The Franchisee With the Insurmountable Lease And Its Satisfying Amendment

Thursday, August 16 2007 @ 11:26 AM MST

Contributed by: psinewman49

Or What Can Be Done When Your Back Is Against the Wall


Submitted by Jim Herst on Thu, 2007/08/16 - 12:57.

The scene: A strip mall, away from the central city (pop. 185,000), well situated on a busy commercial street. No "real" anchors. This franchisee was operating a double store, making money until a non-franchise competitor opened two blocks away. The business was rental and/or purchase of expensive product with a seasonal preference. The objective of the franchisee, our client, was to renegotiate a lease and to delay payment to key suppliers. Beside cutting useable space by half, it was necessary to apportion costs to construct a separating wall, separate utilities, etc.

Having this all dropped in our lap, here's what was done.

The Landlord was quietly advised that unless he co-operated, his tenant, our client, would be forced to fully vacate, leaving without making payment on the yet-to-run three years of tenancy. We knew that one other store in the strip was vacant, this fact worked against our effort. Instead of our direct involvement with the landlord, we instructed our client on how to handle the negotiation. It took our client two meetings over five days to achieve agreement. Costs to restore the abandoned space were divided equally, with our client's portion payable in three equal monthly payments. The lease was amended by formula of 50% less 10%, and with a three-month moratorium.

In actuality, the pro rata restoration costs were less than one month's rental of the amended lease. Overall net result was an immediate improved cash flow for our franchisee-client as well as better lease costs for the following three years. We dealt with creditors, achieving significant savings on past obligations coupled with creditor's acceptance to continue selling this debtor at market price, COD for six months and an agreement to then consider open account terms.

We've seen this type of situation often, and each experience serves to strengthen our ability to achieve acceptable benefits for a distraught debtor. What you do when your back is against the wall is important. To struggle alone is foolish when in fact there are matured, experienced resources available to provide advice. Keeping your own counsel is often best, if you know best. The world is full of a number of things, said Shakespeare, so it may be best to look for and use the best.

I'd like hearing from readers having pressing financial situations. You need not divulge who you are, and I'll seek to provide experienced advice. Let's do it!

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