Challenges in Drafting a Restaurant Exclusive Use Clause

Profit margins for retailers can be quite thin, particularly for restaurants and food-service tenants. Consequently, a restaurant tenant will contend that adding additional restaurants with overlapping cuisines or products could severely infringe upon its profits, thereby changing the tenant's projections and the economics of the deal. The tenant, therefore, seeks to include broad, exclusive-use protection to preclude such overlapping and to afford the tenant the most likely path to success, which success benefits both the landlord and the tenant. Such protection, the tenant will argue, is baked into the rent as consideration for the deal.

Conversely, the landlord will likely resist granting an exclusive use right or seek to narrow the scope of an exclusive use clause so as to limit impediments to leasing and provide objective guidance for future tenancies. The landlord will argue that the rent is consideration for the opportunity to be located in the shopping center, and that the landlord should not bear the burden of the tenant's fear of competition. If the tenant's product is good enough and properly priced, the other tenants in the shopping center should be irrelevant.