COVID-19: Liquidity Management Tips

• 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
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• 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