Tips for restaurant lease renegotiations and licensing renewals

This article is part of our blog series, “Reopening your restaurant: What you need to know,” and gives you some ideas for managing and potentially reducing your expenses as you fully reopen your restaurant after the crisis.

Published May 13, 2020

Tip #1: Check your insurance policy for a “Business Interruption” clause

Do you know if your insurance covers at least some of the loss of business you’ve sustained due to the pandemic? As an example, state legislators in New Jersey are proposing legislation requiring insurers to provide coverage for these claims. If it’s successful, other states could follow suit. Regardless of what your policy says, it’s a good idea to file your claim now in case your policy has a filing deadline. It could be denied today, but if anything changes in the future, you won’t miss your chance.

Tip #2: Explore whether there’s an option to renegotiate your lease

As you reopen, tightly managing expenses will likely be one of your top priorities—and your rent may be one of your largest expenses. If you haven’t already, consider reaching out to your landlord to see if there’s an option to renegotiate the terms of your lease. It may be a good idea to call your lawyer for advice and direction prior to having a conversation with your landlord.  

While it’s probably unlikely that new tenants will be banging on your landlord’s door wanting to pay a good price for your space, you’re likely in a binding contract that doesn’t have an out clause that will apply during this crisis. Possible renegotiation options may include rent deferral, rent relief and the possibility of rent reduction. 

Tip #3: Double check your state and local licenses and permits for renewal

If your licenses and permits are up for renewal, consider checking to see if there’s been any reduction in cost to renew or any credits issued against the licenses that were in effect during the pandemic.

Tip #4: Re-evaluate your forecasts and breakeven analysis

Once you fully reopen your restaurant, you may not automatically jump back up to the revenue forecasts you were driving before the pandemic. To effectively order product, schedule appropriately and pay your vendors and landlord, you’ll need to redo the forecast for your sales as accurately as possible. After you’ve reset your forecast, your next step is to figure out your new break-even number.   

This will let you know the amount of revenue necessary to cover both your fixed and variable expenses within a specific time period. When you combine this information with a per person average, you know how many customers you need to serve—either in your physical location or through your digital channels—to cover all your costs. 

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