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Is your newsagency lease at risk?

Imagine that you have a year to go on your shopping centre newsagency lease, that you want to continue in a business you have successfully operated for the last, say, eleven years and that you have been a good tenant – paying on time, participating in promotions and running a professional shop.

Now, imagine how you would feel when your landlord advises that your rent is to increase 40% and that if you don;t accept they have another party prepared to pay this increase to operate the newsagency in the centre.

Alternatively, imaging how you would feel when this other party which has convinced the landlord that a newsagency can generate greater rent for them comes to you and tells you to join with them otherwise you lose the business.

Newsagents in shopping centres are at risk of being priced out of their businesses.  This is a challenge not only for these victims of secret negotiations between landlords and other parties but also for the newsagency channel more widely.

One of the reason newsagents go broke and newsagencies close doors in shopping malls is that the base rent is too high.  The people negotiating are sometimes removed from actual responsibility for paying the rent.

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Newsagency challenges

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  1. ERIC

    the main aim of the franchisor is to get the newsagency without paying goodwill from the landlord, then sell the franchise to 3rd party. i know it is happening many years already.

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  2. hateBullies

    i need some advise. my lease is expiring feb 2012. how early do i need to start to ask for a new lease from the landlord.

    i have actually sent in a request for a new lease already 2 months ago and have gotten nothing. I have called the leasing agent and followed up only to be told that “since my lease is still far away, it is not their priority at the moment and call back in a few weeks”

    i read in the commercial tenancy act that if we requested for a new lease, the landlord have 1 month to give a response, if they do not respond, my lease will be extended for any period after the 1 month period.

    would it be advisable to bring this subject up with the leasing agent when i follow up, or do i risk pissing them off?

    any advise would be helpful.

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  3. Blake

    Client of mine had a 5×5, he starts negotiating extra “options” after the first 5 is up, with the goal of having a new lease finalised about halfway through the 2nd 5 years.

    If he hasn’t got something organised (not signed & delivered) by his last 2 years, he said he would be looking for a new landlord. Too much of a gamble to leave finding a new premises for any less a period. (He’s not a newsagent though)

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  4. Mark

    hate, start now, ASAP. Consider using a professional lease negotiator. But be careful – find out if they are affiliated with a group as their allegiance could work against you.

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  5. hateBullies

    aside from getting a lease negotiator, what else can we do if they refuse to get back to us about a new lease

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  6. mary

    What also happens is franchised groups go to management and talk there way into a shopping centres that already has an established newsagent. Then get a fulll account with the publishers apart from newspapers and take away business from the already established agent.
    Bullies are everywhere and sometimes the bullied is just too small to fight.

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  7. Y&G

    We had to engage our solicitor to ask for a response on our behalf, when our landlord would not do so for six months! We’re not in a shopping centre, but I guess landlords are landlords at the end of the day, if they think they can get something better at the end of an option. Do not leave this – get onto it ASAP.

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  8. Mark

    I can only speak for newsXpress. It does not negotiate with landlords and does not act behind the back of newsagents.

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  9. hateBullies

    do you think the provision in commercial tenancy law which states that after 30 days with no response from landlord…..the lease will be extended by the amount of time (after the 30 day period) it takes for them to reply.

    will that hold up? can we use it for our protection?

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  10. Mark

    hate, tread warily. You don’t win a fight with a landlord. Was your approach in writing. If so, go back and given them another 7 days and explain that you will need to explore other options if they do not come back to you.

    Also, investigate your CTTT options if you are in NSW.

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  11. allan wickham

    Dont hold me to this, but in my own experience a Landlord will enter a lease renewal negotiation no more than 6 months out from original lease expiring. The reason i was given was they did not have to any earlier than this.

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  12. hateBullies

    @mark not trying to pick a fight with landlord, i know we lose, but just need some protection as well.. I actually emailed and also faxed my request because they have a tendency to “not recieve email and not recieve faxes at the same time” makes me wonder how people contact them.

