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| 1 minute read

Rent Cuts and COVID-19

Rent is just one of the costs most businesses face.  During the best of times, rent can can be approximately 8% of sales at restaurants.  These are not the best of times.  Social distancing, reduced hours and other restrictions will create a "new normal capacity"  for restaurants.  This new normal may approach 1/2 of capacity prior to the pandemic.  Even with increased "COVID premium" pricing, revenues will be down and expenses will take a larger bite as a percentage of those revenues.  Rents may account for as much as 20% of sales.  

Some of the larger restaurant chains see this probability and are trying to get out in front of the problem by negotiating with their landlords for rent concessions, abatements and lease modifications.  This is a solid strategy and should be attempted early and often as businesses begin to re-open.  Your landlord is an important part of your business' success and its cooperation in these critical times will be a building block for the future.  And in the event your landlord will not work with you, it is better to know early and build that into your plan for future operations.  

National restaurant chains and other stable businesses are prodding their landlords for rent relief as the economic picture sours, setting the stage for court battles and protracted clashes between big tenants and property owners.