Do a Deep Dive Before Seeking Lease Terminations

The list of restaurant chains to announce store closures continues to grow. It includes those that have filed for bankruptcy such as TGI Friday’s, Planta, Hooters, Red Lobster, Buca di Beppo, Rubio’s Coastal Grill and BurgerFi, as well as non-distressed operators of outlets like Wendy’s, Burger King and Denny’s. And it is safe to say that more restaurant brands will be scrutinizing and closing underperforming stores in the months ahead, given today’s consumer spending cutbacks, elevated costs, tariff concerns and speculation about a possible recession. In many cases, those chains that do close stores will need to deal with future lease liability for non-operating restaurants.

Current real estate economics favor a three-step approach to mitigating such lease liabilities:

Immediately upon announcement of the restaurant closure, engage with the landlord.

The goal should be to minimize termination fees by collaborating to identify a viable replacement tenant for that…