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  13. Jarryd Moore

    Mary,

    Franchises, groups and individuals have the right to do this. Newsagencts aren’t and shouldn’t be protected from genuine competition. It isn’t bullying, its business.

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  14. Mark

    Jarryd, I would question the ethics of any party undermining an established trading newsagent in a shopping centre.

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  15. Peter

    We have a market review due now. Whilst not an option period, when we negotiated our 5 x 5 x 5 two years ago, we wanted a full maket review at the end of year 2, as we had concerns about the ability to fill the centre at the psqm rates they were seeking.

    Long and behold 2 years in and not one new tennant. We have gathered benchmark data from local ‘similar’ centres and also have letters from other local ‘willing’ landlords on the what they would offer.

    Net result is we will be seeking a 30% – 40% reduction, if not arbitration here we come.

    As it presently stands, we have nothing to loose, and the landlord has everything. Whilst every $ reduction we get can add $3-$4 to our value, for the landlord its a $10-$12 reduction in value and new bnchmark has been set.

    We have noticed th silence on the lanlords behalf in our attempt to negotiate and whilst not a major centre (or owned by Westfields) it is ultimately owned by Lawyers.

    he way I see it thy can either buy us (as we are selling), provide a substantial cash incentive and some form of rental concession or we roll the dice and go to arbitration.

    Having just got back from vegas, and having had a good win over there I am feeling lucky and beleive we will be rolling the dice.

    Cheers

    Peter

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  16. mary

    Mark I think you need to question your companies ethics then.

    Jarrod I disagree with your statement.In a previous lifetime when a newsagent was purchased you paid for the “territory” and assumed no one could open a shop in the same centre as you.Well in this lifetime with franchise groups who pull out all lengths there is now the possibility and the reality that a 2nd shop will open in your “territory” with full magazine accounts.Thats whats wrong ,it isn’t your sub you lose out fullstop.
    I know times have changed and in some parts this industry is moving forward but there really is no security for an agent.The ‘territory’ no longer exists and really that could be a whole new topic.How to protect what little claim you have and save your business.

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  17. shaun s

    Mary i was always under the understanding that what you say is true about territorys . i know when i moved my store 4 years ago i had to get permission of the neighboring newsagent before golden casket would allow it .

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  18. Mark

    Mary not at all. Neither I nor any company I am involved in has moved on an existing newsagent. You know this too.

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  19. scott

    Mark, so the other newsagent at watergardens was not there when you opened?

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  20. Mark

    It was Scott. The centre was dramatically extended to almost 1km in length and the landlord was advertising for a newsagency at the other end.

    Go back and read my post. This is about parties undermining an existing newsagent for their existing site.

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  21. Jarryd Moore

    Mark, Mary,

    If someone, be it a franchise, company or individual, sees an opportunity to enter a centre and compete then I see no ethical dilemma.

    If the centre can support two newsagencies then they both survive. If it can’t support both then one would have to assume that the new newsagent saw an opportunity to present a better offer to consumers. If the existing newsagent was already well established and presented a comelling offer then it would be unlikely a new newsagent would enter the market, let alone survive.

    Newsagents should not be immune from genuine competition.

    Mary, the concept of territories, especially in regards to magazines, is old and has no place in modern retailing.

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  22. shaun s

    Mark , has this actually happened or is it a maybe this could happen .

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  23. Luke

    Jarryd should get out more and live in the real world for a while, none of the big retailers allow any competition whatsoever. They pressure suppliers, shopping centres and even governments to actively reduce others from competing with their businesses but no one else can, look at what the majors are doing with milk prices, we live in a dairy area and the farmers are getting worked over.

    There is no such thing as a level playing field or fair competition it is only survival of the fittest, unless of course you are heavily union backed like the mineral industry that has competition from the South Americans or say NBN Co then you can cry foul and get protection from those nasty competitors.

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  24. Max

    +1 Luke.

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  25. Angelo

    Jarryd, No one here is debating competition as long as it is conducted on a level playing field which the majors simply don’t play in yet and use their financial might to knock small businesses down. Yes, it may very well be the way of the world but it is neither fair nor right and we live with governments that won’t (not can’t) do anything about it.
    Financial might is not a level playing field.

