Providing Real Estate Support Is Essential During the Coronavirus Crisis

The impact of the coronavirus crisis on franchising is far-reaching — there isn’t a part of the industry that it hasn’t touched. For brands with brick-and-mortar locations, this includes real estate. With concepts being forced to close their doors temporarily, a lot of owners are left wondering how they’re going to pay their rent not just this month, but for as many months as the need to quarantine continues.

That’s why it’s important for franchisors to provide support to their franchisees when it comes to real estate and leases. According to Joe Ferguson, vice president of development for Cousins Subs, the first thing that franchisees should be doing — if they haven’t already — is getting in touch with their landlords. 

As Ferguson said, “I believe it is important to get in touch with your landlord as soon as possible and open up lines of communication. Ask your landlord how flexible they are able to be and discuss terms that may work for both sides. For example, I have had many landlords that have been willing to work with us in the short term, but they have requested that we continue to pay maintenance costs under the lease. Be honest with your landlord as to what you need in the short term and how you are going to be able to honor this new commitment. When talking with your landlord, understand that you are one of many tenants that the landlord is most likely working with given how hard retail is hit right now. Landlords will be as understanding as possible, but many most likely have large debt payments to make as well.” 

Danessa Itaya, president of Property Management Inc.*, knows firsthand how focused landlords are on working with their tenants. She said, “When you look at residential or commercial real estate, including everyone who works in the hospitality or restaurant industries, there are a lot of tenants who are saying they can’t pay their rent. That’s why our franchisees are working to see what they can do.”

She continued, “The great news is that banks are being proactive. They’re reaching out to property owners to talk about deferral and SBA lending — there are so many different resources available that allow property managers to be flexible with tenants.”

In addition to helping franchisees communicate with their landlords and providing resources relating to lease agreements, franchisors also need to provide support to the candidates who started the discovery process before the virus hit.

Ferguson advises candidates to continue moving forward with discussions: “I recommend staying in contact with those associated with the opportunities that you were looking into. Determine how each opportunity operated during these unprecedented times and how leaders of those companies worked with their partners. I think that you can tell a lot about a company and its leadership in times of crises, and it can help you understand who you may or may not want to go into business with.” 

Ultimately, the coronavirus crisis is just in its beginning stages, so the franchise industry will have to determine how to adjust to this new normal going forward. 

“I believe that this time will have a lasting impact on a number of restaurants, and those restaurants that may have been struggling prior to this period will not reopen when they are able to do so. I believe retail vacancies will increase in the short term, but proven concepts with strong operations will succeed,” said Ferguson. “The brands that are able to make it through this period will prove the strength of its brand, and those brands will continue to grow when things get back to normal.”