Landlords ‘Taken Aback’ As Starbucks Requests Yearlong Rent Concessions
Starbucks Corp. is asking its landlords for rent concessions for a year at some of its company-owned locations, to offset the damage the coronavirus pandemic has done to the coffee giant's bottom line.
Chief Operating Officer Roz Brewer wrote a letter containing the request, reports the Seattle Times. The letter didn't specify exactly what form the rent reduction might take, merely that the company wants it to last a year starting next month.
“Effective June 1 and for at least a period of 12 consecutive months, Starbucks will require concessions to support modified operations and adjustments to lease terms and base rent structures,” the May 5 letter read, according to the Seattle Times.
Landlords were "taken aback" by the request, especially by the length of time, reports Restaurant Business, citing anonymous real estate industry sources, one of whom also called the request "ridiculous."
Currently Starbucks owns 8,800 stores. Another 6,250 are operated by licensees.
Late in April, the coffee retailer reported that for its second fiscal quarter (ended March 29), global comparable-store were down 10% compared with the same quarter a year earlier, attributing the drop to the pandemic.
The company estimated it lost $915M in sales during the quarter because of mandated store closures, but also reduced operating hours and lower customer traffic.
Starbucks said that it was planning to reopen about 90% of its company-owned stores early in June, including many in the United States, with new safety protocols informed by its experience in China. The reopened stores will feature delivery services, as well as contactless and curbside pickup.
Starbucks isn't the only major food and beverage purveyor to push for rent concessions. Potbelly Corp. is also in such discussions with its landlords, and has said that it might close as many as 100 of its restaurants because of the pandemic. For its first fiscal quarter of 2020, company-owned comparable-store sales dropped 10.1%.