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Retail Law Advisor

How Grocery Stores Are Starting to Cash in on the Blue Apron Trend

Posted in Retail

The Rise of the Gourmet Home Chef

Cart and ComputerBoxed meal delivery services like Blue Apron and Plated have steadily risen in popularity since they entered the market in 2012. Meal kit delivery services offer consumers a no-hassle way to cook meals at home, without having to find recipes, plan meals, or go grocery shopping. Instead, each week (meal delivery services are generally subscription-based, so you sign on for a shipment every week) a box arrives at your doorstep, filled with the exact number of ingredients needed to cook a few meals for the week (typically 3-5 dinners) with step-by-step recipe instructions. The market has become so segmented that companies now cater to every kind of customer from vegans (Purple Carrot), to locavores (Just Add Cooking), to families (Hello Fresh’s Family Box).

Meal kits are a multi-billion per year business that is poised to eat into traditional retail food services, including both grocery and restaurants. Meal kits are projected to rise to about $3 to $5 billion in market share in the next 10 years. The rise of meal kits signals a shift in how consumers want to provide meals for themselves and their families. Americans are looking for an easy and quick way to cook nutritious meals – particularly dinners – at home.  We are not just making our family recipes, but are increasingly inspired by television cooking shows and gourmet restaurants, and are looking for creative, but manageable, recipes to make at home.

Admittedly, meal kits are a small silver of the overall $1.46 trillion Americans spend annually on food and beverages in grocery stores and other retailers.  Additionally, meal kits have their own drawbacks, including the perceived waste of shipping and packaging materials.  Meal kits also suffer from a major retention problem as research shows that only 50% of customers signup after the first week, and 90% of customers leave meal kit subscriptions within six months.

In light of these challenges, grocery stores have a great opportunity to capitalize on the meal kit business.

Grocery Stores’ Meal Prep Offerings

Whole Foods has recently partnered with Purple Carrot to offer plant-based meal kits in its Dedham, Massachusetts store, with plans to expand the partnership.  The in-store meal boxes are cross promoted, so that if a customer makes a favorite meal, all the ingredients are easily available for purchase in-store to recreate it.

Grocery stores can also offer meal kits for delivery, through existing delivery services such as Instacart and Peapod, which provide all the benefits of a meal kit without the annoyance of a subscription.  Customers can simply shop at home online, order one or more meal kits, and have those delivered to their doorstep within an hour or two, and with the ability to add other grocery staples.

Additionally, Boston-area Roche Bros. is pushing the technology envelope through its partnership with Popcart.  Popcart is a plug-in to your internet browser that seamlessly turns a recipe into a shopping list.  With the click of a button, you can go from viewing a recipe online to having an online shopping cart filled with the ingredients required to make the meal, that you can then either have delivered to your house or you can pick up at one of four area Roche Bros. stores.

In the new era of grocery delivery and the desire to make cooking at home as easy as possible, grocery stores are perfectly positioned to both push back at and improve the meal kit business model as part of their overall growth strategy.

When in Rome: Our Take on the ICSC OAC (Open Air Summit)

Posted in Retail, Retail Sales

ICSCWe know from our high school history lessons that large scale public shopping centers have been around since the days of the Roman Empire, if not before. The fabled open air markets of cities like Istanbul and Damascus still exist today and are often the backdrop of our favorite action movies and TV shows (anyone see Skyfall?) As we heard at this month’s ICSC OAC conference in Miami, the industry is seeing a return to days long ago with an uptick in interest in open air centers, including in urban areas across the United States. ICSC’s OAC conference brings together high level executives in the retail industry to discuss the key trends, challenges and opportunities facing the Open Air Shopping Center community, and this year’s event did not disappoint. Here’s what we learned:

Experience Makes Perfect

The notion of “If you build it, they will come” has taken on a different twist for developers and investors looking to build a portfolio of successful projects. E-commerce is changing the retail landscape offering consumers the option of purchasing nearly anything they need or want from their smart phones. This is challenging developers/landlords and retailers rethink the critical question: what will get people to visit our property and stores?

The answer? Creating a retail environment with customer friendly amenities, and a multitude of experiences. The owners of open air centers are focusing on forming a destination with memorable spaces and places. Many of these open air projects not only open up to the community, but they often serve as their civic hubs and gathering places. A terrific example of this is a ground-up, mixed-use development that we are working on for a client in the Florida market, which will offer approximately 600,0000 square feet of a mix of shopping, dining and entertainment venues; 500,000-1,000,000 square feet of prime, Class A office space; approximately 1,000 planned residential units; and even twin hotel towers anchoring its main street retail.

