Do you know what’s going to happen when the recession hits, when everyone worries about the disease that is going to happen if they go outside to eat, which is a reason why tens of thousands of restaurants are going out of business?
*Disclaimer* I’m not a medical professional nor am I an economist, but in today’s world, we’re in the midst of one of the biggest global crisis out there today. Please refer to the CDC and WHO for the most accurate information.
If you have been living under a rock, I’m going to tell you about how bad the situation really is today (as of March 2, 2020).
I’ve heard of multiple incidents where people are laying off 50% of their labor force because of this virus that is spreading amongst the world. I’ve heard of people that are closing down and not getting their inventory in time because of all the inventory is broken. The supply chain is broken.
For example, the other business that I’m running, I can’t even get my plush dolls because the cotton industry and the fabric industry is being affected. No one can go back to work.
I’m talking about insights that we get from down on the street, down from the source of what is really happening because of this disease that is happening.
You know the worst business that is getting hit upfront? It is the food and beverage industry.
Why is that the case? It is because, with the food and beverage industry, we’re looking at roughly 5% to 10% margins only, and what that means is not cashflow is always going to be tight.
Now imagine your business getting hit.
No one comes to your restaurant because they’re worried to be contaminated by this disease. Even if you’re in a city that has no virus, no disease whatsoever, you’re still going to get impacted because of fear of catching this disease.
Some examples of what my other friends are doing is that they are actually forcing their employees to take sick leave. They’re forcing them to work three days and take three days vacation.
Other peers of mine have been actually going into a renovation phase where they’re telling their employees that they’re renovating and closing shop for a month or two.
In more extreme cases, we see that restaurant sales have declined more than 70 to 80%, let alone the five to 10% margins that we’re talking about.
How can we even survive in this market?
Well, the worst is that we don’t even know when this thing will blow-by. We don’t know when is it going to really hit full scale as of today, so what can we do?
We can actually do something about it.
Now let’s look back at what has happened when SARS has hit. After SARS has hit, after it has blown by, the market quickly recovered and actually rebounded even more than when the disease hit.
What can we learn from that?
The first thing that we should look at is not look at how this disease and virus has impacted the industry, how fearful we should get. We should look at the opportunity it presents us.
Now, what is that opportunity?
1.) Everything Is Cheaper
It is that everything is cheaper. You have much more leverage when it comes down to leasing out spaces, which is a reason why now is the time. I’m telling you now is the time to go out there and start bringing in what you’ve always conceptualized, always in your mind to bring it out into the world.
Go out there and starting to negotiating, seeing different places that sparks your interest because now is the time you can leverage off to talk to tenants, to talk to actually landlords and to negotiate for better rates.
Standing from the other side of the coin, me as a landlord, one of my biggest worry is that my unit out there is not going to be rented. I’m going to be at negative cash flow month after month and there is no end in sight.
When a tenant potential tenant comes in and start negotiating rates with me, all I want is just to tell them, “You know what? Take my unit. Take it at whatever costs that you would want to pay me.”
All I want is to have someone pay my mortgage.
Now, I am talking from a landlord’s perspective and that’s how I think. You too should be able to take advantage of this mindset, the landlord’s mindset, to negotiate for more free month’s rent.
And I’ve seen this, again and again, happening because of the situation happening in today’s world. We’re talking about negotiating for:
- cheaper rent on a month-to-month basis
- fixes and renovation rebates
These are all great stuff that you can actually add more value to your business.
By the time your restaurant is built, by the time you have your whole business up and running, you can bet that the market would be starting to recover. You can bet that the virus itself has already blown by because we all know that these viruses don’t last for years, at most it lasts for six to nine months and then the vaccination starts coming out and solution. People understand it. People have different ways to combat it and it just becomes part of life.
Now, do not quote me on this. Like I said, I am not a medical professional, but I’m just speaking to you from a standpoint of an entrepreneur, the standpoint of someone who has been through one of these different diseases previously.
Warren Buffet said something like this before…
“When everyone is greedy, you should be fearful. When everyone is fearful, you should be greedy,”Warren Buffet
This is what’s happening in the market. That’s where the opportunity lies. That’s why people are going to be able to make tons of money in the stock market.
We have all heard of the saying, “Riches are made in your sessions,” and same goes with restaurant owners.
This is a time for you to be able to have much more ammunition for you to bargain with not only landlords, but also with your renovators and with your general contractors.
Because what happens when everyone’s scared? Everyone thinks that cash is king, so everyone’s reserving all their cash. And before you know it, they miss the boat.
When you have the cash now, when you are in the position to spend, to negotiate, to build, don’t be afraid to do so. Go out there, start negotiating. Start telling people about, “Hey, you know what, I know it’s fearful. I know you’re not going to have that much business, so I’m here to give you business. But you know what, to compensate for my risk, give me a 20% discount.” This has worked again and again.
And I’m seeing this as a trend to people that I’ve been mentoring, and it is happening and it is working so go out there starting negotiating.
Don’t be scared because as Warren Buffet said, “When everyone is fearful, be greedy.”
2.) Build Delivery As The Core Of Your Business
The second way to win in this recession, to win as a restauranteur, to win in this crisis is to build delivery as your core business. In today’s world, we are at the forefront of delivery. We’re at the forefront of this transformative way of doing a restaurant business because we see trends that these third-party delivery apps are trending like crazy.
More and more people are getting used to the habit of just ordering their food online and within 30 minutes, the food gets delivered to their doorstep.
People don’t like leaving their homes and that’s why delivery as a core business function in your restaurant is key to your success. It’s key to be able to combat recession like what’s happening today. It is key to combating viruses, diseases that prevent people from going out to consume because of all these variables I’ve been telling you about.
If you haven’t already been considering signing up with third-party app deliveries, definitely check out the video below where I talk about third-party delivery apps.
And more and more people are talking about how delivery as a business is so fundamental and soul core. As ex-CEO of Uber is now actually creating cloud kitchens, and cloud kitchens are basically restaurants with no storefront. They only focus on delivery.
That’s the reason why now is the time to rebuild your business, to build a business that has the delivery. It’s core to be known to provide this service. And while you can actually provide in house service, but also being known as a delivery service-based restaurant you’re going to be able to be at the forefront of this movement, of this trend that is going to be happening in the next few years.
Now is the time to be able to take advantage of that and work that into your business.
These are two golden opportunities you can take advantage of while all this chaos happens. It is up to you how to choose to react to the current situations: be fearful or be opportunistic.