July 20, 2017
In recent years, the number of retailers who opt for more non-traditional stores or shops has increased. This may be due to marketing strategies where entrepreneurs look to test their products or services, try to expand into new locations, take advantage of seasonal sales opportunities or ramp up excitement for consumers. These types of commercial space can come in the form of kiosks, pop-ups or temporary premises.
Landlords also see the benefits of having these retailers in their properties—they attract more consumers and provide traffic to the shopping centre or building. It is important to note, however, that existing tenants may not be happy with kiosk, pop-up and temporary tenancies located in front of their stores. Existing tenants are concerned about interference with their existing exclusive use and no build area covenants, interference with visibility of existing stores and reduction of available parking. There are many legal issues to consider from the Landlord’s, existing tenant’s and new tenant’s perspectives. This chart summarizes many of those considerations.
What constitutes a kiosk, pop-up or temporary premises?
A kiosk premises is generally a standalone booth, cart or constructed area in a shopping centre, mall, office building, plaza, hospital, airport, transit hub or other public areas. A kiosk can be either permanent, semi-permanent or a temporary structure. Kiosks are generally stationary, but some kiosks are movable carts. Typical products sold from a kiosk are things such as hats, sun glasses, scarves, watches, phone cases, pop-corn, bubble tea and a whole host of other consumer products. Kiosks can also provide services such as watch repair, shoe shining, and massage. While most kiosks are generally rented pursuant to a lease agreement they can also be licensed.
A pop-up premises is one that may be open for a day, a week or another short period of time for a specific purpose. Pop-up stores have been used in advertising campaigns to promote a new product or company that is coming to a particular City, to promote cultural or art events or to pre-concert promotional purposes. Target, Justin Bieber, the Weekend and Kanye West are just some companies and entertainers that have set up pop-up stores in Toronto over the past few years. A license is typically entered into for a Pop-up premises because it is a personal contract for a designated use for a specific time.
A temporary premises is generally a space that is required for longer than a day or a week, but often less than a year. Examples of temporary stores are stores that sell seasonal merchandise such as Halloween costumes, Christmas trees or patio furniture to name a few. Like a kiosk, a temporary premises can either be rented pursuant to a lease agreement or a license.
Why a kiosk rather than traditional leased premises?
The first major benefit of most kiosks is that while they are often small, they are often located in the best locations in a given shopping centre or building. Kiosk are typically located in the middle of the central hallway of a development, and as such, they have the greatest access to consumer traffic.
Just because a kiosk is small doesn’t mean it is cheap. Rental rates for kiosk locations are generally much higher than inline stores because of the direct access to consumer traffic.
The small size of a typical kiosk is both a benefit and a burden. Some of the benefits are the location, usable space and visibility; however, some of the burdens are the cost, lack of storage and lack of utilities such as running water and limited electrical service. There is a finite limit to how much stock can be stored in a kiosk and available to customers at any given time. Some landlords offer kiosk tenants storage space in close proximity to facilitate restocking.
A tenant may want the certainty of a specific location but just not want the size and responsibility of a traditional store.
Why a pop-up or temporary premises rather than a long term lease or license?
Generally, the focus of a pop-up store is to capitalize on a particular season, event, or merchandise opportunity that will draw a large number of shoppers within in a short window of time.
Tenants who rent pop-up or temporary premises often have a short sales window and don’t want to have to pay for space during “down times”. Rent is very expensive storage. Sophisticated tenants such as Party City and Kaboom set up temporary premises a few weeks or months before their key selling season to capitalize on sales. A key to being nimble enough to be able to open up temporary stores is to have an excellent grasp on your basic
- Halloween – costumes and paraphernalia – i.e. Party City & Spirit Costume
- Christmas – trees, ornaments and holiday decoration – i.e. Distillery District
- spring – flowers
- summer – ice cream & rental of sports equipment
- holidays – flowers, decorations, fire crackers – i.e. Kaboom
- farmer’s markets and flea markets – i.e. St. Lawrence Market or the HWY 400 flea markets
- campaign offices
- new product line – from a one day store to a store opened for many months
- concert and/or entertainment merchandise:
i.e.: clothes, food, art, antiques, jewellery, designer and decorator service providers
Short Sales Window:
- liquidating products
- seasonal plants and related material
Where to locate pop-up and temporary premises
- Malls, plazas, parking lots, store front, pedestrian malls, common areas in multi-use properties
- As noted above, kiosks, pop-ups and temporary premises can be mobile, as well as, stationary, accordingly, sales carts, buses, vans and RVs provide excellent opportunities to maximize sales of a given product at any time of the year at any place.
- Stationary transport containers
- Landlord needs to ensure that the Exclusive Uses provisions contained in leases with existing tenants are protected and not violated.
- It is important for landlord’s to be very clear and restrictive when agreeing to the permitted use provisions in a kiosk, pop-up and temporary leases/licenses.
- Tenant of kiosk, pop-up and temporary premises must know exactly what types of utilities that they require to operate their premises and not assume that all utilities will be available.
NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.