Restaurant owners / Small business what is the survival strategy?

[Anonymous]

Anonymous wrote:TBH there are lots of small businesses in my area that sold over priced goods and food that weren’t going to survive anyways. And I don’t feel bad for them.

There are also just too many of the same type of businesses and if some close it won’t be a big deal either.

Lastly it would be nice if this was a wake up call to some of the local retail landlords to stop pricing out established small businesses with massive rent increases.

It'll exacerbate the problem. One common complaint about all these "town center" malls that seem to be popping up these days is all the tenants are national chains -- Chipotle, Uncle Julio's, Panera, etc. No local businesses. The reason is landlords know a national chain has better ability to pay the rent even if that location is not performing well.

This will just make it worse -- the small businesses that are out there will stop paying rent and go under, and landlords will be even less likely to rent to them in the future = customers will complain more about the lack of local businesses.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A Commercial landlord here. We are of course being flexible with our tenants because, for many of them, it's the right thing to do. But you'd be foolish to think that we are not taking notes on those that are being difficult right now just to take advantage of the situation - we know who you are. Depending on how your lease is structured, we are taking it back in future months or on renewal - with interest. In the end, the customer pays for everything.

I'm a commercial landlord also. Serious question for you: How many tenants do you think will even survive this? I estimate no more than 50%. I am starting to think that the commercial/retail landscape of this country will be changed forever in the next six months. Between most restaurants evaporating, half of other SMBs dying, and things like telemedicine and WFH becoming acceptable, I see a pretty dire future. Not to mention the system financing problems i.e. unhealthy leverage inherent to commercial real estate.

I would say there will be turnover, but the resulting vacancies will be filled. The businesses that were here served real demand. I don't think there will be long-lasting consumer behavior change from a 1-3 month interruption in our lifestyle. People have short memories in the grand scheme of things. The cultural backdrop of American society is one of optimism and adventure. Sorry to say, most small retail storefronts are operating on very low profit to the point that they really can't survive an interruption like this. But replacement businesses will come back.

To hit on some specifics. Telemedicine will be very limited, IMO. Most patient visits are not just a consultation but involve an examination. There is no way to do this effectively and reliably without in-person contact. Teleworking is very difficult to implement for small businesses because they lack the resources to properly manage a remotely working staff. The office environment provides a degree of assured isolation, a sense of formality that serves to improve the efficiency of workers.

As to financing/leveraging, every landlord's situation is different. Hopefully, you don't have too much exposure of the wrong kind and can work with your lenders to smooth out short term ripples. Best of luck.

Most of our visits, including physicals, the doctors barely do anything or touch us. Telemedicine works for me.

[Anonymous]

I am the pp who is the investor in the restaurants. So many people on here clearly have never owned a smaller business before. Depending on how you count what is a business I own about 6-8.

Business 101 is that a business has to be in the black at all times. If it is isn’t the owner needs to adjust something to get into the black and so fast. Businesses that run in the red will fail.

If the restaurant pays its employees while shut down it will fail. If it spends the cash it has on rent for the next few months it will fail. The right strategy is definitely to go into crisis mode, pay absolute necessary expenses only and sort it out with everyone else later.

So strange so many people on here are concerned about the landlord. I’m surprised but hopefully pleasantly so. I own commercial properties throughout the areas with about 25 retail tenants. I expect those in the restaurant or other affected areas to call us and tell us the same thing. We’ll sort it out later. In my restaurants I intend to pay back the landlord. Maybe spread out over 12-36 months. No penalties and no interest. Frankly if my tenants made that same offer I’d jump in it.

As to the commercial landlord who says he is keeping notes. If you are more focused on a tenant paying you next month than their ability to survive and pay you in perpetuity you will have a lot of vacant properties in a few months time. I actually have a hard time imagining that you really are a retail tenant landlord. There are times to be a dick and there are times to work it out with tenants. I’m surprised you don’t know the difference.

