Potpourri for $1000

Originally Published : April 22, 2020

Doctor, Doctor, give me the news…

Dear HL Clients,

I tell my staff that we are all legal oncologists now. Our clients are facing the most serious threat to their existence and are relying on us to help treat (advise) them so they can survive. So, we throw everything at the crisis. We lock horns with landlords and request deferments and abatements. We apply for loans and try to figure out a way to use the money constructively. We provide delivery advice to keep some revenue going. We lobby our dearly elected to try to get them to help us and we host webinars to get you all the information that you need. Whatever we can do to keep the business alive. 

But sometimes, it’s not enough and we have to give clients the bad news. The harsh reality. The cold facts that their business just might not be salvageable. Over the past few days, I have had this conversation with more than a few of you. Thankfully, most restaurant people are realists.  We talk about difficult landlords and accumulating rents and spaces that are no longer built for success because it was already tight in there and a labor pool that will be hesitant to return to the industry and the fact that things were already really, really hard for restaurants before this all went down.  In an economy that was zooming along to boot. 

And we analyze and prognosticate and sometimes, when we peer into the future, we realize that a business built eight years ago may no longer have a place in tomorrow’s world.  And that’s when we have to take the emotion out of it and make that life or death decision to either keep it running on life support and hope for a miracle or end it with compassion and care and move on to other things.  

You know that I am an optimist and that I believe that hospitality people are the salt of the earth and that if anyone can beat this thing, it’s us.  But we had better put some serious thought into what we have going on and what retail restaurants and bars are going to look like in 6 or 12 months and make our moves now.  We just don’t want to come out of this with too much debt or get beaten up so badly that starting over becomes more difficult than it has to be.  That’s all.  The only thing we can control is the debt that’s mounting.  So, let’s be smart about it.  If you’ve made a career in hospitality, you have the strength and stamina to do just about anything.

Now, for those of you who have made the decision to keep on truckin’, I say bully for you!  We have your back and let’s get you to the other side of this thing in one piece and in the best shape possible so you can kick everyone’s ass once things get back to sane. Just know that we will always fight to the end for you and won’t ever give up!

In other news:

From the Accounting Desk of Scotto & Melchiorre

The Economic Injury Disaster loan (EIDL) is like a box of chocolates, you never know what you’re going to get, but make sure you check your email and see if you received an email from [email protected] With the subject SBA Application No.  Funding has slowed down due to limited funds, but with this new stimulus, more money is coming into this program. 

From the Hospitality Consulting Desk of Jared Lewis

Vendor Relations

While landlord/tenant talks are getting the bulk of attention at the moment, it would be remiss of us as an industry to not heed the condition of our relationships with the broader ecosystem of vendors with whom we do business. It would be good for them to hear from you for their own sanity and more selfishly, to keep in good stead if you plan to do business with them down the road.   

An easy way to re-establish contact is to reach out to each of your sales reps to request a current statement of your account and let them know you are working on a plan to get back in good standing, eventually.  It’s an oblique way of saying “we’re still here and we’re trying to do the right thing (even though we can’t send you money right now)”.  

With those statements, take the time to reconcile your AP records against each vendor’s open receivables.  Address discrepancies, record any skipped invoices and confirm that all payments have been applied on both your end and theirs. 

Reconcile your bank and/or credit card accounts and if you’ve restricted activity on either, pay close attention to checks and e-payments that have been mailed or submitted but not yet cleared your accounts.  Separate from knowing the outstanding payables you show on your books, it will help your cash flow planning to know what draws against your accounts have yet to happen and when they will.  

Who, when and how much you pay to anyone during these times is a matter to be decided by every business on its own.  With that said, when cash is tight those decisions must be made and now is the time to do it.  With an accurate accounts payable aging report now in hand, start by ranking your open balances by whatever criteria you see fit.  As we all know, being on COD with the SLA is never fun so perhaps cleaning up open balances with your liquor vendors is a good place to start.  For the most part I’d say we all care more about the little guys over our prime vendors but will being on credit hold with Dairyland or Baldor throw a wrench in your relaunch?  If so, that’s a factor to consider.  

Once you’ve arrived on a general plan of who you would like to and need to pay as a priority, see what you can do.  If you can make small payments while you’re shut, great. If not, talk to your vendors, let them know you’re trying and see what they can do to help.  Remember that 13-week cash flow plan?  Accurate AP records are a critical part in the forecasting process.  If you haven’t started yet reach out to someone that can help. 

From the Insurance Desk of Eric Weiner

$$$ Saver
We’re sure you’ve seen the commercials on television where the insurance companies claim that they are on “your side” or that you are “in good hands.”  Well in some sense they are—here is how we can help save you money on your insurance premiums! 
– A restaurant/bar owner (who had already paid their insurance premiums in full without financing) obtained a substantial premium return for after we updated their sales figures with the insurance company.

– A closed restaurant took an alternative liability policy that satisfies their lease requirements, with their landlord’s prior consent and approval, in lieu of renewing their regular insurance policy.  Their immediate costs reduced from $30,000 to $2,400, while still providing the requisite coverages needed to protect their property (buildout & inventory etc.) and lease obligations. 
– Another restaurant that remains open for delivery received a much-needed premium refund, after we lowered their revenue metrics with their insurance company.
 – Also, an adjustment of Workers’ Compensation payrolls (and when applicable, a change in class codes) has enabled us to save our client additional monies.  
We strongly encourage you to maintain you Employment Practices Liability Insurance (EPLI) Policies.  These policies are written on a “claims made basis” and a cancellation will affect all of the past year’s coverage.  We expect a flurry of “wrongful termination” and Wage & Hour claims and remind you that generally the cost to defend these actions is usually far more than that of keeping your EPLI policy in place.

Register for our Landlord/Tenant Webinar: Peace on the Lower East here: https://zoom.us/webinar/

It’s Tuesday, April 28th at 1:00

Guest Jerry quote from HL client and friend, Laurie G.

As Jerry liked to say:  “Run for the money, caught short on the rent
Big ideas but the cash’s all spent… Run run run for the roses”  

Laurie – I think Jerry would understand our plight right about now.

Good night,