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  26. Brendan

    The original post is regarding rent being pushed up in a bidding war for an existing business and its location. This sounds like what happened in Geelong some years back and undermines the operators of existing businesses. Any party offering the higher rent lacks ethics and the centre owners are risking making a viable business unprofitable in the long term. I wonder who truly comes out in front in this scenario.

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  27. Jarryd Moore

    Luke, Angelo,

    No one is talking about the majors here. The problems surrounding the market share and power of the two major players are a seperate issue.

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  28. Jarryd Moore

    Brendan,

    Assuming the party offering the increased rent is a franchise trying to get the existing newsagent to sign up, my understanding is that they would have to justify the new rent figure in their financial modelling. If said financial modelling was knowingly wrong or the franchise was negligent in their due diligence then the newsagent may have legal recourse available.

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  29. Mark

    Scott, should have also mentioned that the landlord announced Supanews was taking the new (greenfield) site. newsXpress only became involved after Supanews pulled out and when the landlord approached newsXpress.

    This post is about newsagent related parties approaching a landlord with a ridiculous (un-commercial) rent offer undermining an existing newsagent who is paying a market rate rent and who has established solid goodwill for the business.

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  30. Tim

    Which group is it that is demanding that this newsagency join them or else?

    This is plainly poor business ethics and I would like to know who it is.

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  31. Jarryd Moore

    Mark,

    Any newsagent forced into this situation should seek legal advice, particularly in relation to the Franchising Code of Conduct. If the rent negotiated is commercially unviable then issues may arise with the disclosure document or possible unconscionable conduct.

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  32. Brendan

    Gates, bolting horses and all that stuff…..the situation should not be allowed and as Jarryd says is unconscionable conduct by both parties ie. landlorfd & franchise group.

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  33. Mark

    Unfortunately newsagents don’t always explore their rights and options.

    I wrote this post as a warning. I’m not planning on naming names.

    If you are in a shopping centre, make sure that your lease is rock solid and that you are not undermined.

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  34. Luke

    Jarryd, in your post 21, you stated
    “If someone, be it a franchise, company or individual, sees an opportunity to enter a centre and compete then I see no ethical dilemma”, you did not say except for the majors, and again in comment 13 you stated “It isn’t bullying, its business.” You cannot pick and chose, either everyone has the right to be protected as the existing lease holder or no one does including the majors or franchise groups that try and muscle people out.
    I have seen first hand existing small business be forced out of centres so that the bigger boys do not have to compete, be it green grocers, newsagents, service stations or bottle shops.

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  35. Jarryd Moore

    Luke,

    No existing business should be protected against genuine, sustainable competition, regardless of where that competition comes from.

    Issue arises when new competitors enter a localized market (in this discussion a shopping centre) and purposely tries to shut down the competition. The problem arises when they employ tactics that make their own business unviable (the majors are known to run individual stores at significant losses for years). This is not sustainable competition and most importantly is bad for the consumer.

    While competition should be encouraged, it should not go unregulated. Within that regulation issues such as market share and market power need to be addressed. While these problems are not always limited to major players, regulating said issues will inherently target them.

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  36. hateBullies

    can anyone recommend a reputable/competent lease negotiator in WA? google turns up only a couple. thanks.

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  37. Luke

    where did you cut and paste this from Jarryd? One day you may have an original thought.We may talk once you actually own a business instead of simply working in one.

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  38. shaun s

    i do not know Jarryd or luke so i have no personal opinion of either but i was having a bad day and to see a smart comment like that always makes me laugh ..

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  39. Jarryd Moore

    Luke,

    Don’t resort to personal attacks. If you have a rebuttal please put it forward.

    I have not claimed the ideas I expressed to be original. When we’re discussing a topic as old as competition and free-market regulation I doubt anyone could come up with a new idea.

    The business I now consult/oversee (and managed for 5 years) is a family business. I have been involved in every aspect of it – even more than the actual owners over the last 5 years.

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