And as to the posters asking why a restaurant doesn’t carry 6 months of all expenses in hand, you should know that restaurants net 4-8% of revenues. And also that savings held In The business are taxed to the owner the same as if the owner pocketed the money. Which means to accumulate 6 months expenses after taxes would take a restaurant roughly 8-16 years to accomplish.

[Anonymous]

Anonymous wrote:I am the pp who is the investor in the restaurants. So many people on here clearly have never owned a smaller business before. Depending on how you count what is a business I own about 6-8.

Business 101 is that a business has to be in the black at all times. If it is isn’t the owner needs to adjust something to get into the black and so fast. Businesses that run in the red will fail.

If the restaurant pays its employees while shut down it will fail. If it spends the cash it has on rent for the next few months it will fail. The right strategy is definitely to go into crisis mode, pay absolute necessary expenses only and sort it out with everyone else later.

So strange so many people on here are concerned about the landlord. I’m surprised but hopefully pleasantly so. I own commercial properties throughout the areas with about 25 retail tenants. I expect those in the restaurant or other affected areas to call us and tell us the same thing. We’ll sort it out later. In my restaurants I intend to pay back the landlord. Maybe spread out over 12-36 months. No penalties and no interest. Frankly if my tenants made that same offer I’d jump in it.

As to the commercial landlord who says he is keeping notes. If you are more focused on a tenant paying you next month than their ability to survive and pay you in perpetuity you will have a lot of vacant properties in a few months time. I actually have a hard time imagining that you really are a retail tenant landlord. There are times to be a dick and there are times to work it out with tenants. I’m surprised you don’t know the difference.

And as to the posters asking why a restaurant doesn’t carry 6 months of all expenses in hand, you should know that restaurants net 4-8% of revenues. And also that savings held In The business are taxed to the owner the same as if the owner pocketed the money. Which means to accumulate 6 months expenses after taxes would take a restaurant roughly 8-16 years to accomplish.

Commercial landlord PP here. Your original post is not nearly as reconciliation as you sound now. You essentially typed that you were going to not pay your landlord because "what are they going to do, not like another restaurant or anyone is looking at leasing space right now". In other words, your intention is to be difficult not because you can't pay, but because you've decided to take advantage of the situation. We look for tenants with whom we can develop some level of mutual trust and respect. A tenant that takes advantage of us like this is not a tenant we want to accommodate on future improvements, or lease rates negotiations. When times are hard, we want to see that tenants are doing the best they can to meet their obligations. If they truly have difficulty, we'll work with them on a payment deferrement. We've agreed to waive rent in the past and will likely do the same for some tenants this time around. To be sure, the kind of tenant we provide flexibility to will not be the ones who are obviously taking advantage of us, like you characterized in your first post.

Lastly, all I said is that we would take notes and act appropriately in the future, not that we would play hardball with a dishonest tenant right on the spot. We'd push to get what we can, take notes, and plan for the future. Again, the customer always pays for everything, and we are always smiling.

[Anonymous]

I am much more likely to dine in at a restaurant than order out.

I can cook, and this experience is helping people learn to cook who never did before.

Where did the food go? I don't know but the grocery stores are out. People bought way more food from the grocery store than they ever did before.

I own a tiny online business. Meaning I sell on ebay. No employees but I can't buy new stuff to sell, at least not how I did. My sales are way down but I can still at least cover my fixed expenses and hopefully make a small profit.

My biggest issue is I'm a homeschooling parent now. And I have almost no childcare. Finding some time to keep the business going is my biggest challenge along with uncertainty and smaller profit margins already.

[Anonymous]

Any new updates?

[Anonymous]

Anonymous wrote:Any new updates?

Didn't post earlier but for every restaurant that closed in my neighborhood 1.5 have taken their place.

In the next two weeks we're getting a Pupatella, Smokin Pig BBQ, Officina Italian Market, the Amazon Fresh store, and Baan Siam.

https://dc.eater.com/2020/6/5/21281479/baan-siam-thai-restaurant-opening-menu-food-photos-mt-vernon-triangle-dc

So IMO the reports that commercial rents would drop and no more restaurants would survive was wrong...as predicted.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Any new updates?

