In a retail setting, especially in situations where the landlord is receiving a percentage of the gross sales earned by the tenant, landlords will attempt to establish minimum (and maximum) hours of operation for the tenant. Also, the landlords quite often reserve the right to modify these hours of operation upon providing notice to the tenant. This requirement that the tenant be obligated to be open for business for certain specified hours may have far-reaching effects on the net income of the tenant derived from its business operation. Further, the tenant may desire to have the right to 'go dark' or not operate during certain times or days during the year. As a result, a tenant should consider carefully what impact the hours of operation provision in the lease has, the various remedies that are available to the landlord for the tenant's failure to operate during those required hours of operation, and the need for the tenant to establish in the lease certain times and certain days during the year when it is not obligated to be open for business.
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Retail Hours of Operation: A Tenant's Perspective
Hours of Operation Requirement
As landlords attempt to maximize the amount of percentage rent generated at retail locations, they have increasingly sought to maximize the total number of hours that the tenant is obligated to operate at the retail facility. In particular, during the 'holiday season' (which seems to be getting longer and longer each year), landlords are attempting to require tenants to open for business very early in the morning (sometimes as early as 5:00 a.m.) and to remain open for business far later than the standard hours of operation during the rest of the year. While the tenant may want to maximize its gross sales, it usually does a cost-benefit analysis to determine whether it wants to be obligated to be open for business during those extended days and hours. For instance, a jewelry store will most often not derive its business until late morning or afternoon on each day. As a result, being obligated to be open for business at 5:00 a.m. does little to achieve or to maximize gross sales for the jewelry tenant. Further, the employees of a jewelry tenant are often well compensated and as a result, there is a tremendous amount of lost expenses by way of wages to the employees, if the tenant is obligated to open for business at 5:00 a.m. Further, there are a maximum number of hours that each employee can be required to work each week and if you lengthen the work day, it often requires the jewelry tenant to hire more employees in order to satisfy the hours of operation being required by the landlord. In addition, there is a security concern for some tenants ' for example, a jewelry tenant ' that are forced to operate late into the evening (especially if other tenants in close proximity to the jewelry tenant are not open for business). Similarly, retail operations that cater to children (e.g., amusement centers, comic book stores, hand-held motorized vehicle racing facilities, etc.) often have virtually no customers until after school hours. As a result, lengthening the workday in the early hours of the morning does little to achieve additional gross sales for those tenants.
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