Starbucks, Whole Foods Face Landlord Pushback Over Closed Stores

Starbucks and Amazon’s Whole Foods are facing fights with landlords as they gear up to close stores.

According to a report in CNBC, citing court documents, Simon Property Group got a favorable ruling in a court case over Starbucks’ plans to close 77 Teavana stores at Simon’s properties. An Indiana judge ruled in favor of Simon’s, stopping Starbucks from closing stores or having any going-out-of-business sales. The lease Starbucks signed with Simon for the Teavana brand stipulated that the stores must be open and operating during normal business hours. Some of the 77 Teavana leases will be active for another 10 years, noted CNBC.

“We are disappointed in the judge’s ruling,” a Starbucks spokeswoman told CNBC. “Our focus continues to be on finding a resolution.”

Last week, a Washington court handed down a similar ruling in a case against Whole Foods, which recently closed one of its 365 stores in Bellevue, Washington without giving the landlord much notice. Although the lease required that the store operate without any interruptions for the first 10 years, Whole Foods closed it down anyway, citing so-called site challenges and underperformance.

CNBC noted that landlord-tenant disputes are common, but are usually settled out of court with the landlord getting a large cash payment from the departing renter. The results of the Starbucks lawsuits could embolden more landlords to use the courts to settle disputes as more companies opt to close stores and restructure instead of file for bankruptcy. With a bankruptcy, the tenant can get out of the lease because the company has no money.

“Mall owners typically have operating clauses in leases that protect them from such situations, like Teavana, and are enforceable when push comes to shove,” Boenning & Scattergood analyst Floris van Dijkum told CNBC.


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