A&W asks franchisees’ landlords for a two-month rent deferral

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A&W Canada is asking landlords for a two-month rent deferral, as the COVID-19 pandemic forces restaurants to limit dine-in service or close in an effort to stop the spread of the virus.

The burger chain, whose franchisees operate nearly 1,000 restaurants across the country, e-mailed its landlords on Wednesday, saying "our franchisees need immediate support to ensure the long term viability of their businesses.”

"We are asking for your agreement to defer rent payments for a period of two months,” said the e-mail from Patti Parente, the vice-president of development for A&W Food Services of Canada Inc.

One of the landlords who received the e-mail from A&W said a blanket request for a rent deferral is “not working with landlords.”

“I expect A&W to pay the rent on time,” said Cierra Watson, executive vice-president of Watson Properties. “If no money comes in, how are you supposed to pay the mortgage, hydro, gas, insurance?"

Ms. Watson’s company owns two low-rise buildings in Toronto. She said another restaurant tenant came to her and wanted to work with her on a solution, which Ms. Watson said she was happy to do.

But she found A&W’s demand outrageous. “It is a chain. A&W is saying ‘Screw you. Because I am A&W, you are going to take it,’ ” Ms. Watson said.

A&W said it sent the e-mail because it had been contacted by many of its landlords to discuss how to “help support” its franchise operators. “As a response, we drafted this letter to start these kinds of positive, forward-looking conversations with all our landlords,” the company said in an e-mailed statement.

Grocers, drug stores and discount chains are the only retailers that have seen a spike in sales as Canadians are told to stay at home. With April’s rent looming, tenants and their landlords are scrambling for a way to pay their respective bills.

Some banks have said they would consider deferring mortgages for up to six months for small businesses. But Ms. Watson and other landlords say that is not a viable option. Interest continues to accrue over those six months. In the meantime, there are still bills to pay, including realty taxes and insurance.

Leases typically contain force majeure clauses that cover events outside of the parties’ control. Those clauses usually require the tenant to continue paying the rent, even in the event of a government shutdown.

“The worst thing the tenant can do is not pay the rent. The reason being, 99 out of 100 leases have wording ‘whatever is happening in the world, does not prevent you from paying rent,’ ” said Mark Uster, a lawyer with Dale & Lessmann LLP who specializes in commercial real estate.

Ontario has temporarily banned evictions for residential tenants, though has not done the same for commercial ones. If a business does not pay the rent, the tenant is technically in default on the lease, allowing the landlord to begin proceedings to evict the tenant.

Ms. Watson said she was prepared to take legal action if A&W did not pay the rent.

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