Opinion: Will Starbucks' US retail property showdown be replicated in the UK?

The Stateside courtroom dispute between coffee giant Starbucks and a mall owner centred on whose interests should come first when stores were to be shut.

Starbucks revealed plans to shut its Teavana chain in the summer, but a US judge halted the closure of 77 branches after legal action by mall owner Simon Property Group.

The property business argued that if Starbucks “prematurely” broke its lease then it might have to fill the voids with less creditworthy or less sought after tenants “who will only agree to less desirable lease terms and/or a shorter-term lease”, The New York Post reported.

In the UK, stores are obliged, in theory at least, to trade in particular locations for the term of a lease.

“Big retail property businesses will typically come to an accommodation, reassigning leases and/or taking the chance to bring in an equally or more attractive tenant. Smaller property owners and other interested parties may not be so amenable”

However, that obligation is almost never enforced, the exception sometimes being anchor stores. A financial deal of some sort is often struck and, when retailers are in distress, landlords frequently accept CVA proposals.

But what about if a retailer is profitable but seeking, as many are, to restructure its estate?

Big retail property businesses will typically come to an accommodation, reassigning leases and/or taking the chance to bring in an equally or more attractive tenant.

Smaller property owners and other interested parties may not be so amenable.

Not quite an instance of a ‘keep-open’ clause but more ‘you will open’ is Marks & Spencer’s involvement in a development in Rochdale – a scheme from which the retailer is reportedly considering pulling out.

Rochdale Borough Council’s chief executive Steve Rumbelow has indicated such a decision could end up being contested in court.

He told The Mail on Sunday: “As far as the council is concerned, Marks & Spencer has a legally binding agreement to take space in Rochdale Riverside.

“They negotiated a deal as a key anchor tenant and committed to it knowingly and willingly. Marks & Spencer should be under no illusion that we expect them to fulfil their legal obligation to Rochdale and the new retail scheme.”

As retailers reshape their businesses, whether under financial pressure or not, perhaps some affected landlords and towns will take inspiration from the Starbucks decision in the States and actively seek – before m’learned friend if necessary – to enforce leases to the letter.

Keeping the customer satisfied

The latest BRC-KPMG monthly sales data showed that while Black Friday “was the biggest week ever for non-food products online”, it didn’t move the dial generally.

Over the three months to November, non-food sales slipped 1.2% on a like-for-like basis.

And rather than increasing overall sales, Black Friday “has shifted spending away from other parts of the festive period”.

That means that for the remainder of the golden quarter, retailers will have to be on top form on all fronts – from product to service to fulfilment – in order to win spend.

And they will need to be prepared for what the new year brings, including a likely tough first quarter.

You’ll find plenty of insight on how consumers will be feeling and behaving in our special coverage this week, which will help ensure you keep the customer satisfied in 2018.