All retailers, from carpet sellers to wine merchants, need stores that reflect their brand identity.
All retailers, from carpet sellers to wine merchants, need stores that reflect their brand identity. For fashion retailers how the store looks and feels is absolutely crucial to success; a fashion item is bought not only because of the quality but often because of the identity a customer is buying into.
It is important that retailers are aware of restrictions that landlords and planners can impose in order to protect their brand. Some can be successfully resisted while others must simply be acknowledged and alternatives explored.
Many leases request the retailer seek landlord approval for external signage at the property. Landlords justify this by claiming that their investment value depends upon the external appearance of the store. A way around this may be to exclude a need for approvals where signage is consistent with the retailer’s retail branding. Another might be to ask the landlord to agree a side letter which gives the retailer a personal right not to require such approvals.
A landlord will often insist upon approving any fit-out works, including the layout of the proposed unit. Obviously the fit-out is vital in terms of getting the right “feel” for a store and the landlord is always likely to insist upon giving consent for any structural works, but a retailer should always try to exclude as much as possible from the soft “fit out”. The retailer should seek the necessary approvals with the landlord at the earliest opportunity as they will not want the lease to complete (and the rent begins) before the shop can open for trade.
Many fashion stores, especially those catering to a younger market, want to lure in customers with music, lights and model shows. Some stores even hire “bouncers”, leading to queues of shoppers crowding a property. This may add to excitement but many leases contain restrictions on the noise from within the property being audible outside. When a store is within a shopping centre, it is unlikely that it will be permitted to use the outside of its premises as an extended marketing area. For retailers who rely on this kind of customer lure, it is important that requirements are flagged at the Heads of Terms stage so that rights can be granted and restrictions removed.
It is becoming common for a landlord to try and influence the employment decisions of retailers, often at the request of local authorities. Retailers are now commonly asked to sign up to obligations whereby they will only recruit people from the local vicinity, or before placing a vacancy, go to local authority job exchanges. Some retailers may be happy to comply with these obligations, however, for many recruitment of suitable staff is key to the brand offering and they may not wish to have an added layer of bureaucracy to their employment procedures.
Many retailers seek units in old, traditional town centres, where local authorities often impose obligations to alter branding and signage in a way that is sympathetic to the historical character of a building. It is very unlikely that this type of obligation can be resisted however it should be flagged to design teams as early as possible so that they can begin to adopt the retailer’s usual exterior branding to comply with requirements.
When a retailer wants to open the doors of its property quickly it is often tempting to sign up to whatever covenants a landlord tries to impose - the belief is that if the current relationship is good a landlord will not do anything to jeopardise their tenant’s business. In many cases this is quite correct; landlords (especially those with turnover rents) want to see their a tenant’s business thrive. It is worthwhile remembering, however, that where a landlord/tenant relationship has deteriorated (or where a more desirable tenant is identified), a landlord may look to the obligations within the lease and take action where there are clear breaches. Defending these actions will not only be costly to a tenant but compliance may result in a dilution of the brand offering from the store.
- Jeremy Liebster, Associate, DLA Piper