Discount and Value to the Front of the Line

We know from industry data that millennials would rather use their disposable income for experiences rather than owning things. These younger consumers also prefer buying discount or off-price products. Outlet centers, most in open air format and including experiential offerings such as restaurants, food halls, family entertainment centers, grocery stores, cinemas and other attractions are enjoying growing popularity. As we reported after ICSC’s 2017 Mid-Atlantic Conference and DealMaking earlier this year, discount and value retailers have been building on a hot streak. The consensus we’ve heard on discount retailers is that they have been able to undercut department store competitors on price without sacrificing much by way of style or quality. As a result, consumers still cannot get enough.

Mixed Views on the Economy

In general, the tenor at ICSC OAC was that while open air centers remain a favored asset for investors, we are still seeing cautious optimism among retailers. Retailers are being more conservative about new deals, perhaps a result of uncertainties on evolving tax law changes and the new presidential administration. The brokers we spoke to are generally more positive. Conversely, retail developers seem more gloomy on the markets (for example, many are being priced out of major urban locations such as New York City). We think that the billions of dollars in CBMS debt coming due in the next few years will continue to put pressure on regional malls (Class B/C) and some major retailers as well.

Innovation at Work

Despite various views on the economic climate, everyone we spoke with agreed that landlords and retailers need to find creative ways to partner together to make the store and center experience more customer friendly. Also, taking the much-discussed convergence of brick and mortar and online even further, we were fascinated by one conversation we were a part of where a major retailer, which started as a catalogue company many years ago, is using the massive amount of customer data they have accumulated based on their catalog business and more recently their ecommerce business to their advantage. By knowing where their customers are located, they are able to use that information to identify ideal locations for their brick and mortar stores. With 30 or so stores now across the U.S., this retailer shared that e-commerce sales typically decrease a little when a store is opened, but that over time the e-commerce sales actually increase without impact on store sales because the stores are helping them to find new customers in areas where they know their products are in demand. The synergy between this retailers’ stores and e-commerce business is working for them, and we think, is evident of a growing trend we will continue to see play out.

We are looking forward to several upcoming industry events in the spring, including Bisnow’s National Retail East event in New York in April, and of course ICSC RECon later in May, and we promise to keep you informed on what we’re hearing and seeing in the dynamic retail marketplace as we travel.

Copyright Compliance: (Re-)Register Your DMCA Agent in 2017 to Keep Your Website Docked in the Safe Harbor

Posted in Intellectual Property, Retail, Technology

copyright
The Digital Millennium Copyright Act (DMCA) “safe harbor” provisions shield certain online service providers from copyright infringement liability arising from content posted by users on their website. Provided that the service provider registers its DMCA agent and complies with the other statutory requirements, the service provider may encourage user interaction with its website with peace of mind that the activities of its users will not expose the service provider to a heightened risk of liability for copyright infringement.

While the statutory requirements of the safe harbor remain unchanged, a recent change to the designated DMCA agent registration requirement requires action by all online service providers that wish to retain the protections of the safe harbor. In order to qualify for the DMCA safe harbor going forward, all online service providers – including service providers that registered before the new electronic registration platform went into effect on December 1, 2016 – must register their designated agent with the U.S. Copyright Office in the new electronic DMCA Designated Agent Directory. The deadline to register on the new electronic platform is December 31, 2017. With the cost of registering at only $6 and the entire process to be completed online, the new registration process is inexpensive and relatively simple to complete.

Despite the relative simplicity of the new electronic registration requirement, there are two new features of the DMCA registration process that will require additional administrative upkeep by online service providers. The first new feature is that online service providers must include in their registration a list of all alternate names that the public might use to look up such service provider’s designated agent. The search tool on the Copyright Office’s new DMCA Designated Agent Directory does not allow users to browse the names of service providers but instead requires users to type in the name of the service provider in order to search for the designated agent. Therefore, given the format of the search tool, the service provider is obligated to inform the Copyright Office of alternate names that users might use when searching on the database. Secondly, the DMCA registration now has a three-year expiration period, which means service providers must docket a reminder to renew their DMCA registration.

