CoVID-19 LET’S TALK ABOUT RENT

Rent Calculator Tool

In last week’s newsletter we talked about how just abating rent commensurate with the decline in monthly sales may not be enough to retain F&B tenants in the future. Of particular concern was F&B tenants who may not see a return to full capacity for some time such as CBD venues, University Retail outlets and tourism based locations.

We showcased a tool B&P has created to help landlords not just calculate the “mandatory” rent abatement but also to calculate the profit risk profile of each individual store to determine if the mandatory rent abatement will be sufficient to maintain the tenant on their lease or will the store likely remain under financial distress. If you missed the newsletter click here.

If you want to discuss using the rent calculator with us click here.

Which F&B Tenancies Are More At Risk

This week we wanted to further expand on which F&B outlets in a landlord’s portfolio may not be able to continue to trade through the pandemic. There is no doubt we will see shrinkage of F&B outlet numbers across the nation so Landlords that take a pro-active approach to reviewing their F&B portfolio risk and implementing mitigation strategies will retain the best property values and customer experiences into the future.

Here’s a sample of the types of F&B tenancies at risk;

Risk Profile #1 – High/Low Casual Dining

Post GFC Australia experienced a radical decline in fine dining and the rise of casual dining. Casual dining aimed to replicate a high quality food experience in a “packed” dining atmosphere at way cheaper prices. This HIGH volume/LOW price model worked a treat as we worked through the GFC with a desire to still go out but not spend us much. Where CoVID-19 impacts this model now is that the intensity of the labour model for fast casual dining may not be able to be reduced proportionately to the reduction in production (HIGH volume) these restaurants require as social distancing laws limit the dining capacity. Fast casual tenancies not able to streamline their menus, manage their bookings timetable, increase their average transactions value per guest or reduce labour through digitisation and automation will suffer extreme subdued trading.

B&P’s ReBound package takes fast casual restaurants through strategies to mitigate all these risks.

Enquire now about the ReBound package for your tenants

Risk Profile #2 – Cost Of Goods Sensitivities

Health orientated F&B outlets have been one of the highest growth cuisine categories for some time – think poke, sushi, salad and smoothie bars. These cuisines rely on fresh foods which come at market prices. Border restrictions, loss of backpacking workforce to pick fruits and veg and continued risk of environmental devastation such as fires and floods can skyrocket produce prices. Just ask any Mexican operator what happens to their profits when the price of avocados doubles. In an average sub-regional setting the cost of goods for a chicken shop can range from 42-49% while a pizza shop cost of goods ranges from 36-41%. This means a pizza shop can experience a 13% better bottom line profit and therefore the ability to continue trading with less abatement than a chicken shop may.

Understanding which outlets in your portfolio can lose profit as their cost of goods climbs will help you understand how to negotiate rent abatement with these tenants.

B&P’s rent calculator uses our extensive operational knowledge and database along with ATO data on the profitable of various F&B outlet types to identify tenancies with this risk profile.

Find out more about our rent abatement calculator here

Risk Profile #3 – Dine In Reliance

Global data is providing evidence that the majority of F&B categories will not maintain pre CoVID-19 sales levels by relying on dine-in only. B&P recommends ensuring all F&B tenants can demonstrate they have at least 7 revenue streams. This can include meal kits, delivery, eventing and merchandise.

To ensure your portfolio is pivoting to embrace all the potential revenue streams book them in for ReBound package with a B&P expert here

Risk Profile #4 – Unproductive Seating Design

State by State there is continued variance on the capacity of guests permitted in F&B outlets. A dine in meal, where customers are in contact with other community members for longer than `15 minutes in an enclosed space with high touchpoints like door handles, menus, condiments, cutlery, glassware, toilets and furniture makes F&B high risk transmission experiences. It is why the industry was shut down so quickly and why patron caps and social distancing measures will remain for a long time across the hospitality sector.

Tenancies with a large number of communal tables, booth seating or high indoor as opposed to outdoor seating ratios will struggle to be able to reach 50% of pre CoVID-19 turnover. B&P in conjunction with Three Fishes Retail Design have developed a CoVID-19 design review package where we look at how to manage seating productivity, customer queuing, signage and technology to boost store sales productivity. Enquire about our CoVID-19 Design Review package here

Use B&P’s Resources To Boost Your Portfolio Performance

Retaining your F&B portfolio will take more than rent abatement. Throughout the pandemic B&P has provided thought leadership and real time tools to manage F&B operations and preserve rent and customer amenity. We now have a whole suite of 8 CoVID-19 resources available to tenants and retailers to get through this pandemic and thriving on the other side. Check out our website for all the latest resources available.

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