Ken Burgin

Suddenly, Everything Needs to be Negotiated!

Restaurant & cafe operatiors now have to do a lot more negotiation, and it’s not just the small stuff. Three months ago you were arguing over a 20c increase in chicken prices, or the chef wanting a $30 wage rise.

Now you’re dealing with a stubborn landlord, an unknown bank manager, impatient suppliers and a cranky partner. Most of what you did before was haggling, now it’s time to work like a grown-up!

Negotiating with landlords is a good place to start, and is likely to give you the largest financial return if you get it right. Shopping centre leasing executive Julian Mero advises:

  • Preparation and planning are two of the most important components of a negotiation. Without them you negotiate with force, threat or bluff which is not desirable and can break down the communication.
  • Understand the other side – what do they need? What is the landlord’s financial position, or if it’s in a shopping centre, what are they allowed to offer?
  • At the beginning, create the right atmosphere, communicate your position and learn their position – asking questions gathers information and gives you time to assess.
  • Back up every phone call with an email, outlining what you understood was agreed.
  • Never give anything away without something in return – eg an extension of the lease, or help with refurbishment in return for paying more rent than you anticipated.
  • The first offer has more influence on the final deal than any other factor – so plan and make it carefully.

The most common mistakes Julian sees in negotiation:

  • Don’t rush, the person with the most time pressure has the lower hand.
  • Neglecting the other sides position or problems – the landlord is not a demon!
  • Letting price dominate all other interests – there are other concessions that may be worth more than just a rent reduction.
  • Searching too hard for common ground to make the deal happen.
  • Neglecting your ‘walk away position’ previously set – if it looks like you were bluffing, you immediately lose leverage.

Business broker Paul Leach has dealt with many landlords, and people buying and selling restaurants & cafes. His advice for negotiating in the current crisis:

  • Act quickly and communicate with your landlord immediately.
  • Crunch the numbers and make a plan. Be ready with up-to-date bookwork – your sales data, P&L statement, bank statements etc. Back up your argument with honest, transparent information.
  • Do all that you can to meet your current rental obligations.
  • Work out what help you need from the landlord and look at it from both sides.
  • Don’t take “No” as being final – it might be the start of some serious discussion.

Chris Voss of the Black Swan Group talks about the personal interaction that takes place, and his tips could be blended with the practical advice of Julian and Paul. Remember most of this will be on the phone or email, not face to face:

  • Use the voice of a soothing late-nigh DJ – let’s get everyone nice and calm.
  • Establish a connection with your opening – ‘I’ll bet things are crazy over your way. I’ll bet this is all pretty overwhelming.’
  • Label what you hear: ‘this must be pretty stressful for you’ and ‘It probably feels like things are changing from one minute to the next’ or ‘It sounds like you guys have thought through quite a few options.’
  • Shape new thinking with the word ‘how’ eg ‘How do we work our way through this so that we don’t destroy each other. and we’re in a position to pick up the pieces and work together when this is over?’

Buckle up – you’re about to save yourself a lot of money!

Here’s Chris Voss telling us how to save deals in the post-coronavirus environment…

Some of this article was written by me for Hospitality magazine.