After paying landlords in full through the coronavirus crisis, coffee chain asks for concessions starting June
Starbucks has made payments in full to landlords during the COVID-19 crisis. But as stores begin to reopen with modified operations to maintain physical distancing, the Seattle-based coffee house giant has asked property owners for rent relief through summer 2021.
In a letter dated May 5, Roz Brewer, chief operating officer and group president, asked landlords for rent relief for at least 12 consecutive months starting June 1.
“Starbucks will require concessions to support modified operations and adjustments to lease terms and base rent structures, so we can withstand this uncertainty together,” Brewer wrote.
The letter was sent to landlords the same week Starbucks announced plans to reopen 85% of its nearly 8,600 company stores with modified operations and hours. Systemwide, the company plans to have more than 90% of its 14,600 stores reopened by June.
In its latest earnings, Starbucks Chief Financial Officer Patrick Grismer indicated the chain was looking for relief after “remaining current” on all rent payments since the crisis began.
“We are having ongoing conversations with our landlords in various markets regarding what may be commercially reasonable lease concessions in the current environment,” Grismer said. “We've note yet confirmed those arrangements and it's really premature to indicate what that relief may look like. But it is something that we are pursuing.”
In Brewer's letter, she said stores must adjust to “the virus’s impact on behavioral changes, occupancy and sales channels.”
Since jurisdictions began mandating the closure of dine-in operations to stop the spread of coronavirus, paying leases, among other things, has been a top concern for operators. Cheesecake Factory warned in late March that they were not planning to pay rent in April because of closures related to COVID-19.
“None of us know the full extent of the challenges ahead, but it is clear the value of commercial real estate has changed,” Brewer, left, wrote. “We understand what we ask of you may not be easy, and our commitment is to be fair, in our discussions.”
The note concluded: “We look toward the future with realistic optimism, and expect as you have in the past, your support in the enduring success of the Starbucks brand. We will be in touch soon.”
Starbucks previously said “the new normal” for the brand includes expanding options for curbside pickup, adding entryway handoff of drinks for mobile orders and designing stores to ensure physical distancing.
“The other side of COVID-19 is a very different world,” Brewer said in the letter.
When dining rooms closed, Starbucks initially remained open for carryout. But the brand was not able to control social distancing, so it removed carryout as an ordering channel early on during the crisis.
The company estimated sales losses at $915 million due to temporary store closures, restricted sales channels, reduced operating hours and severely reduced customer traffic.
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