Didn't post earlier but for every restaurant that closed in my neighborhood 1.5 have taken their place.

In the next two weeks we're getting a Pupatella, Smokin Pig BBQ, Officina Italian Market, the Amazon Fresh store, and Baan Siam.

https://dc.eater.com/2020/6/5/21281479/baan-siam-thai-restaurant-opening-menu-food-photos-mt-vernon-triangle-dc

So IMO the reports that commercial rents would drop and no more restaurants would survive was wrong...as predicted.

It takes at least 6 months to open a restaurant. All of these openings were planned (and the investments made) pre-Covid, so that doesn't say much about that market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Any new updates?

Didn't post earlier but for every restaurant that closed in my neighborhood 1.5 have taken their place.

In the next two weeks we're getting a Pupatella, Smokin Pig BBQ, Officina Italian Market, the Amazon Fresh store, and Baan Siam.

https://dc.eater.com/2020/6/5/21281479/baan-siam-thai-restaurant-opening-menu-food-photos-mt-vernon-triangle-dc

So IMO the reports that commercial rents would drop and no more restaurants would survive was wrong...as predicted.

It takes at least 6 months to open a restaurant. All of these openings were planned (and the investments made) pre-Covid, so that doesn't say much about that market.

I'm going to laugh because - yes, its true that they were pre-planned most investors would still pull out before opening if possible if they think the world is ending.

D.C. had 7% higher residential home sales in March 2020 vs March 2019 as well - people kept buying homes, life moves on. And now the market for home sales is even bigger.

I personally think the restaurants that opened and remain open will see a huge surge in the summer from bottled up consumer need. This is a screenshot which kind of shows just how well those that can meet the demand are doing (yes, they lack staff).

[Anonymous]

Anonymous wrote:

Anonymous wrote:It takes at least 6 months to open a restaurant. All of these openings were planned (and the investments made) pre-Covid, so that doesn't say much about that market.

I'm going to laugh because - yes, its true that they were pre-planned most investors would still pull out before opening if possible if they think the world is ending.

D.C. had 7% higher residential home sales in March 2020 vs March 2019 as well - people kept buying homes, life moves on. And now the market for home sales is even bigger.

I personally think the restaurants that opened and remain open will see a huge surge in the summer from bottled up consumer need. This is a screenshot which kind of shows just how well those that can meet the demand are doing (yes, they lack staff).

No need to speculate, Opentable publishes its order data set every day here:

https://www.opentable.com/state-of-industry

As others have said, one of the problems with restaurants is the very low margins which makes them struggle if even a small % of demand evaporates. Shadow kitchens are putting pressure on their ability to raise delivery prices. It's a brutal market. IMO the real test will be to watch volume once the Federal unemployment insurance expires end of July.

[Anonymous]

Sounds like the ghost kitchens were right to push ahead then.

[Anonymous]

Why do so many people open restaurants when the margins are so low? To turn a buck, seems like it takes an awful lot. I worked in restaurants when I was young. It's hard work.

[Anonymous]

Anonymous wrote:Why do so many people open restaurants when the margins are so low? To turn a buck, seems like it takes an awful lot. I worked in restaurants when I was young. It's hard work.

Ego. For the individual owners, I can see a lot of them just like to brag. But in a good year - the profits on alcohol are extensive.

And if you 'break out' like Wolfgang Puck or Gordon Ramsey or David Chang (and all of them think they will) its very easy to get extraordinarily rich without a degree or coming from wealth.

Also money laundering.

[Anonymous]

Anonymous wrote:
Also money laundering.

+1

[Anonymous]

The reason restaurants cant hire people is because of expanded unemployment benefits, NOT because the restaurant industry is thriving right now. Unemployment benefits prorate to something like $40-50k in annual salary. Of course most low-wage employers are going to struggle filling vacancies.