Retailers that allow users to interact with their websites by posting or submitting content should consider registering their designated agent with the U.S. Copyright Office as a layer of defense from copyright infringement liability in the event that user content contains infringing material. A common form of user interaction with websites is leaving reviews for products purchased from the retailer. However, given the rise and influence of social media on the retail industry, the mediums for user interaction with websites have become more numerous, and exposure to copyright infringement risk by online retail service providers may become a more relevant issue than before. For example, retail websites that enabled customers to re-post Instagram photos of the customer wearing a product to accompany a review may be at risk of copyright infringement if the Instagram photo contains something proprietary, such as artwork. Similarly, retailers that encourage customers to submit YouTube videos with product reviews for reposting on the retailer’s website could potentially be liable for copyright infringement in the event that a song or other content used in the video is proprietary.

Although not every retail business with an on-line presence may currently feel the need to secure DMCA safe harbor protection, such protection will likely become more relevant as customer engagement increases. With the move in retail marketing towards encouraging greater user interaction with retail websites, the likelihood of retailers inadvertently committing copyright infringement becomes greater. New online retail marketing techniques are prime to be exploited by copyright trolls who mine the Internet for copyright infringement. Registering with the DMCA Designated Agent Directory may allow retailers to optimize their websites to use unique forms of marketing, such as social media marketing, while still limiting their exposure to liability for inadvertent copyright infringement.

Although the DMCA safe harbor requires strict adherence to the registration process and other statutory requirements, a service provider’s compliance with all such requirements will be rewarded with a defense against online copyright infringement liability. Online retailers that registered their DMCA agent under the former registration platform should comply with the U.S. Copyright Office’s new procedures before their protection expires later this year. Online retailers who have not previously registered a DMCA agent and satisfied the other safe harbor requirements may want to take a fresh look at this opportunity.

Leveraging Digital Tech to Make Brick and Mortar Retail A Destination

Posted in Retail, Retail Sales, Technology

shopperWith a growing percentage of retail sales shifting online, brick-and-mortar retailers are adopting novel approaches to enrich the experience of avisit to their stores.

In some cases, stores are using novel technologies to attract new customers. For a limited time, Bloomingdale’s flagship in Manhattan featured a “Clothing-to-Go” window display offering passersby the opportunity to control the color of Ralph Lauren clothing in the display from the sidewalk using touchscreens.  Those interested in what they saw—even if they originally had no intention of setting foot in the store—could then either go inside to make the purchase, or send a text to receive a link to a page to buy their selected outfit online.

Other retailers are incorporating technology to enhance the experience for customers already in their stores, not only as a novelty attraction but also to improve customer engagement and increase the data the store can collect about its customers. Rebecca Minkoff’s digitally connected store, developed in collaboration with online giant eBay, allows shoppers to use an interactive mirror/touchscreen on the main floor to flip through lookbooks and, if they enter a phone number, order a drink, or save items that they would like to try on in the dressing room.  Once in the dressing room, smart mirrors let the customer continue to play with looks, request additional sizes and styles to try on, and even complete their purchase. Such in-store technological innovations allow for the convenience of online shopping, combined with the immediate gratification of being able to try things on right away. According to Minkoff, this approach pays off—the interactive dressing rooms initially resulted in triple the expected clothing sales and gave the company valuable data about consumer preferences and habits. Other retailers like Bloomingdales, Nordstrom and Neiman Marcus are also experimenting with “smart” fitting rooms.

Apparel isn’t the only industry where retailers are taking advantage of digital innovation. Home improvement giant Lowe’s has collaborated with Microsoft’s HoloLens team on pilot projects that use an augmented reality (“AR”) headset to allow customers to plan big-ticket home renovations. Like other AR systems, HoloLens creates a “blended environment” in which computer-generated objects are overlaid on top of actual ones, enabling the user to see both simultaneously and manipulate certain features. Donning the headset, consumers can browse options for a kitchen upgrade, previewing how new layouts, colors and materials would look when installed in their homes, increasing their confidence and potentially allowing them to make decisions more quickly. Lowe’s can also collect data about what items draw customer’s attention and use that information to design displays or plan for inventory.

Another example of smart technology that blends the convenience of online shopping with the irreplaceable experience of trying something in person is Sephora’s use of in-store “IQ Kiosks.”  The Color IQ Kiosk uses a special device to scan and analyze a customer’s skin tone, then uses the data to recommend various products in flattering colors. Since it is unlikely that consumers will want to invest in their own skin-tone scanner for one-time use, the ability to get this information from a visit to the store can be a valuable draw to shoppers. The Fragrance IQ Kiosk mimics an online quiz that asks the customer about their style and preferences and then emails them recommended scents.  The Fragrance IQ Kiosk can also immediately puff out a sample of the suggested products, something the Internet on its own has yet to achieve.

