Search Knowledge Base by Keyword
[Rick Braa] Negotiating Agreements
Acclaimed restaurant consultant Rick Braa took the time to host a comprehensive webinar on financial strategies and tips to make use of during the coronavirus crisis. In the second part of the webinar, he dove into the negotiated agreements you’re going to want to prioritize.
The first place to start is with your rent.
“You have to understand what the landlord’s best alternative to a negotiated agreement is,” Braa said. “A lot of the landlords, they have a big nut to cover as well, so you have to understand their position and try to work together as partners on the same deal.”
The most advantageous agreement you can get is a straight percentage rent, that’s great. Landlords are generally hesitant on this option, though Braa said some are open to it. This is the most helpful agreement you can reach, though –at a minimum, you’ll end up covering their maintenance, and getting that straight percentage rent through 2021 would be “greatly advantageous”.
Next is procurement — consolidate vendors down to a few. The more product you buy from one vendor, the higher the likelihood you’ll have better prices.
Look at your third-party delivery fees—do you need to renegotiate? As their volume goes up, you’ll get more leverage with them.
Don’t forget about your vendors and don’t forget about payment plans—these are reasons Braa likes the Small Business Administration loans, especially the Economic Injury and Disaster Loans. They give you the freedom to pay those off.
Credit Card Processing — the Washington Hospitality Association, in coordination with US Bank, has what Braa calls “incredible” credit card processing and pricing “really can’t be beat”. Braa has never seen a lower price.
“It’s very inexpensive … If you’re not on it, you should get on it,” he said. If you are prohibited by your POS system, he encourages you to go back to your credit card processor and see if they can negotiate a lower rate or even have an audit done that may determine if they are living up to their commitments to you.
Debt service — work with bank/investors for debt relief.
“Some banks have provided 100 percent relief for six months or so … it’s time to go back to that,” Braa said.
He spoke to the need of forbearance, which is relief of the principle. Oftentimes they’ll add this to the back of the loan, which is preferable. If they do this, there’s no punitive penalty.
Lastly, he spoke about insurance.
“Make sure you understand what’s needed on insurance,” Braa said.
If you have sales declining or a smaller workforce — both of these need to be adjusted in your insurance rate. Most policies let you do that every time, possibly every quarter.
“I will tell you that we are seeing a big uptick in rates considering any kind of employees,” Braa said. “We’re starting to see a lot of lawsuits around employees.”
It’s hard to track where people get sick and some lawsuits are popping up, causing a lot of angst for insurance companies, who are jacking up rates in kind.
“Expect to see lower overall dollars out of your pocket but a higher dollar percentage spend on anything to do with employee insurance,” Braa said.