Rent relief is one of the most obvious measures landlords can implement to help their restaurant tenants through the transition period when they will be operating in-house dining, but likely seeing vastly reduced customer traffic. “With the reopening procedures basically an unknown on all fronts, we have suggest rent relief, deferred [rent], percentage rent only when open or on the pick-up/delivery services [and] using LC and security deposits to help offset rents,” writes commercial real estate consultant John Jay Schwartz, of TheManWiththeSquareFeet.com.

According to Ken Levin, president of VIV Management Corp., which serves as landlord to several restaurant tenants at its centers with which the firm has negotiated rent relief, “The cost of replacing a tenant is much higher than the cost of keeping a tenant, so we view rent relief during the COVID-19 crisis as a loan or as an incentive we might give a tenant for lease extension. VIV has asked the tenants to keep paying NNN expenses during the rent relief months.

Phoenix-based retired commercial real estate investor and restaurant operator Jim Rogers agrees that rent relief should be the first step: “Rents need to be adjusted to reflect the new near-term reality. Would require certified reporting of sales as a condition of any temporary rent abatements.” Rogers adds that in those situations when he would adjust rent, the idea is to try to keep “a floor equal to the net expenses in place.”

Another finance-based solution is for the landlord to offer restaurant operators bridge loans if they’ve been unable to secure PPP loans or if the PPP money is slow in arriving. That makes sense in cases where the restaurant has historically performed well and needs the money to get over the rough patch created by the pandemic.

Community marketing efforts for restaurant tenants can take many forms. One solution is to reach out to local trade area customers and update them on the safety precautions being implemented at the restaurant to reassure them they can come back, according to Rogers. It also makes sense to ask local residents for their support for the businesses—"This is especially important for local mom-and-pop operators who tend to have a very loyal following,” he notes. Schwartz likewise says that using their neighborhood contacts and doing emails blasts has helped his restaurant clients, “along with signage in front of their units.”

While in many places in-house dining will be limited to 50 percent of capacity for the foreseeable future to prevent the spread of infection, creating or expanding restaurants’ outdoor dining areas can partially make up for that reduced capacity. In fact, certain municipalities, including San Francisco, which opened for outdoor dining this weekend, and New York City, plan to give restaurants temporary sidewalk licenses at no cost and to increase the amount of street space that could be used for outdoor dining. Shopping center owners have also written to us to say they are working with lawyers and local municipalities to use center parking lots and sidewalks to create outdoor dining areas. Of course, social distancing guidelines will have to remain in place in outdoor areas, as well as indoors.

For retail centers that house multiple restaurant tenants, Rogers suggest coordinating their operating hours so that they are not all open at the same time. That can help limit sales cannibalization and ensure that all of the tenants benefit from the center’s shopper traffic.

A simplified restaurant menu can help restaurant operators in several ways. One, it can cut down on food waste and aid in reducing expenses. Two, it can improve operating efficiency, allowing the restaurant to speed up customer turnaround. Some restaurants have already started doing this. For example, national chain Red Robbin Gourmet Burgers has reduced its menu by 55 items, a move that has reportedly worked so well the company has no plans of bringing those items back. When our contributing writer Liz Wolf visited a bar and grill on her trip to the Phoenix area recently, the restaurant she ate at also offered a reduced menu.

This may be a rather difficult step to take, but slashing down overall operating expenses can help restaurant operators stay financially viable and that includes cutting labor costs when it won’t negatively impact sales levels. “In one instance, after reviewing an operator’s hourly sales data, we convinced him to reduce hours drastically, resulting in elimination of almost half his staffing needs, but with a significantly lower loss in actual revenues,” Rogers notes.

Restaurant owners should also be encouraged to examine their sales data by day of the week and hour of the day and vary staffing levels based on how busy the restaurant gets during specific times, Rogers writes. “Key variable cost of staffing can be more efficiently allocated to fewer more profitable hours being open.”

As mentioned in the section on pared down menus, a way to make up for sales lost to caps on dining capacity is to speed up the time it takes to serve each customer, especially during peak traffic times like lunch and dinner. To achieve that goal, restaurant owners will have to look at their operations and possibly make physical changes to kitchen layouts to make them more efficient, downsize dining stations (smaller stations take less time to serve than larger ones) and institute tablet menus that use QR codes instead of paper ones for ordering, which can both cut down on the potential spread of infection and speed up the ordering process.

Finally, reviewing and appealing all real estate tax valuations is a “must do,” according to Rogers. This might put the landlord in a more comfortable position to offer the necessary rent concessions and work with lower rental revenue streams while the pandemic’s impact lasts.