While the examples above of flashy new tech are designed to intrigue and draw in customers, there is also potential for leveraging technology on the backend. Geofencing systems, which we have written about in this space previously, combined with electronic shelf tags, offer the potential for dynamic pricing, where a customer walking by a display who has an app installed on his phone may receive a special price offer in real-time based on past purchases and known brand loyalties. Dynamic pricing is already common online, where retailers (and other industries such as airlines) use browser cookies and customer logins to offer personalized deals designed to clinch a sale.  In the in-store context, dynamic pricing has the potential to tempt customers into an unplanned purchase, with the added benefit of allowing them to examine the product in person before committing.

Most of these technological innovations are being rolled out slowly in pilot programs for a reason—there are privacy and ease-of-use concerns—not to mention cost issues—that make it prudent for retailers to test and test again before transforming their sales models. But the potential to offer customers unique experiences and information indicates that we can expect to see more digital innovations in stores in the months and years to come.

 

The Ascendency of Accessibility: Surge in Website Lawsuits Continues

Posted in Compliance, Employment, Restaurants, Retail, Technology

Keyboard - access key Contact usThe proliferation of accessibility lawsuits under Title III of the Americans with Disabilities Act (ADA) has not abated. It is well-documented that ADA-related litigation increased by 37% from 2015 to 2016, which is symptomatic of long-term trends. Growth is fueled in part by litigants’ increased focus on internet-based technologies, including websites and mobile applications. This trend is unlikely to wane in the near future, especially given the continued expansion in e-commerce and internet-enabled applications that retailers, hospitality providers, and other commercial enterprises rely on for advertising, customer engagement, and sales growth.

Title III of the ADA prohibits discrimination against disabled persons in places of “public accommodation.” As a result, businesses that provide goods or services to the public must provide disabled persons with the same type of access to those goods and services, and must remove certain existing barriers to access. Although individuals may have legitimate claims under Title III, the majority of these lawsuits are filed by a small cadre of plaintiffs’ attorneys and advocacy groups. These attorneys and groups specialize in identifying potential ADA violations, locating suitable plaintiffs, and then filing numerous lawsuits that typically settle quickly for nuisance amounts. The incentive for these serial litigants is the ADA’s private enforcement incentive: plaintiffs who prevail on their claims generally recover attorneys’ fees, expert witness costs, and other legal expenses.

With few exceptions, courts interpret Title III as applying to websites and mobile applications. In particular, courts have viewed websites and mobile applications as “public accommodations” where they enable the public to purchase, view, or reserve goods and services. This implicates most websites and mobile applications offered by retailers, restaurants, and hospitality and other service providers.

Title III’s specific technical requirements are complicated and often misunderstood.  In addition, there are currently no specific ADA standards for websites or other internet-enabled technologies. To address this void, the Department of Justice is working on regulations. The Department of Justice began that process in back in 2010, with the anticipated publication date sometime in 2018. However, the current political climate and associated regulatory uncertainty may further delay these regulations.

This lack of regulations creates challenges for businesses—whether designing or modifying their websites or responding to a demand from a plaintiff’s attorney. As we mentioned in an earlier post, the Department of Justice has used the Web Content Accessibility Guidelines 2.0 when entering into settlement agreements with businesses. We suspect that the Department of Justice’s internet accessibility regulations, whenever they are issued, will be based on these or similar guidelines. For that reason, until the issuance of definitive regulations, some businesses have decided to look to these guidelines when designing or modifying their websites and mobile applications. The guidelines include detailed technology and design recommendations, including:

  • Providing alternative text for screen reader technology (converting text to audio);
  • Providing captions for video, and providing transcripts for audio;
  • Making file downloads accessible;
  • Not relying on color alone to convey meaning; and
  • Making sure content is structured, clearly written and easy to read.

The lack of Title III website accessibility guidelines creates uncertainty for businesses. Until definite regulations are promulgated, many business owners have concluded that incorporating principles and recommendations from the Web Content Accessibility Guidelines 2.0 is the best approach. That also may help persuade potential litigants trolling for their next lawsuit to look elsewhere. Businesses are well-advised to be proactive, remain vigilant with their website and mobile application design and maintenance, and seek legal counsel to address any questions or concerns.

