Should my mom move out of the restaurant location she's had for more than 10 years because of the expensive lease?
She's owned this rotisserrie chicken restaurant since 1996. In 2004 she signed a five-year lease that was expensive at the time. She could afford it then because business was going well, but sales and revenue have dropped over the past couple of years and this lease has crippled her ability to reinvest in the business. The lease ends in the first quarter of 2009 and I wondered whether it would be a good idea to move despite the fact that we have a strong customer base already.
Get the working capital your business needs from Entrepreneur Lending, powered by CAN Capital. Learn More »Go back to your current landlord and renegotiate your current lease. A landlord would rather have lower rent than no rent, especially if there is a glut of demand for commercial space (which may or may not be true in your area).
The idea is to stay if you can--especially if you have a strong customer base. It's easier to try to get reduced rent than to lose half your sales by moving to a new location.
If that is possible, then you need to work on boosting sales versus further reducing costs--which you can only cut so far before it affects your overall service and performance. Your quick-service style is perfect for people on the go, or former restaurant-goers looking to downsize based on their own cutbacks in higher-level spending.
Find ways to attract those customers--and go back to your current and seemingly loyal customer base to increase repeat visits, upsell existing
menu items or find ways to increase your prices (even 10 percent across the board will help your bottom line and will cause little fall-off in customers).
Ideally, you can do all three--and with the reduced rent, position yourself for the economic upturn, which will come sooner rather than later.