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COVID-19: Liquidity Management Tips

3/23/2020

 
  • Be proactive/constructive with lenders – seek any relief you can work out (deferrals, accruals, suspensions, interest only, potential to add abated payments to end of the loan, etc.)

  • Consider draw down on any available lines of credit to fortify balance sheet with cash

  • If you have floating rate debt, extend LIBOR contracts/payment frequency from 1 month to 3 months or more

  • Be proactive/constructive with franchisers on royalty and ad fund contributions – seek any relief you can work out (deferrals, accruals, suspensions, etc.)

  • Augment working capital
    • Reach out to service providers, vendors and landlords to extend payment terms and seek other support
    • Broadliners: reduce number of deliveries (for lower volumes), get out of minimum purchase contracts

  • Rent (some jurisdictions have passed legislation abating rent/late charges and other penalties - check online)
    • Analyze leases as it will impact the approach you take with landlords
      • Is your rent below market?  If so, landlords may be less willing to offer concessions
      • Highest and best use real estate (is your property more valuable as condominiums?)
      • Do you have a force majeure clause for rent abatement or extended closing?
      • Is your landlord relationship already strained?
    • Decide if you want to take a partnership approach or if you are forced to play hardball
      • Partnership – offer percentage rent for a time, or add abated rent to back end of lease
      • Hardball – don’t pay, negotiate . . . but be aware of the above analysis
    • If you have to close your restaurant, it may be a default under your lease

  • Repairs and maintenance (“R&M”) and capex
    • Set strict approval processes for R&M and maintenance capex – only critical items allowed
    • Pause or cancel all development/remodel capex
    • Seek potential refund of new development fees from franchiser with intent to repay later when new development restarts
      ​
  • Create a weekly (or daily) cash flow forecast that is as detailed as possible
    • Run sales sensitivities at various sales loss levels to understand break-even point and staffing levels

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2700 N. Arnoult Road | Metairie, LA  70002
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  • About Us
    • Upcoming Events
    • Leadership >
      • Past LRA Chairs
    • Advertising & Media
    • LRA Staff Directory
    • LRA Recent News
    • Contact Us
  • Membership
    • COVID
    • Benefits
    • Membership Application
    • Advocacy >
      • Why Tipping Works
    • Chapters
    • Louisiana Restaurant Legends
    • ADA Compliance Disclaimer
    • Member Login
  • Training
    • ServSafe Foodservice Manager
    • ServSafe Alcohol
    • ServSafe Allergens
    • ServSafe Food Handler
    • ServSuccess
    • Manage My Restaurant
  • LRA SIF
    • Agents & Brokers
    • Leadership
    • Coverages
    • Claims
    • Loss Prevention
    • Questionnaire
    • Compliance Reporting
    • LRA SIF Staff Directory
    • Contact Us
  • Showcase
    • Attendees >
      • 2021 Exhibitor List
    • Exhibitors
    • Be a Sponsor
    • Floor Plan
    • Hotels & Travel
    • Contact Us
  • Education
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