Announcements, Industry News

Restaurant Saves $40,000 in Working Capital by Leveraging Otso Guarantees

Dominic Miller was opening up his third location for his successful restaurant, “Jacoby’s.” He found a location he liked through his tenant representative, Joe Walsh, and began negotiations. As usual, he received a proposal and groaned not only at the rent (that was Joe’s issue to handle), but also at the thought of putting up another $35,000-$40,000 in deposits with yet another Landlord.

The Landlord indicated that although Dominic had two other locations, the Landlord is not the owner of those retail assets and as such needed to make their own determinations. 

Dominic already had close to $100,000 sitting in dead money with his other locations and, insultingly, had an existing deposit of $40,000 sitting with a Landlord he had already completed a seven (7) year lease term.  He tried to capture the deposit back at his renewal last year but was told politely, “this is how it’s done.” 

After reviewing the initial proposal, Joe (his broker) sent over an email he had received from a company called “Otso” that outlines a program that replaced the need for commercial leases. Dominic asked Joe to socialize the idea with his prospective Landlord.

After the prospective Landlord chatted with Otso, they liked the idea of reducing their risk by offloading some of their common up-front deal costs in a lease. They decided to join Otso for free and sent out a link to Dominic to assess his financials and gain the approvals necessary.

As noted by the Landlord, Dominic spent five minutes going through the Otso application and was immediately approved for $40,000. No surprise he thought, he had a good business history and payment record.  

The Landlord was able to quickly review Dominic’s banking and business history, which made them feel comfortable about Dominic and his record. The Landlord especially liked reviewing the banking history information. 

With a $40,000 approval Joe, Dominic, and the Landlord negotiated a lease with a proposal that was inclusive of a “deposit-free” rate. This came together rather quickly and they were able to sign a lease in less than 2 weeks from completing the Otso application. Record time!

Dominic was able to use the extra $40,000 to enhance his build-out by putting in an expansive bar area he felt the market would respond well too. He knew he was paying for the Guarantee by Otso in his rent, but the fee was so nominal from his original proposal it basically got negotiated out by his broker anyway. When he saw how well this benefited his business, Dominic decided to call his Landlord on his other two locations.

Editors Note: Check out how Otso can help your business by viewing the links below. Names changed to ensure confidentiality.

Otso for Businesses

Otso for Landlords

Why your Deposit Should be Zero

 

Previous ArticleNext Article
We're the team at Otso! We're dedicated to making commercial real estate leases better for everyone by reducing risk and enhancing capital flexibility.