Rent is typically the largest fixed cost for a retail store and is often the key factor in losing business money, as it does not go down if business is slow.
Navigating a rent reduction is a challenging process that requires attention to detail. The success of such an approach will depend on the strength of the case presented.
A rent reduction is usually sought when a business falls on hard times. Building the case to support this must be based on facts.
Here are some tips for making the case for a retail store rent reduction:
Understand your situation. Evaluate your rent as a percentage of sales and compare it to your retail channel benchmark data. Let’s say, for example, that your rent is 15% of sales revenue and the benchmark for your type of business is 10%. Your rent in this scenario is 50% higher than baseline than it should be for your type of store. This makes your business less attractive to sell as other stores in your channel may be on sale at the same time.
Gather information. Research downtown traffic figures and compare them to traffic from previous periods. Most owners will not share this data. It may be that stores near the center have data that they are willing to share. You are looking to see if the center is losing customers, as this may explain a decline in store sales.
Get your finances in order. Understand your financial situation and where the business is making and losing money. Up-to-date financials will be important for a landlord to accept any form of rent relief. They need to believe that you are experiencing what you say you are experiencing.
Document what you have done to grow the business. Owners are used to retailers expecting them, the owner, to bail them out. Put together a file of all the marketing you’ve done and the promotions you’ve run. This should show the landlord that you have invested in generating traffic to the center and your store.
Develop a plan. Be clear on what you are looking for from the landlord. If it is a rent reduction, describe in your proposal document why, how much, and for how long. If it is a rent-free period, please describe the same information and explain why you are seeking this.
It would be dangerous to meet with your landlord or write or call him and ask for a rent reduction. They would be correct in dismissing such an approach without any supporting evidence or case. The more work you put into your proposal, the better.
Make sure your proposal includes a payment to the owner. This could be staying downtown, starting to pay your rent on time, or working on finding a new tenant for your store. Regardless of the outcome you propose, there has to be something in the proposal that the landlord can trust.
Achieving a reduction in retail store rent is achieved through preparation and focus. Take your time and present a truthful case professionally.[resentatruthfulcaseprofessionally[resentatruthfulcaseprofessionally