Chapter 9: Retail Leasing for Fashion
Steven R. Gursky and Mitchell B. Stern
Summary adapted from Chapter 9 of "Fashion Law: A Guide for Designers, Fashion Executives and Attorneys" edited by Guillermo C. Jimenez and Barbara Kolsun (Fairchild Books, 2010).
Choosing the right retail location involves many considerations. Chapter 9 discusses the various issues a fashion company encounters in negotiation of commercial leases for retail stores.
When selecting the location of a store, options include a stand-alone building, a retail space in a neighborhood mall, a regional shopping mall or shopping center or a street location, often in a downtown business district. One should consider if the location matches the brand positioning of the particular brand or designer. In addition, the neighboring businesses, known as co-tenancies or adjacencies, need to be considered when selecting a location. Other important considerations when selecting a location are geographic location, visibility, level of foot traffic, and size.
Once the location is selected, but before a formal lease is formulated, a letter of intent is written to determine whether the parties have reached a meeting of the minds on the important issues. The letter of intent should include, among others, a description of the leased premises, the term of the lease, permitted use, the amount of rent to be paid, and maintenance responsibilities. The letter, however, is not a legally binding document and does not prevent either party from backing out if negotiations are not successful.
A tenant may negotiate with a landlord for an exclusive, where the tenant will be the only retailer of its type in a mall or strip center. Similarly, a landlord may impose a radius restriction prohibiting a tenant from opening a store within a relevant and specified trading area. If the storefront requires construction or modification to give it the desired appearance, consideration must be given to the lease restrictions that the landlord may place on construction or modifications. Many leases contain a condition that provides for approval by the landlord over exterior signage of the store. However, the tenant should make every attempt to restrict the landlord's approval to signs that appear on the exterior of the premises and not the interior signs or displays in the tenant's store.
Going through the leasing process without a team of professionals is risky. The advice, knowledge, and contacts a fashion designer can receive from experts are vital to the success of their business. When assembling a team of professionals, personal recommendations are always the best way to find experts. Always have in-person interviews with your candidates and question them on their experience and past clients you can call for a reference. The team of professionals should include an attorney with considerable experience in retail leasing, a retail leasing broker or consultant, an accountant, architects, designers and contractors, and advertising, branding and public relations consultants.
Author details:
Steven R. Gursky
Olshan Grundman Frome Rozenzeig & Wolosky LLP
New York, New York
Mitchell B. Stern
Olshan Grundman Frome Rozenzeig & Wolosky LLP
New York, New York
Summary by: Lara Corchado