ICSC Mid-Atlantic Conference & Deal Making Recap

Posted in Landlords, Leasing, Real Estate, Restaurants, Retail, Tenant

ICSCWith seemingly all of the country’s attention focused on Washington DC lately, we snuck out of the District and across the Potomac River to National Harbor last week for ICSC’s 2017 Mid-Atlantic Conference and Deal Making. The conference was very well attended, and the mood among attendees and presenters was generally upbeat. Anecdotally, the sentiment seemed to be that for, retail real estate in this region, the sun is still shining—for the moment.

Restaurants Are Leading the Charge . . .

Restaurants, particularly unique, local, and slightly funky concepts (such as food halls) are generally regarded as increasingly being responsible for driving traffic to shopping centers. Seemingly every demographic that carries a smart phone—millennials, boomers, tourists, etc.—is seeking the next trendy dining-out experience, presumably to actually eat a meal, but definitely to fill up their Instagram, Snapchat, Twitter, and other social media accounts. The social media cycle is seemingly a positive force for brick-and-mortars: consumers have become crowd-marketers to their friends and followers.

Landlords hoping to capitalize on the burgeoning restaurant scene are crafting a tenant mix that makes it easy and enjoyable to mix dining and shopping. Food courts, once features designed to maximize convenience, are being turned around into restaurants that maximize experience and emphasize quality foods. Among the restaurants and regional fast casual chains generating buzz were Taylor Gourmet, La Colombe, Honeygrow, and First Watch Café.

. . . Discount and Value Retailers Are Also Doing Well

While some high-end anchors were creating major ripples or capturing the president’s attention for reasons most retailers strenuously avoid, discount and value retailers have been building on a hot streak. The consensus we’ve heard on discount retailers is that they have been able to undercut department store competitors on price without sacrificing much by way of style or quality. As a result, consumers seemingly cannot get enough.

But Other Deals Are Getting Harder and Taking Longer

The ICSC conference highlighted restaurants and discounters as the clear leaders of the retail sector. However, we heard that for other categories of retailers, deals are not coming together as quickly. Both landlord and tenants may be experiencing some trepidation—whether about possible changes to tax laws, a recession that many predict should be coming soon, general uncertainty as a new administration finds its way, or some combination of these reasons and others—deal velocity seems slightly down relative to recent hot years.

Recent news that Whole Foods is closing several stores, pulling back from a number of high profile deals and otherwise scaling back new store development, was at the forefront of many conversations. It is clear that other large format retailers are also possibly scaling back expansion plans, or at the very least, taking a pause to re-examine the relationship between their online and brick and mortar presence.

Rising Interest Rates: Will Landlord’s Be Able to Keep Up?

One of foremost macro concerns for nearly every landlord is the near term interest rate climate. The past several quarters have been a steady stream of speculation that interest rates are due to hike again. Landlords may face a situation in the near future where deal velocities stay low and depress rents while debt costs rise.

The Power of the Melody Pushes Fashion Forward

Posted in Retail, Retail Sales

The many genres of music – particularly, rock, pop, hip-hop and country – have always pushed the needle forward in fashion. Musical icons from today and yesteryear have given a voice to fashion by creating a kinetic experience full of imagery and a visceral aesthetic that retailers long to foster in their brick and mortar retail stores. Today, music’s grip and influence on fashion have become more and more evident with the boom of music festivals that have become Millenial’s and Gen Z’s version of Woodstock and Glastonbury. Music festivals, including SXSW, Panorama, Bonnaroo, and Coachella have become “see and be seen” fashion experiences. And, recently, retailers have taken notice and launched festival-inspired fashion capsules in an effort to ride the wave of music festivals. Major international retailers, such as ASOS, Nordstrom and Macy’s, have designed comprehensive campaigns appealing to music festival fans. By promoting these music festivals on social media and creating festival-worthy fashion lines, these retailers have inspired brand loyalty among a target market of Gen Z and Millenial consumers, and, more importantly, offered festival fashionistas a streamlined method of outfit shopping. In the coming years, competition among retailers courting music festival fans will only increase as the international love affair with music festivals further escalates.

