Cut Expenses – Negotiate Short-Term Lease Amendments

As you work on the front-facing aspect of your business – keeping your facility clean and ensuring customers feel safe – do not ignore the other side that will inevitably suffer.

April 1, 2020
Cut Expenses – Negotiate Short-Term Lease Amendments

As you work on the front-facing aspect of your business – keeping your facility clean and ensuring customers feel safe – do not ignore the other side that will inevitably suffer.

We can turn our facility into a germaphobe’s dream with all the disinfectant and bleach we can find.  We can show our customers policies and action dedicated to keeping them safe.  Financial set-backs will happen regardless.  Whether it’s a lower amount of people coming in to sign-up, a higher amount of memberships being paused, or a combination of both…you’ll likely need to cut expenses to keep the business in fighting shape.  Let’s look at a major cost for most business owners:  rent.

Talk With Your Landlord.

Right now.  The only time that is better than “right now”, would have been earlier in the week.  You need to open a professional dialogue with the intent of expressing your concern.  Landlord’s don’t like surprises and some will, at the very least, appreciate your attempt to be proactive.  Here is an example letter we’ve seen used:

To Whom This May Concern,

Due to the recent events related to COVID-19, I have some concerns about our business. So far, we have not experienced any issues of cancelled memberships. However, considering how early we are in this event I’d like to open a proactive dialogue with you.

Our plan at this point is to continue operations unless we are forced by (the city/county/state) to close – but either way, we would be greatly affected in our ability to satisfy our lease agreement expenses. I am emailing today to try and get ahead of any issues and hopefully create some plans for the near future to weather this storm, should it worsen.

We are currently working on several ideas to meet the needs of our customers during this time of limited social interaction. However, in the event that incur drastic decrease in revenues or we are forced to close for a period of time, I am asking if (business name) would be willing to either 1) waive lease payments during that period and tack them on at the end of the lease or 2) consider a payment plan to repay them when business is back to normal?

In either case, I plan to stay in communication with you during this uncertain time.

Thank you for your consideration,

Signed Your Name”Name Goes Here

It is strongly encouraged to alter the template e-mail above to suit your individual scenario and include any pertinent information that can support your case.  Here are things you could cite that can strengthen your position:

  1. Local restrictions already in place on other business
  2. Forced closures of business in other industries
  3. Hardships placed on other business in similar industries/markets nation-wide

Follow-up Conversations

Any further conversations with your landlord afterward should be geared towards detailing a plan, which will put both parties at ease.   Everyone’s financial scenario will be different and the decrease in rent you would be seeking should be realistic and allow you to carry your current margins forward.  If you currently maintain a 20% net profit margin, but anticipate a 30% reduction in revenue for the next fiscal quarter, how much of a rent decrease would allow you to maintain the original margin?  This could be a good starting point for negotiations if you don’t plan to close your doors.

If you do plan to cease operations, start by asking for rent abatement for the time you are closed and that an equal amount/timeframe be added to the end of the lease.

Everything is Negotiable

Remember that the above suggestions are a starting point for you and your landlord.  They are likely feeling pressure from the pandemic as well, so if they don’t go for your first suggestions it’s your job to find a middle ground on which you can both survive.  If you have any questions or would like to share some insight, please make sure to post to the Gym Survival Guide FB Group!

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