Some contracts are negotiated too late
Over the years, while advising on retail operations, I have often encountered the same situation: by the time the draft reaches our office, a significant part of the contract has, in practice, already been negotiated.
The location has been chosen. The investment has been approved. The rent, term and main commercial conditions have been agreed. There is a project, a works schedule and a planned opening date.
And yet, some of the issues that will have the greatest impact on the operation may remain unanswered.
In what condition will the premises actually be handed over? What must be completed before the store can open? Who controls each phase of the works? What happens to payments if the opening is delayed? Who bears an additional investment that was not anticipated? And how much flexibility will the retailer have to adapt the operation if, several years later, the concept, brand or group structure has changed?
This is where, in my view, the legal negotiation truly begins.
Not in discussing each clause in isolation, but in addressing a much more important question: does what has been commercially agreed actually work in the reality of the operation?
The same premises, different perspectives
The landlord and the retailer share a common interest: the location must work.
But they do not view it in the same way.
For the landlord, the key considerations are the value and stability of the asset, the quality of occupancy, the consistency of the commercial offering and the predictability of income.
For the retailer, what matters is the investment required to open, the total occupancy cost, the time needed to recover that investment, the store’s performance and the ability to adapt the operation as the business evolves.
This difference in perspective gives rise to some of the most interesting — and also some of the most demanding — negotiations.
The rent may be acceptable while the overall occupancy cost is not. An operating obligation may be entirely justified yet become problematic if it does not account for circumstances outside the retailer’s control. A guarantee may be necessary but disproportionate to the risk it is intended to cover. And a break option may be expressly included in the contract without, given the conditions attached to its exercise, offering a genuine alternative.
Before discussing who is liable, it is important to understand who is in control
This is one of the issues to which I pay closest attention in a negotiation.
It is relatively easy to assign an obligation to one of the parties. What is more difficult — and far more important — is to establish whether that party is able to control the risk associated with the obligation it is assuming.
If the handover of the premises, certain infrastructure or the performance of specific works depends on the landlord, the consequences of a delay should not be treated as though they fell entirely within the retailer’s sphere.
Conversely, if a change to the concept, brand or operating model results from a decision by the retailer, it is legitimate for the landlord to assess the impact of that change on the asset.
Contractual balance does not mean a mathematical division of responsibilities. Some risks should be assumed by one party, and others should remain with the other.
What matters is that responsibility should, as far as possible, follow the ability to prevent, control or minimize the risk.
When this does not happen, the problem may not become apparent at the time of signature. It emerges later, when something unfolds differently from what was expected and it becomes clear that the party that assumed responsibility did not, in fact, have the means to avoid or limit the consequences.
A store does not remain the same for ten years
This is another aspect that can sometimes be overlooked in a negotiation focused too heavily on the moment of signature.
Anyone working in retail knows that an operation is unlikely to remain unchanged throughout the entire term of a contract.
Brands evolve. Concepts are revised. Stores are refurbished. Groups reorganize. Sales channels are increasingly interconnected. And what made sense when the store opened may need to be adjusted several years later.
The contract must be prepared for that reality.
A change of brand does not necessarily mean a change of operator. A reorganization within the same group does not, in itself, present the same risk as the entry of a third party. A refurbishment may require the temporary closure of the store while also being essential to keep the operation competitive and preserve the value of the premises.
There is no single answer to these situations.
It is necessary to understand what is actually changing, the impact of that change on the other party and the interest that is intended to be protected.
This is precisely where negotiating experience makes a difference: distinguishing what genuinely changes the risk from what merely changes the way the business is organized.
Legal advice adds greater value when it comes early
When lawyers become involved early enough, they can identify issues that may become far more difficult to resolve if left until later.
Is the planned opening date compatible with the necessary works and permits? Is the commencement of payments properly aligned with the handover of the premises? Are responsibilities for the works clearly defined? Has the total occupancy cost been considered as a whole? Will the operation be able to adapt if the concept evolves? Will a future group reorganization be unnecessarily restricted?
The aim is not to turn commercial decisions into legal issues.
It is to understand the operation well enough to identify where the contract may constrain it — and to do so while there is still room to negotiate.
It is after signature that we discover whether the contract was truly fit for purpose
A contract may be very well drafted from a legal standpoint and still not be the right contract for that particular operation.
Its quality becomes apparent later: when the premises are handed over, when the store opens, when works are delayed, when an unforeseen investment arises, when the brand wishes to refurbish, when the group reorganizes, when it becomes necessary to exit or, quite simply, when the business evolves in a direction other than the one that appeared likely at the time of signature.
It is at those moments that we see whether the contract reflected the logic of the operation or merely recorded the negotiating positions that existed at the time.
After many years advising on retail operations, one conclusion continues to be confirmed: the most difficult problems rarely arise from a lack of clauses. More often, they arise from questions that were not asked early enough.
It is impossible to anticipate everything that may happen during the life of a store, but it is possible to understand the business well enough to know what cannot be left undiscussed before signing.