Music festivals, which are a perennial draw for A-list celebrities and social-media influencers, celebrate street style as much as the music they are supposed to exhibit. In a strange twist, music festivals have become a social calendar event where what fashion-conscious onlookers are wearing is just as important as the artists performing. These content creators all have the ability to jumpstart a new trend that will become the next #Instafashion moment. Given the enormous popularity of music festivals – evidenced by each #hashtag and geotag – on social channels such as Snapchat, Instagram and Youtube, savvy retailers have capitalized by sponsoring these events and opening up pop-up stores on site. These retailers hope to capture the heart of the Millennial customer who will now associate the brand with an experience, hopefully engendering brand loyalty going forward. Nordstrom was one of the first retailers to open up pop-up shops at music festivals, which included a photo booth where customers were encouraged to upload the photos to social media and use its hashtag. Marketing campaigns that are seamlessly integrated into event experiences tend to resonate with consumers on a deeper level. By leveraging the social capital of music festivals, retailers such as Nordstrom have been able to cast a wider net in an effort to sell their products to future festival goers.

Music festivals are fast becoming the Super Bowl (Congrats! @Patriots) in the fashion calendar. And, considering the global reach of music festivals, retailers’ opportunities to increase sales and reach new consumers appear endless. For retailers that step up to the plate and create interactive experiences on the festival grounds or at a star studded sponsored private party, music festivals can be a home run marketing opportunity that engages both festival-goers and followers on social media.

The (Border) Adjustment Bureau: Hold On to Your (Imported) Hats

Posted in Cross Border, Retail, Retail Sales, Tax

euro and dollar sign_dreamstimefree_2840174Retailers would be wise to pay close attention to the upcoming tax-plan deliberations of the 115th U.S. Congress. A proposal currently being considered would adjust the U.S. corporate tax by making imports a non-deductible expense. This adjustment is intended to create incentives for domestic production, as companies would no longer be able to reduce their taxable income by deducting their overseas expenditures.

Here’s an example. Currently, if Joe Retailer imports $1 million of goods, spends $500,000 on domestic costs and sells the products for $2 million, Joe could deduct the cost of the imports and all domestic costs from the sales amount, and would pay 35% in taxes on $500,000, for a total tax hit of $175,000. Under the proposed plan, however, Joe would be able to deduct only the $500,000 in domestic costs, and would pay 20% in taxes on $1.5 million, for a total tax hit of $300,000.

Thus, some retailers importing goods made abroad fear a looming tax crunch. Recent media reports have highlighted the potential effects of the proposal on the apparel, toy, and electronics industries, although other import-heavy industries find themselves in a similar situation. According to one RBC Capital Markets analyst, cited in a recent Wall Street Journal article, the earnings loss to six large retailers from a “border adjustment” could total $13 billion. Other economists, however, are downplaying these concerns, noting that such companies could recoup any tax losses with gains from decreased importation costs and a stronger U.S. economy. Companies may also attempt to pass increased tax costs through to the consumer by raising the price of goods.

Of course, the final fully-negotiated tax plan may look vastly different from the current proposal. Indeed, President Trump has publicly criticized the border-adjustment component of the GOP tax plan, saying “Anytime I hear border adjustment, I don’t love it.” Even if passed in its current form, the economic effect of the proposal on retailers, consumers, and the overall economy is hotly debated. Nonetheless, it is worth keeping an eye on the result of negotiations concerning the “border adjustment”.

A final thought: Despite the murkiness of the future under the new administration and Congress, one outcome is crystal-clear:

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman
Should five per cent appear too small
Be thankful I don’t take it all

–       The Beatles

 

 

Oh the Sidewalks Outside Are Frightful, But Landlords Will Make Them Delightful… or Will They?

Posted in Compliance, Landlords, Leasing, Real Estate, Retail, Tenant

ShovelAlthough we haven’t seen much snow accumulation in the northeast to date, we know that this can (and likely will) change before the warmer weather returns. Before the snow really begins to fall, it would behoove both landlords and tenants to become informed about their snow clearing responsibilities and to ensure removal plans are in place that are compliant with laws and lease documents.

The City of Boston (City) and other major cities such as Chicago and New York require property owners to bear the responsibility of removing snow and ice from sidewalks abutting their properties. Although each local ordinance differs with respect to the nature of the accumulation and time of day that the snow must be removed, all ordinances impose fines for non-compliance. Currently, the fine for failure to comply with the City’s snow removal ordinance ranges from $50-$200.  A Bill was proposed in March, 2015 which would give the City the authority to increase these fines, but due to the widespread impact and the potentially steep increase in the fines, the Bill initially met some opposition. However, it seems that concerns for pedestrian and vehicular safety tipped the scales, and on December 30, 2016, Massachusetts’ Governor Charlie Baker signed the new Bill into law giving the City the authority to increase the fines. This new law enables the City to impose fines up to $1,500.00 on owners of commercial properties and buildings containing more than six residential units who fail to remove snow or ice from sidewalks as required or if the snow is placed in the public way. The Mayor and the Boston City Council are now responsible for determining the new fines.

