FCA Member Update

COVID-19: Commercial leasing update

Dear FCA Member

Many FCA members in commercial leasing arrangements are experiencing significant pressure in meeting rental payments during the Covid-19 pandemic, and the FCA is committed to providing you with expert advice and support. The FCA has engaged with commercial leasing experts to prepare a toolkit of advice for franchisors and franchisees in this area.

Given the unprecedented challenge, some retail businesses have been successfully negotiating zero rental with landlords to bolster their ongoing viability.

LeaseWise Managing Director Ange Kondos has said that the landlords he has communicated with recognise the gravity of the situation and the need to assist their tenants by providing rent relief. Generously, LeaseWise have offered to provide free, expert advice to FCA members with specific queries and can be contacted via info@leaswise.net.au The FCA thanks LeaseWise for their support of our members at this time.

The FCA recognises that even rental relief during this period may not ensure the survival of all small businesses, and we continue to make representations to government for special consideration and support measures for small businesses, especially those in food retail.

To assist our members, the FCA has prepared two suggested template letters that can be sent to landlords requesting a temporary waiver of rental payments while the current pandemic impacts on customer numbers and revenue. A template letter for franchisees is available here and a template letter for franchisors is available here. Please note that this is not legal advice but practical information that may assist in gaining relief from the burden of leasing costs.

Phil Chapman from Lease1 has provided the following 10 step guide on the issue:

  1. Review rosters v trading hours and create a saving plan (landlords are already advising they will be flexible in some instances)
  2. Negotiate with bankers to defer loan payments. Our feedback is that banks are being reasonable in the current environment
  3. Same for equipment and chattel leases, seek to defer
  4. With suppliers, negotiate suitable payment terms and even defer part or all payments for a period of time
  5. Review and remove all non-essential operating costs, for example storage
  6. Defer capital expenditure on equipment, shop refurbishments, etc and channel funding into the operating costs plan
  7. Compare your numbers on customer counts, sales, gross profit and P & L reports for the same weekly/ monthly period this year to last year
  8. Review your lease for savings areas such as waiving of annual rent reviews, reduction in security/ bank guarantee to free up capital
  9. Create a revised sales and cash flow projection to the end of this calendar year making assumptions based on the above savings
  10. Make an appointment to sit down with your landlord and discuss where they fit into the battle plan. This can include rent abatement, deferring rent, extending lease term or a combination of these.

The FCA is also advocating directly to government to include cash relief to franchise businesses on commercial leasing arrangements. We understand a second business stimulus package is currently being prepared and will be announced shortly. Please contact me directly with questions or if we can provide further support to you.

Regards

Mary Aldred
Chief Executive Officer

   

 

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