Summary
- Like so many individuals the world over, they really have found themselves under force majeure.
- How are they going to pay their own bills without any income?
- It’s much more intelligent to assess the situation from as unbiased a standpoint as possible.
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- By now, you probably know the news. The Cheesecake Factory (CAKE) is an economically suffering, economically harming trendsetter. As I wrote in a Forbes article two weeks ago:
The Cheesecake Factory has told its landlords it will not be sending in rent checks for the month of April, as its eateries remain closed off to the public to try to help halt the spread of Covid-19.
Here is exactly what the national restaurant chain said in its 8K filing earlier this week:
“‘Given the impact of governmental regulations and landlord decisions to close properties, considering the nature of our rent obligations and as part of ongoing efforts to manage our financial position and further preserve financial flexibility, we are not planning to pay rent on our leases for the month of April 2020 at this time. We are in various stages of discussions with our landlords regarding ongoing rent obligations, including the potential deferral abatement and/or restructuring of rent otherwise payable during the period of the Covid-19 related closure.”
As I also noted in that article:
There are likely going to be a flood of similar memos to come from restaurant chains and retailers following Cheesecake Factory’s lead. It only takes one big business to publicly set a precedent before many will follow.
And so they have.
Big Names, Big Spaces, and Big Disappointments
At last check, AMC Entertainment Holdings Inc. (AMC), WeWork, and Staples were three of the biggest names saying "no."
Each one is worth discussing in further detail. First though, I’d like to cite a Yahoo article from late last month, when The Cheesecake Factory first made its groundbreaking news.
Focusing on the question of how these businesses can get away with skipping out on their financial obligations, it wrote:
A lease is a contract just like any other legal agreement. And unless they made provisions for something like this by including a ‘force majeure’ clause in their leases, it may be difficult to get out of paying rent.
For the record, “force majeure” is an event beyond control, and most contracts exclude it these days. However, “there may be some legal doctrines that might help businesses” regardless… especially in such unprecedented times as these.
Besides, what are commercial landlords going to do about their top tenants taking such stands in a literally unworkable situation? I’m not sure even a bankruptcy court could figure that question out.
That’s certainly the argument office supplies store Staples seems to be banking on. According to Fox Business, it “didn’t propose any payment deferrals and didn’t promise to pay rent in May either.”