In addition to the obligations imposed by the City, property owners also have common law duties in connection with snow removal. In a previous article, we discussed the Massachusetts Supreme Judicial Court (SJC) case Papadopoulos v Target Corp, 457 Mass, 368 (2010) which established a new standard of measuring liability for tort actions involving snow removal. In particular, property owners are now required to act as a “reasonable person under all the circumstances”. Accordingly, it is of particular importance that landlords allocate snow and ice responsibilities in lease documents.

In a typical retail lease, landlords are responsible for the maintenance of common areas, including the removal of snow and ice. However, it is not uncommon for a retail lease to include a provision that obligates the tenant to remove snow and ice from its entryway and the sidewalks abutting its space. While tenants are reluctant to obligate themselves to perform this duty, particularly when they are paying common area maintenance costs, it may be in the best interest of both parties for tenants to be responsible for snow removal from certain areas close to the premises. Even when a landlord actively works at the property to remove the snow, significant accumulations often make it difficult for a landlord’s crew to keep up with clearing all parking areas and sidewalks to satisfy the City’s ordinance and the common law. On the other hand, tenants are uniquely situated to ensure that the snow is cleared in an expeditious manner that permits its customers to safely access their business. Regardless of how the duties are assigned in your lease, keep in mind the long term implications on your snowy day fund if you fail to follow the requirements of the City’s ordinance or the lease and pay careful attention to compliance.

Upscale Food Halls—On Trend and On The Rise

Posted in Landlords, Leasing, Real Estate, Restaurants, Retail, Retail Sales

forks_86449_imageThe growth of high-end food halls is taking off around the country as consumers seek fast, fresh, high-quality, chef-driven meals with a local touch, and as landlords seek to cash in on the continued growth of fast-casual dining. These boutique-style, upscale food halls are modeled more after famous European markets like Barcelona’s Mercado de la Boqueria than after airport or suburban mall food courts. Following the success in New York City of Eataly, Todd English Food Hall at the Plaza and Chelsea Market, food halls are experiencing a wave of growth across the country.

Eataly, which launched its first store in Turin, Italy in 2007, opened in New York City in 2010 with a mix of restaurants and retail market stands selling high quality Italian food products from both Italian and New York area producers, with New York celebrity chef and restaurateurs Mario Batali and Joe Bastianich providing an imprimatur of quality and authenticity. Eataly New York features gourmet groceries, coffee and pastries, a variety of grab and go options and full service restaurants to drive business throughout the day. Eataly now operates two markets in New York City and one in Chicago, is developing a store in Los Angeles, and has just opened a 45,000 square foot store at Boston’s Prudential Center. Eataly’s newest store in Boston will have its own local flair, a collaboration with local Boston celebrity chef Barbara Lynch and products from producers across New England to compliment the wide range of Italian products offered for sale.

Rather than a single entity operating all of the stands and restaurants, as is the case at Eataly, New York’s Chelsea Market, located near the High-Line, but a tourist destination in its own right, offers a well-curated selection of high-quality shops, food stands, and restaurants, with a focus on local, New York businesses. This template is being replicated in different neighborhoods across New York City with new food halls such as UrbanSpace Vanderbilt, and Gotham West Market. It is also being replicated in other cities across the country, as evidenced by Union Market in Washington DC, Ponce City Market in Atlanta, and the Pine Street Market in Portland, to name a few.

Food halls sit at the intersection of a number of trends and desires. For consumers, these include increasing spending on food and, in particular, on restaurants, preferences shifting toward unique experiences, and demand for fresh, healthier food, with a local twist. For restaurants, food halls offer a great location and the ability to open a physical presence for a fraction of the capital commitment of a standalone store. And for landlords, food halls are a highly desirable retail amenity, in a retail sector experiencing strong growth, with the ability to mitigate risk across a larger number of smaller tenants. Food halls may not be the answer for every retail space. But with high-end food halls operating successfully in many different markets across the country, the number of these upscale food halls seems likely to continue increasing each year.