Starbucks Asks for One Year of Rent Relief from Landlords

The coffee chain has closed hundreds of stores during the coronavirus crisis and limited others to takeout and delivery.

In late April, Starbucks signed a lease for 23,000 square feet of space on the ground floor, concourse level, and second floor of the Empire State Building. The coffee giant has been one of the New York City landmark's tenants for more than a decade, but the new square footage will give them access to the building's swanky art deco lobby, and allow them to reach even more office workers and Observation Deck visitors.

According to the Commercial Observer, the rent on the ground floor was priced at $325 per square foot, but the company might pay less in rent due to the fact that the deal also includes space on two other levels. And, if Starbucks gets its way, all of its corporate-owned locations—presumably including this yet-to-open Fifth Avenue store—get a full year's worth of rent relief.

Daily Life In New York City Amid Coronavirus Outbreak
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On May 5, one day after Starbucks started reopening some of its U.S. locations, its chief operating officer Roz Brewer sent a letter to the landlords of all 8,800 of its company-owned units, asking them to give the chain a break. Restaurant Business reports that Starbucks asked for 12 consecutive months of relief "to support modified operations and adjustments to lease terms and base rent structures, so we can withstand this uncertainty together."

Brewer's letter followed similar comments that the company's Chief Financial Officer Patrick Grismer made last month during its second-quarter earnings call. "We are having ongoing conversations with our landlords in various markets regarding what may be commercially reasonable lease concessions in the current environment,” he said. “We’ve not yet confirmed those arrangements.”

Grismer added that the chain remained "up-to-date" on all of its rent payments through April, despite the number of stores that had temporarily closed. More than half of the corporate-owned locations closed at some point in March or April, while the ones that remained open saw their same-store sales drop by 25 percent last month.

In a statement posted to its website, Starbucks CEO Kevin Johnson said that more than 85 percent of its company-operated stores have "responsibly reopened," and it expects more than 90 percent of its stores to be open by early June, with modified operations that include additional mobile ordering and grab-and-go options, continued curbside pickup at some locations, and a "shift toward more cashless experiences."

In March, the Cheesecake Factory wrote a letter informing its landlords that it would not be paying the April rent for any of its 294 restaurants. "Please understand that we do not take this action or make this decision lightly, and while we hope to resume our rent payments as soon as reasonably possible, we simply cannot predict the extent or the duration of the current crisis," founder and CEO David Overton wrote. (Less than a month later, Roark Capital invested $200 million in the chain, which will presumably help with rent—and a lot of other things—going forward.)

As for Starbucks, it did acknowledge that asking for a year's worth of rent breaks "may not be easy" for all of those landlords, but it hoped they'd be up for a fair discussion about it. According to Restaurant Business, its request wasn't exactly welcome news; one of the outlet's sources called it "ridiculous."

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