In the Spotlight: Maximizing Cash Flow Through the Use of Kiosks and Carts

In today's uneasy economic climate, landlords and tenants alike are faced with the challenge of maximizing revenues, profits and cash flow. In situations where retailers are becoming more selective, leasing is slowing and rents are stagnating or moving lower, retail landlords have to be creative and resourceful in order to maintain and increase revenues.

One way to achieve this is to create more revenue-generating areas of the landlord's shopping center without incurring excessive cost and without sacrificing the synergistic mix and quality of the center. The leasing of common-area kiosks and carts is a good solution.

Kiosks and Carts

Common-area kiosks are small semi-structural transportable selling facilities that can be constructed within the common areas of most shopping centers. Common-area carts are usually much smaller, non-structural, and easier to relocate. These and other similar portable selling facilities can easily be located in the common areas of most shopping centers; however, they are more prevalent in enclosed regional malls and other regional shopping centers. Landlords often lease these facilities to operators who sell smaller, easy-to-carry items (such as pagers, cell phones and similar products) and food items not requiring significant preparation. Leases and license agreements for such facilities can provide for short or month-to-month terms (particularly for carts) or lengthier terms, similar to those provided to the tenants of in-line spaces. Rents and fees, similarly, can span the spectrum, depending upon the demand for such locations in a particular shopping center and the popularity of the center itself.

Step One for the Landlord

Before embarking on a kiosk and/or cart program, the landlord should confirm that the location of these facilities in the common areas is permitted under existing leases affecting the center. Many standard form in-line leases for regional mall premises are drafted broadly enough to permit such uses, by allowing the landlord to utilize the shopping center or common areas for promotional, commercial and other purposes in the landlord's reasonable discretion. However, landlords should review their existing leases to be safe. In addition, future leases should be drafted broadly enough to allow such uses. It would be advisable for future leases to provide specifically that the landlord can utilize the common areas to locate commercial kiosks, carts and similar facilities.

Step One for the Tenant

From the in-line tenant's perspective, it is important to limit the landlord's use of kiosk, cart and similar selling facilities in the common areas if they are going to interfere with, or otherwise disrupt, the in-line tenant's business. One way for the in-line tenant to protect itself is to negotiate for language in its lease that provides that the landlord will not locate any such facility within a mutually agreed-upon zone, which should be reflected on an exhibit to the lease. Another commonly negotiated compromise is an agreement between the parties that no such facilities will be located within a certain number of feet, measured from the in-line tenant's store front.

Conclusion

When representing the landlord, it is important when negotiating such compromises to limit any such restriction area to the areas located between the lease lines of the premises and to guarantee that existing structures, and replacements of same, will, at all times, be permitted.

The extent of a kiosk/cart restriction area is usually a function of the leverage between the parties in the particular transaction. However, there is usually sufficient room and compromise to allow landlords to enjoy the benefits of leasing portions of the common areas, without unduly interfering with existing tenants.

Scott Grossfeld is a Partner in the Los Angeles office of Cox, Castle & Nicholson LLP. Mr. Grossfeld's practice focuses on retail development and commercial leasing. He has extensive experience representing both landlords and tenants in all types of retail, office and industrial lease transactions.

In today's uneasy economic climate, landlords and tenants alike are faced with the challenge of maximizing revenues, profits and cash flow. In situations where retailers are becoming more selective, leasing is slowing and rents are stagnating or moving lower, retail landlords have to be creative and resourceful in order to maintain and increase revenues.

One way to achieve this is to create more revenue-generating areas of the landlord's shopping center without incurring excessive cost and without sacrificing the synergistic mix and quality of the center. The leasing of common-area kiosks and carts is a good solution.

Kiosks and Carts

Common-area kiosks are small semi-structural transportable selling facilities that can be constructed within the common areas of most shopping centers. Common-area carts are usually much smaller, non-structural, and easier to relocate. These and other similar portable selling facilities can easily be located in the common areas of most shopping centers; however, they are more prevalent in enclosed regional malls and other regional shopping centers. Landlords often lease these facilities to operators who sell smaller, easy-to-carry items (such as pagers, cell phones and similar products) and food items not requiring significant preparation. Leases and license agreements for such facilities can provide for short or month-to-month terms (particularly for carts) or lengthier terms, similar to those provided to the tenants of in-line spaces. Rents and fees, similarly, can span the spectrum, depending upon the demand for such locations in a particular shopping center and the popularity of the center itself.

Step One for the Landlord

Before embarking on a kiosk and/or cart program, the landlord should confirm that the location of these facilities in the common areas is permitted under existing leases affecting the center. Many standard form in-line leases for regional mall premises are drafted broadly enough to permit such uses, by allowing the landlord to utilize the shopping center or common areas for promotional, commercial and other purposes in the landlord's reasonable discretion. However, landlords should review their existing leases to be safe. In addition, future leases should be drafted broadly enough to allow such uses. It would be advisable for future leases to provide specifically that the landlord can utilize the common areas to locate commercial kiosks, carts and similar facilities.

Step One for the Tenant

From the in-line tenant's perspective, it is important to limit the landlord's use of kiosk, cart and similar selling facilities in the common areas if they are going to interfere with, or otherwise disrupt, the in-line tenant's business. One way for the in-line tenant to protect itself is to negotiate for language in its lease that provides that the landlord will not locate any such facility within a mutually agreed-upon zone, which should be reflected on an exhibit to the lease. Another commonly negotiated compromise is an agreement between the parties that no such facilities will be located within a certain number of feet, measured from the in-line tenant's store front.

Conclusion

When representing the landlord, it is important when negotiating such compromises to limit any such restriction area to the areas located between the lease lines of the premises and to guarantee that existing structures, and replacements of same, will, at all times, be permitted.

The extent of a kiosk/cart restriction area is usually a function of the leverage between the parties in the particular transaction. However, there is usually sufficient room and compromise to allow landlords to enjoy the benefits of leasing portions of the common areas, without unduly interfering with existing tenants.

Scott Grossfeld is a Partner in the Los Angeles office of Cox, Castle & Nicholson LLP. Mr. Grossfeld's practice focuses on retail development and commercial leasing. He has extensive experience representing both landlords and tenants in all types of retail, office and industrial lease transactions.