Wednesday, April 1, 2020

It's April 1 and Rent Is Due: Restaurateurs Struggle To Make Payments

Posted By on Wed, Apr 1, 2020 at 12:01 PM

click to enlarge Most landlords will not accept pizza as a rent payment. - JIM NINTZEL
  • Jim Nintzel
  • Most landlords will not accept pizza as a rent payment.
While April Fools Day marks a new month, the struggle for restaurants across the nation—and locally—is no laughing matter.

Last week, The Cheesecake Factory sent a letter to the landlords of their 294 restaurants, spread out across 39 states, explaining they would not be paying rent at any of their restaurants or affiliates for April 2020. 

"Please understand that we do not take this action or make this decision lightly, and while we hope to resume our rent payments as soon as reasonably possible, we simply cannot predict the extent or the duration of the current crisis," wrote Cheesecake Factory Incorporated CEO David Overton in a letter to landlords. "We are continuing to evaluate the implications of this situation on our business and we realize the impact this action will have on our landlords. We appreciate our landlords' understanding given the exigency of the current situation."

When you have Cheesecake Factory clout, you can get away with holding your landlords over a barrel. But working with landlords in The Old Pueblo is like walking a fine line, according to Nick Heddings, owner of Arizona Pizza Company on Sabino Canyon Road and Upper Crust Pizza.

"Landlord and tenant relationships are unique," Heddings said. "Everything is great until you don't pay the rent."

Heddings said he plans on continuing to pay rent for the time being, but will not be paying his sales tax this month. Taxes for both of Heddings pizza parlors usually total upwards of $11,000, he said. That money could be better spent keeping his doors open and his employees working, according to Heddings.

"I'm going to file (sales tax) so they know how much money I'm supposed to give them," Heddings said. "But that's about $11,000 that can stay in the account until the next problem comes up."


When the next problem does come up, Heddings said he'll try to work something out with his landlords. He's hoping they'll be willing to work with him, like his insurance company has over Heddings' company vehicle.

"If I have to, I'll go to my landlords and say, 'I'm trying to keep my business alive so here's my plan' and try to give them some portion of the rent," Heddings said. "I really believe paying for my food and paying for my employees are my top priorities. I can push back bills, but I can't push back paying employees."

Gov. Doug Ducey has urged landlords via Twitter to consider the hardships their tenants are facing.

"The world has changed since March 1," Ducey tweeted. "Bills that were otherwise routine are now a struggle for many people and small businesses. Let me make my expectations clear: No family, individual or small business should face eviction or lose critical services because of hardships caused by #COVID19. It’s basic decency. At the same time, if you can afford to pay your bills, please do so. The current crisis shouldn't deter you from meeting your obligations."

Dave Musso, owner of Saguaro Corners and Mulligans Bar and Grill, said he has a great relationship with both of his landlords. In fact, when dine-in service shut down two weeks ago, Musso's landlord at Saguaro Corners told him not worry about the rent at the moment.

"They said, "We appreciate all you've done for us and we want you not to worry about the rent right now," Musso said. "That's pretty awesome. It brought tears to my eyes. The faith they have in us is pretty cool."

Musso said it's a different story with his landlord at Mulligans Bar and Grill. When the news came out that restaurants and bars would have to stop dine-in service, he said he reached out to his landlord hoping to work something out. Musso explained Mulligans had just lost around $4,000 the bar spent getting ready for St. Patrick's Day, only to cancel over the pandemic. The landlord didn't respond until later in the day. When they did respond they merely sent Musso a link to the Small Business Association's Disaster Relief Loan.

"If he had just said, "We expect you to pay your rent,"' that's fine. But this was passive-aggressive," Musso said. "They've always been good to me and I'm sure they're being pulled both ways, but I found that funny."

Musso said it's not a problem at the moment to pay Mulligan's rent while closed, but he was hoping this landlord would be a bit more sympathetic to the situation restaurants—and the average tenant—is in.

"I have money to pay them right now, but I figured a lot of landlords would be reaching out to their tenants, trying to pull a plan together," Musso said. "I'm sure all tenants are having this problem and it's not like there's a lot of people looking to take over any place right now, either. I feel landlords should be doing the best they can right now."

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