Starbucks’ growth plans include major international push
New York City — Starbucks Corp. is looking beyond its cafes for expansion in the future. Detailing its growth plans Wednesday at its investor conference, the chain announced it plans to triple the number of its cafes in China, offer more products in grocery stores and open new kinds of stores to build on its recent recovery.
“We are particularly pleased with the response we’re seeing from our Chinese customers, and expect to operate at least 1,500 Starbucks stores in Mainland China by 2015,” John Culver, president of Starbucks Coffee International.
Starbucks also plans to improve its U.S. retail operations by adding mobile payment options and improving the way it serves customers during peak hours. Addressing the “myth of U.S. saturation,” Cliff Burrows, president of Starbucks Coffee U.S., said that while the company will not add stores in the United States at the pace it once did, it will seek out new locations in targeted neighborhoods to capture significant retail growth opportunities.
Starbucks executives said they will keep considering acquisitions — big and small — that could help the company develop more products to sell through other retailers.
Juicy Couture on Manhattan’s Fifth Avenue closed due to bed bugs
New York City — Juicy Couture’s store on Fifth Avenue in Manhattan has been temporarily closed due to the discovery of bed bugs.
“Like other major retailers recently impacted by this issue, we are moving swiftly and aggressively to address the problem. We expect the store to re-open later this week,” the company said in a statement. “The people who shop and work at the store are our top priority and we are taking all necessary precautions.”
Focus on: Smart Growth Chains, big and small, plot growth with caution
Eighteen months ago, the word in retail was contraction. Talk of expansion was mostly shelved, pending some kind of palpable turnaround in the economy.
Today, as 2010 comes to a close and all eyes are trained on 2011, discussion about adding stores is supplanting talk of closures. But, caution the experts, retail growth should unfold slowly and strategically, and not with the optimistic abandon of years past.
“Before embarking on or resuming expansion, it is important to arm yourself with specific information prior to launching negotiations for new space,” David Rodgers, director of lease audit for St. Louis-based Brown Shoe Co., told attendees of the National Retail Tenants Association, or NRTA, annual meeting, Sept. 27-29 in Anaheim, Calif. “It’s about gaining leverage, and that is more important now than ever.”
In the session entitled “Living with the Deal,” presented by Rodgers and Matthew Bisignano, a director of development for the Taco Bell division of Louisville, Ky.-based Yum! Brands, the following lease provisions were presented as key negotiating points for the expanding retailer: termination rights, use clauses, no radius restrictions, consents, occupancy protections, first rights of refusal that at the very least allow the retailer to purchase its existing location, and assignment and sublet provisions. “
A termination right can be the single greatest clause to have in the event your store needs to close before the end of the term,” Rodgers said. Even when focus is on expansion, smart retail chains will provide for the possibility of closure, he noted.
Use clauses are another key lease provision worth bringing to the negotiating table. “Consider any possible use,” Bisignano advised, “and don’t be restricted to just your category of business.” A provision to avoid, Bisignano said, is radius restriction. “It limits the ability to grow your business.”
A buzz phrase among all lease negotiators is occupancy protections, and Rodgers and Bisignano noted four main protections to negotiate into new leases: co-tenancy; exclusive use rights; specific signage rights that include design, size and location; and visibility protections.
“At minimum, protect yourself against structures being constructed that would interfere with your store’s visibility,” Bisignano said.
Another key provision to negotiate into new store leases is eliminating percentage rents, which both Rodgers and Bisignano said are prohibitive for future expansion, remodeling and second concepts. As well, nixing percentage rents in a lease “removes budget uncertainty and eliminates sales reporting requirements and the labor associated with the reporting,” Rodgers said.
He added that building automatic renewal options into new leases ensures a retailer will never lose a store by missing a notice deadline and provides leverage if the landlord wants to re-tenant a space for a higher rent amount.
Other negotiating positions include relocation clauses to allow recovery of all unamortized costs of improvements, plus money for moving expenses, the ability to waive reconciliations and adjustments if not invoiced within reasonable time frames, and the right to obtain more capacity if needed for expansion or other concepts.
“In short, when negotiating leases for new stores, think long term and push for protective language for common issues, expansion and/or failure,” Rodgers said.