On December 7, the Michigan Department of Health and Human Services (MDHHS) extended its closure of indoor dining for bars and restaurants in Michigan until December 20. This closure is an extension of the three week order that took effect on November 18 and was set to expire at 11:59pm on December 8. It goes without saying that these closures, and the ones that were implemented previously, are crippling the food industry. There are estimates that anywhere from one in every six to one in every three restaurants and bars may close permanently due to the loss of revenue from the pandemic closures. For a restaurant or bar owner, if you haven't don't the following, your need to act now in order to increase your business' survivability during these closures. Speak to Your Landlord (or Bank) - Rent (or mortgage payment) is the largest fixed cost when it comes to restaurants and bars. The loss of ability to pay rent (or mortgage payment) needs to be addressed immediately. First, determine how much you are able to pay with the current revenue of your restaurant or bar. If your restaurant or bar is closed completely, your ability to pay is different than a restaurant or bar that is open for takeout and/or delivery. Then, once you know the maximum amount you are currently able to pay, contact your landlord (or bank) and seek relief. In some cases, landlords have agreed to forgo rent until the closures are lifted; however, it is more likely that the landlord (or bank) will negotiate a temporary reduction. There are a number of ways of structuring a rent reduction including reduction based on current gross revenue, abatement based on capacity or deferral. Keep in mind that the the landlord (or bank) may be more willing to work with you now because they do not want to have a vacant building with no potential for rent. Remember, any changes in rent structure, even on a temporary basis, should be in writing. Reduce Employee Expenses - Employees are the lifeblood of a restaurant and bar. Nobody wants to see employees lose their jobs, or even have their hours reduced. Unfortunately, in these times, difficult decisions must be made and sometimes that means reducing hours and laying off more staff than what you have already done. Staff reductions may not work on a permanent basis, but they are a way to shed expenses in the short term, especially if all the current staff is not needed during the closures. Once decisions have been made as to which staff will be laid off, clearly communicate with the laid off staff and the remaining staff too. Be sure to follow all established company policies. Be as honest with all the employees as possible, while not making any promises. For any laid off employees, complete any necessary corporate paperwork and paperwork the state may require to assist employees with potential unemployment claims. Renegotiate with Vendors and Creditors - Look at your current bills and determine if any of the vendors' and creditors' agreements can be renegotiated. For example, if you have a food supplier that is cash upon delivery, speak with the supplier and see if there is a credit option. In the same conversation, request a price break on the goods you purchase. It doesn't hurt to ask and if a discount is available, the savings will help preserve cash flow.. If there are repayment terms on a loan, look to renegotiate the terms with the creditors. Don't wait until you cannot pay to speak to your vendors and creditors. The bottom line in increasing survivability is acting now. Don't wait until it is too late and there is no hope for saving your restaurant or bar. Legal Pathworks has a proven process of helping its clients during this difficult time. Reach out to us and we can help.