When the federal government stepped in to assist businesses facing payroll and rent challenges due to COVID-19 with the Paycheck Protection Program, independent shoe retailers got a welcome but short-lived reprieve.
While shoe stores around the country continue to reopen, reports of sharp declines in revenues of up to 60% over last year, have forced store owners to meet their vendors and landlords at the bargaining table to renegotiate payment plans.
Although retailers report most vendors have been flexible when it comes to extending payment options, it often takes enhanced negotiating skills to convince landlords to follow suit.
“Landlords are in the worst position,” said Todd Lewis, owner of the 10-unit Shoe Fly chain based in Tyrone, Pa. “If vendors get frustrated with us and can no longer extend credit, they have a lot more options [because they] can sell their shoes online or find other retail outlets. If [landlords] kick me out, who are they going to replace me with?”
According to Lewis, there isn’t one-size-fits-all solution to the rent issue. So far, he’s found smaller [real estate] firms have been easier to deal with since they’re not as concerned about setting a precedent. Of the store’s nine landlords, Lewis said the store has so far settled with seven on payment plans that have included several months of free rent or postponement of payment. “To the [remaining two], we’ve not paid any rent. We’re holding out until we get it resolved. I feel that’s the best leverage I have at this point.”
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At Sole Shoes in Westfield, N.J., owner Anna Mastroianni didn’t have to make the first move when it came to negotiating rent payment. “My landlord reached out to me first,” she said, about the start of the pandemic in March. “He said he knew what was happening and not to worry about April. I didn’t have to pay.”
According to Mastroianni, her landlord went a step further, following up his initial offer with a rent reduction for the months that followed. ”And, if the rent is not paid on the first of the month, they understand,” she said. “We take good care of the property and they appreciate it.”
Like Lewis, Mastroianni agrees working with smaller real estate firms allows for increased flexibility. “My landlord is a [local] family-owned business,” she explained. “They always tell me they want me to succeed. They’re in our corner.”
Property ownership is also helping retailers successfully navigate the rent crisis. Wagner Shoes, a two-unit chain in Pennsylvania, owns its Pittsburgh location, while its nearby Monroeville store is rented. “We’re fortunate to own our [Pittsburgh] store, while we have a long-standing 15-year relationship with our landlord in Monroeville,” said Mark Wagner, regional manager.
According to Wagner, the store skipped rent payment for two months during the pandemic. “We took legal advice and the landlord accepted it,“ he said. “But, when we reopened, we started to pay again.” In fact, “We’ve renewed again for 2021 at the same rate as this year,” he said, noting the favorable terms.
Pedestrian Shops, a three-store Colorado-based chain with locations in Boulder and Denver, shares a similar story, dividing its locations between property ownership and rental. According to Zoe Polk, operations manager, Pedestrian Shops owns two locations in buildings in Denver and Boulder, with another leased store in a small strip center in Boulder, where it’s been operating for 30 years.
The landlord, a medium-sized corporation, has been flexible when it comes to recent rent payments, said Polk, adding that the landlord approached them with a payment arrangement. “We weren’t begging,” she said. “They came to us before we thought to come to them.”
According to Polk, the store was able to skip payments for March and April, although It’s a small location with a reasonable rent. In fact, said Polk, the store this month moved forward and renewed its lease for another five years.
Also sitting on both sides of the rental fence is Maurice Breton, founder of Comfort One Shoes in Manassas, Va., a 16-store chain, which owns two locations in Alexandria, Va., and the Georgetown section of Washington D.C.
For the remaining stores, Breton reached out to each landlord in early April to begin discussions, noting just one remained unresponsive after repeated requests. “Holding back rent was one of the tools in our tool box when discussing landlord relief,” said Breton, about actions retailers could take to stay afloat.
However, he noted, “Everybody felt that by now everything would be back to normal. But, that’s not the case. There’s a lot to be concerned about. While many independents have gone through negotiations with landlords and think it’s over and [have] conceded to a [payment arrangement], in many cases [store] sales are below a level that’s sustainable.”
According to Breton, Comfort One was well positioned to handle the rent situation by already operating each store as a separate entity. This set-up, he said, eliminates the chance of one store impacting the business of another. “The corporate guarantee doesn’t allow for one store to cause harm to the other 14,” he noted, particularly as stores in urban areas have been hit harder than those in suburbia where business has started to rebound.
At the end of the day, said Lewis, the relationship between retailers and landlords is a two-way street. “I believe if you’re a good merchant and have been trustworthy in the past, landlords will ultimately come to the table and work with you.”