locations as a pleasant place to sit back and stay for a while. Instead of offering coupons, they trained their associates to add on a dessert and maybe a coffee to go. They stayed true to their brand and reaped the rewards.
Because of the recession, the real estate industry was in an all-time low: prices were going down because no one wanted to spend their money during that time of crisis. But while others struggled, Panera opened a new store every five days on average.
They were eagerly acquiring new leases because they were confident in what they had built, their services, and the smiling faces they employed. Because of this, they thoughtfully expanded their locations and enjoyed huge discounts on spaces for them.
Panera had a growth in its share price of 5,646% between 2000 and 2016.
You Can Achieve Success, Even During Tough Times
So you may be thinking to yourself, “I have a great business, but I’m already locked into a lease, what options do I have?”
Well, it may soon be a great time to speak with your landlord.
If you go today, keep in mind he/she may be just as afraid as everyone else. And depending on your area, you may see your landlord attempt to hold pricing as long as possible. Now is the time to develop a plan so you can do this thoughtfully and confidently.
On the other hand, you may be struggling along with thousands of others to keep up. Maybe it’s a lack of foot traffic or simply a decline in orders. Whatever it is, you need to consider discussing your situation with your landlord to renegotiate your contract.
Renegotiate your lease
Here are some things to plan out as well as keep in mind:
- Consider what kind of relationship you have with your landlord. In challenging times, good tenants mean stability, and the better the relationship with him/her, the better it will go when you renegotiate. Your landlord will be reviewing your payment history and might want to see other documents.
- Do your research. Talk with neighbors. How is the market particularly affected in your area? Are there renovations or changes that need to be made that may affect the price? Or are there upgrades that have been completed recently which may work against you?
- Think of practical reasons why your requests are reasonable. If your sales might have gone down, maybe you won0t be able to pay your current lease, so explain this situation to your landlord.
- When you renegotiate, make the initial request in writing, so there is no “he said/she said.” Be clear in what you hope to gain at the onset.
- Present your desired terms enough in advance in case you need to break the lease. Review your contract and consider what that may look like.
- Be polite and thoughtful, and consider coming back with an answer or counter once you’ve thought about their offer. Acting out of emotion is a great way to lose a negotiation.
- Finalize everything in a renewed lease contract.
- Smaller landlords may be more willing to review the lease terms, primarily if your business represents a more significant part of their property
- If all else fails, and the terms cannot be negotiated. Consider asking for longer terms at that locked-in rate if you know the location is where you want to be.
Getting a new lease
Of course, if the coronavirus outbreak could have a similar effect as a recession, and prices could start going down (as many people don’t want to invest during an uncertain time. But this is your opportunity: renting a new space could save you the money you might have lost during the coronavirus crisis. That way, you can help your finances get to where you need them to be.
Take Stock of Your Situation
We want to see our customers excel in all aspects of their business. And making sure you feel like you can pay the lease will ease some of the burdens in this uncertain situation.
The last thing you want to do is wait until you’re at the edge before you start to take action. Start the conversations with your landlord to renegotiate your lease as soon as you feel comfortable.
Remember, as we see rates begin to drop, it may be time to consider expanding your locations, not scaling back.
If you’re worried about cash flow, consider working with us at Camino Financial. We built Camino Financial with the express goal of making sure small business owners had access to the capital they needed to develop their businesses. Maybe a loan is right for you and can help your business during these hard times.