Negatively impacted by the COVID pandemic, a major franchisee of a national quick-serve restaurant chain had multiple stores closed for several months, preventing the franchisee from earning revenue, paying employees and covering other operating expenses, including rent and charges owed to landlords in two states.
A strategic partner recommended that the company turn to Virtas Partners to restructure 40 leases across two major metropolitan markets to try to avoid bankruptcy and significantly reduce occupancy costs for temporarily closed locations which were slated to re-open amid uncertainty and a drop in traffic and revenues.
Client Background
Our client was a very successful restaurant company pre-COVID, with profitable stores in two major markets. The pandemic brought on government-imposed restrictions across all locations, forcing the client to lay off staff, cease operations and seek out ways to survive beyond receiving PPP money and making Draconian cuts to their 40 stores’ operating budgets.
Scope of Services
- Portfolio review of leases, four wall EBITDA and analysis of landlord quality and leverage
- Strategizing on best approach to savings given lease terms and recent correspondence/interaction with landlords
- Restructuring—negotiated with all 40 landlords and their attorneys to structure money saving deals
- Overseeing completion of lease amendments and legal documentation reflecting deals
- Post-amendment management of client/landlord relationship as COVID persisted and payment issues continued
Significant Milestones
- Completed lease analysis within days of retention
- Met with client to discuss strategy and approach to each location
- Contacted all 40 landlords and successfully completed deals to either abate, defer, forgive rent or terminate or extend leases
- Provided follow up services as COVID persisted and several deals needed to be tweaked to reflect reduced traffic/revenues
Value to Client
- Average savings well in excess of $10,000 per location (most locations at 1,000-1,500 SF)
- All legal actions to evict/collect forestalled and ultimately dropped
- All locations remain open. Several locations have lease terms that allow for future survival
- Hundreds of jobs preserved across 40 locations
- Client credibility restored by our intermediation in solving past due rent issues and crafting acceptable payment plans