Post-Pandemic Analysis: Renegotiate With A Human Heart
We are all in this, 'together'. So, sit down with your vendors and agencies, sit down with your delivery platform, and sit down with your landlord. Talk to them to find win-win solutions, together.
The food delivery business of individual brands has taken a major hit in many countries with stricter lockdowns and higher competition coming from established dine-in brands starting their delivery operation. The industry landscape will look very different after the pandemic and we will need to navigate through this with clear foresight and sharp strategy.
Negotiations are hard but this is the need of the hour.
#1 DISCUSS WITH YOUR DELIVERY PARTNER / AGGREGATOR
Delivery partners charge somewhere between 15-30% of your bill value, depending on your country and experience. Coming out of a pandemic, it’s important to sit down and renegotiate with them on the commission rates. It may be possible to reduce their other platform-related charges (check here to know more about the hidden platform charges).
We all should remember, a delivery partner will succeed only if the delivery kitchens do well and delivery kitchens will thrive only if their delivery partners are successful in fetching good business to them.
If you are an established delivery brand with a solid percentage of your business coming from regulars, this might be the right time to consider adding your own delivery fleet. In this market, many people have lost their jobs and you may consider creating your own app and adding your own fleet to reduce your delivery partner dependency. Details on how to develop your own app and delivery fleet are covered in our class.
#2 SECURING GOVERNMENT LOANS AND GRANTS
This is the time, when you need to be calm and read between the lines. Many governments around the world have announced different kinds of relief packages for the industry, like the Payroll Protection Program by the US Govt, but it does come with a few terms and conditions. Chain establishments with higher cash reserves will have the legal resources and corporate structures to navigate through this complex process. Independent owners will have to be extra cautious to not get caught in between and get their paperwork watertight.
#3 REACH OUT TO YOUR BANKS & FINANCERS
Many business owners have started their businesses by taking loans and mortgages. It’s a critical time for them to reach out to their financier to learn about possible relief and moratorium options. Do not be afraid to renegotiate your mortgage terms with the big banks. Also, businesses that do not have an ongoing loan can explore the possibility of taking one to gather enough cash flow, which helps them cross the bump. Bankers can help you understand and access all the different debt financing options available to business owners under the current market circumstances.
#4 NEGOTIATE WITH YOUR LANDLORD
Approach your landlord proactively and try to renegotiate your rental agreement terms. If you are in a shared kitchen, sit down with the facility owner and work out a feasible way forward.
Treat your landlord like your long-term partners and plan together for a temporary deferment or reduction in rent and spread it out over the remainder of the lease. Be clear that the agreement you're negotiating is temporary and for the good of the relationship in the long term.
Landlords understand the challenges of the post-pandemic business environment and they know it's unlikely they will find new tenants in this economy. Some Government bodies have mediated in favor of the tenants, to create a non-eviction policy for a defined period.
#5 RE-NEGOTIATE WITH YOUR VENDORS
To weather through the storm and land on your feet, you will need to reduce costs, where ever possible. But at the same time, before making any request, it’s important to put yourself on the receiving end. Try to communicate openly and create a mutually beneficial solution. For example, securing longer payback terms is typically ideal for you; however, that jeopardizes your vendor's goal, which is to get paid as soon as possible.
Early payment discounts are an easy way of negotiating terms that suit both parties, the vendor gets paid sooner while you get a small discount for paying early. Without paying and communicating, trying to cut your vendors loose in this market dynamics will only get you a bad reputation and hurt your business further, in the long run.
#6 TALK TO THE TAX PEOPLE AND FIND OUT ABOUT TAX BREAKS
During the crisis, policymakers of various countries introduced multiple tax breaks and deferred tax payment structures. Work closely with your accountant and tax advisor to identify areas where you can save and how restructure your finances in the best possible way for the benefit of your business.
After a global crisis like this, everyone is hurting. Clear and transparent communication between all parties can resolve many of your troubles. whenever possible, pick up the phone and have real conversations to strengthen your working relationships. It’s essential to empathize with the person on the other side of the table and approach your negotiations with a human heart. Please keep in mind that we are all playing for the same team.
Suppliers, restaurateurs and delivery partners are a holy trinity and we will have to hold each other's hands to make this industry work. If you approach negotiations with a "we're all in this together" attitude, you're more likely to keep those partnerships intact, creating a win-win for all.