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Online shopping wreaking havoc on brick & mortar retailers – Can you seek relief?

Recent media coverage focused on the difficulties being faced by those within the retail sector has made for slightly depressing reading.  The most notable casualty of the increased popularity of online shopping continues to be the brick and mortar retail space – with a drop in Australian consumers making in-person purchases causing major dislocation for those invested in physical retail stores.

As people continue to move towards online shopping for a variety of goods and services including (but far from limited to) clothing, footwear, accessories, jewellery and toys – traditional shopping centres have been forced to re-vamp their footprint in the creation of a broader food and leisure experience.  This has caused ever increasing competition for food and beverage retailers.

What does it mean for you?

Coleman Greig Lawyers suspects that if you are a retailer in the food and beverage sector (not to mention those invested in retail stores selling clothing, footwear, accessories, toys etc.), you would generally be experiencing a fall in revenue – and in turn, pressure on your profit margins.

You may be either a franchisor with a leasing portfolio managing multiple sites for your franchisees, or a franchisee who must comply with obligations under a lease.  Irrespective of your trading conditions, you’re bound to pay your rent in full and observe the terms and conditions of your occupancy agreement.

In what ways are you able to seek relief?

If you are facing this type of financial pressure, Coleman Greig encourages you to consider the following strategies:

  • Speak with your landlord to see if they can grant you some form of rental relief.  You may be able to negotiate a temporary rent reduction, or even something more permanent.  
  • If your landlord will not agree to any form of rental relief, it may be worth considering whether there are any grounds for legal redress.  
  • One common form of legal redress for a tenant can come about through circumstances where a landlord has misrepresented a certain state of affairs e.g. tenancy mix, timing of certain works etc.  
  • Misrepresentation can often be difficult to prove, thus you would need to have evidence such as written correspondence, content in your disclosure statement (which you should receive as a retail tenant in most jurisdictions across Australia), letters of offer issued – and the lease documentation itself.  
  • If you have been a long-term tenant and your lease is up for renewal or negotiation, it may be the perfect opportunity to discuss a better deal with regard to rent.  
  • Taking legal action can be costly, not only in terms of money, but both time and emotional energy – so you would not want to embark on this course lightly.  Coleman Greig encourages you to consider informal means of dispute resolution at first, such as round table conferences – or alternative dispute resolution methods such as mediation.
  • You should also consider speaking with and looking through websites of the relevant government department which governs your jurisdiction’s leasing regime e.g. Department of Fair Trading NSW.

Think before you take the leap

Given the current state of affairs with regard to the competition being faced by brick and mortar retailers, it should go without saying that it is absolutely crucial for tenants-to-be to do their due diligence and conduct thorough research before embarking upon any form of retail business investment – whether it be as a franchisor launching a brand, or a would be franchisee.  This does not necessarily mean that becoming a franchisee is a bad idea – there are, of course, a lot of great brands and opportunities alike in the market place, although it is exceedingly important not to embark on this particular course with closed eyes.

With the above in mind, Coleman Greig would strongly recommend seeking relevant professional advice prior to entering into any occupancy arrangements.  Similarly, if you find yourself facing notable difficulty within the franchising or tenancy spaces – please get in touch with Coleman Greig’s Commercial Property team.

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