Dependency in Lease Negotiations

by | January 17, 2007

I was recently thinking about the small, entrepreneurial retail outlets located near the Larry’s Markets grocery store in Bellevue. These outlets selected this location because Larry’s Markets catered to their ideal customers. It occurred to me that the recent bankruptcy of Larry’s Markets turned these retailers’ business plans on their heads. The bankruptcy resulted in a change of ownership of the store and transitioned an upscale grocery chain to a G.I. Joe’s sporting goods store which definitely does not cater to the same demographic. What does this mean for these small retailers? That may depend on what their lease allows. As a retailer negotiating a lease, you should contemplate the dependency you may have on the existence of one key store or other term in the lease and whether the lease gives you the opportunity to exit the lease or sublease if the store or other term your business plan relies on ceases to exist. Think about these dependencies as you choose your location and negotiate your lease. Consider the risk you’re undertaking and what your alternatives are under the lease if things go sour.