The Restaurant Blog
In speaking with restaurant owners across the country most have mixed emotions regarding the bailout, rescue, help them cover their tracks, bill that is before Congress tonight. When the bill failed to pass during the last session many owners were happy, while still others were miserable because credit card credit was being hit hard for many of their customers.
It is no secret that the hospitality industry has taken a serious hit in the dining room and customer counts, average check, and overall volume has substantially decreased over the past few months.
It may not be getting better soon. As credit lines dry up and loans and financing become harder to acquire owners may have to look at creative financing to keep the business afloat. As soon as credit disappears vendors, landlords, and other suppliers tend to put more pressure on an owner, especially if your seats are apparently emptier than they had been in the past.
But, don’t despair. The first guys to make the deals are the ones who get the best treatment. And, while vendors are not pleased if yo owe them any money or are late with a payment, they are certainly happier to see even a partial payment than they are to see their competitors delivery truck in front of your restaurant.
Here is the restaurant rescue bill: Ten Tips on making life a little easier and getting through the tough times…
1). Cash plus ten. No vendor in the world wants to hear this, however, if you owe any vendor a substantial amount of money ask if they will take a C.O.D. payment plus 10% of the balance, or at least a portion of the balance instead of the entire amount.
2). Lease reduction. This is not as tough as it may seem. When the market is flooded with vacancies and the credit market has dried up now is the perfect time to approach your landlord and ask for a monthly rent reduction in order to get through the tough times. Many landlords have owned there buildings for year and do not have huge mortgages on them and if the move helps save a business and keep the space occupied landlords often realize it is the wise thing to do.
3). Percentage rent negotiations. This is the perfect time to negotiate a percent-rent lease. They are easy to do and are extremely easy to live with. The seasonality of the business is one of the professions major downfalls. Nothing hurts worse than paying a summer rent rate in the middle of winter when the lake is frozen, the tourists are away and the heat bill is skyrocketing. A percentage rent lease alleviates this problem. When negotiating make sure the percentage rate stays the same and that it is fair for each party.
4). Split up your orders. Don’t ever be in a position where you only have one vendor for a product. Make sure that you have relationships with numerous vendors, large and small and that you can always call onther vendor at the last minute to deliver. It is wise in fluctuating times to make sure you order a few things from other vendors so they attempt to get your business.
5). Negotiate price. If you are paying the price on the price list, you are not doing your job. One of the major rushes that a trader on the commodity floor gets is when he buys a contract for a less sum than he sells it for. Let’s face it, we are in the commodities business. The bad news is they are delivered to our back door. With this in mind, negotiate a better price in tougher times.
6). You are not the only one with financial difficulties. Your customers are going through the same thing. Most of that is gone. His restaurant was sold. His portfolio has shrunk, His construction business shriveled and he still lives in his huge house. He also still enjoys going out to dinner. Think of you specials on a regular bass and see if you can come in at an extremely reasonable price- one night a week- to attract more customers.
7). Cash. They are paying with Cash? As credit dries up, so do credit cards. You may find yourself with an influx of cash on hand as people go the atm machine more than they used to. Don’t think it is yours. It isn’t. Although your first instinct is whatever your first instinct is, go to the second one. Deposit it and use it for paying restaurant bills.
8). Cash. The staff has cash? Pay closer attention to your closing work. With a credit card, the bank reconciles for you. With cash, you and your partner, the waiters have to perform that duty. Often your partner sees the cash before you ever do.
9). Your waiters and cooks are in the same boat. Don’t think because you see the waiters making tips that everything is smooth in their world. They too are going through some financial struggles. Take this into consideration. You may want to implement the staff meal if you don’t already have one. It is a great perk to a hungry, struggling waiter and spaghetti is pretty cheap.
10). If you have thought about selling, now is not a bad time to do so. There are still hawks with money that may look like vultures, but in reality they are saviors from above. Do not think you will get more for your restaurant during good economic times than you will now. Restaurant sales are based on the fact that your property is in a good location, your numbers and volume are reasonable and can be increased and that the landlord will approve a new tenant. This is the perfect time to get a new tenant approved. Especially if you have followed tip number two.