COVID 19 & Rent Negotiations

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COVID 19 & Rent Negotiations

Don’t delay.

Rent is one of your store’s three largest expenses (along with inventory and payroll). In the coming days and weeks, sales are going to decline for all of retail. You need to do everything you can to lower your expenses, and you should start with the biggest obligations.

Check on your legal rights.

Some cities have instituted rent suspensions or eviction moratoriums. Know where you stand before you begin negotiating with your landlord.

Start with an email.

In 99 percent of the cases, the best first step will be to email your landlord. He or she no doubt is dealing with a day full of crises, like you, and an email will start the communication process in a way that doesn’t make them feel they are on the spot, or that they have to make any immediate decision, which very likely would not be a positive outcome for you. Your goal should be to set up a phone appointment to discuss the current situation, unless you know from previous experience that a series of emails has been more effective.

Explain your position and the steps you’ve already taken.

Begin your conversation with your landlord with a succinct update on the ways that you, as a small business owner, have already quickly responded to this unprecedented situation. Show them that you’re actively trying to help yourself and are committed to ensuring that your business survives this crisis. Some talking points to keep in mind:

  • You have taken effective steps to continue selling books, digital books, and digital audio to your customers, whether it’s curbside service or online sales via your store website or Bookshop.org
  • Share data to show the results of those efforts, and share with them that ABA’s data show that online sales across the indie channel have seen an unprecedented growth in volume and conversion rate, showing that customers are still buying books and are purchasing them from independent stores. This is especially relevant following Amazon’s decision to de-emphasize book sales, with the shipping of current Amazon book orders delayed by approximately one month.
  • You have reached out to publishers and other vendors to extend payment deadlines and/or modify other trade terms in order to maximize cash flow and sustain your business through this difficult period.
  • You are looking at every expense line with an eye toward cutting costs and deferring optional expenses.

Make this a discussion about succeeding together.

You want this to be a negotiation that has a positive tone, and is framed as a way for both you and your landlord to work together so that when this difficult period ends — and it will — your store is in the best possible position to resume operations and return to being a good tenant. Help the landlord understand that it’s in their best interest to help you; they don’t want an empty storefront any more than you want to close. It’s also possible to make the case that everyone is going to have to share temporary sacrifices so that we can come together as a community to rebuild the economy after the outbreak passes.

Your ask.

There are three types of rent relief you can ask for:

  • Rent Reduction. Request a reduction in rent, Common Area Maintenance charges (CAM), or both. Or ask to switch to a percentage rent, or a lower base rent plus a percentage rent.
  • Rent Deferral. Ask to defer your rent to a later time, or set up a payment plan for back rent.
  • Rent Abatement. Ask for rent to be forgiven for a set amount of time.

You have to closely review your most current numbers to assess your needs, but ABA believes that a very reasonable request is for rent deferral: no rent for the next two to three months, effectively an interest-free loan, with repayment beginning January 1, 2021. Your situation may warrant that you start by asking for a rent abatement of three months instead. Don’t be afraid to ask big.

In addition to deciding what you’re comfortable with you’ll need to decide whether you want to ask for something specific, or ask your landlord for general relief and see what they offer first. There is no shortage of business school debate about this, but in this case there is an argument in favor of making the first offer; you need this negotiation to be as short as possible, and your first offer can anchor the outcome to your advantage. The scope of this crisis has created a very different climate for negotiations. You are in a good position to ask for relief and your landlord has good reason to try and work with you to come to a satisfactory conclusion for both of you.

ABA is here.

If you have any questions or want to discuss rent relief contact ABA’s Dan Cullen.

 

About ABA

The American Booksellers Association, a national not-for-profit trade organization, works with booksellers and industry partners to ensure the success and profitability of independently owned book retailers, and to assist in expanding the community of the book.

Independent bookstores act as community anchors; they serve a unique role in promoting the open exchange of ideas, enriching the cultural life of communities, and creating economically vibrant neighborhoods.

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