Include Eight Protections in Food Court Lease

If you're like many owners of shopping centers or office building complexes, you're eager to find new ways to generate income. One solution may be to add a food court—that is, a special area dedicated to small restaurant tenants selling a diverse selection of carry-out or ready-to-eat food customers can consume in a common seating area. At shopping centers, a food court not only can generate additional income for you, but can help extend the length of shopping excursions—and when customers stay longer at a center, they're very likely to buy more. It's also a desirable amenity for tenants of an office complex.

While a food court has its good points, it also carries certain risks. You can reduce these risks by including the following eight use and operation protections in your lease with a food court tenant.

Control Use and Operation of Area

Put these protections into your lease with a food court tenant to control the tenant's use and operations at its space.

Protection #1: Limit tenant's use of space. Require the food court tenant to use its space only as a “carry-out” or ready-to-eat food establishment whose food the customers can eat only off-premises or in the food court's seating area. You don't want the food court tenant operating as a full-service, sit-down restaurant. Ask your attorney to adapt this Model Language for your lease.

Model Lease Language

Tenant shall use the Premises solely for the preparation, sale, and delivery of food to the public for “carry-out” or for consumption in the common seating area adjacent to the Premises which is made available for the non-exclusive use of customers and patrons of Food Court tenants (“Food Court Seating Area”).

Protection #2: Limit which food items tenants can sell. Limit the food items that each food court tenant can sell from its space. This is important because food court customers like having a variety of foods to choose from. Without any limits, the food court tenants' offerings might overlap too much. Or a food court tenant might begin selling food items or a cuisine that violates the exclusive you gave to a full-service restaurant elsewhere in the center or office complex.

To effectively limit which food items a food court tenant can sell, review its proposed menu and then, if the menu is acceptable, attach it to the lease. Make the food court tenant agree in the lease to sell only those items listed on the attached menu.

Model Lease Language

Tenant agrees to sell only those food items specifically enumerated on the menu attached hereto as Exhibit [insert #] (the “Menu”).

Protection #3: Say tenant defaults if it drops menu item without your consent. If the food court tenant decides without your consent to stop selling any of the foods on the menu attached to its lease (and doesn't offer a substitute that you've approved), say in the lease that it will have caused an “event of default.” Then, you can resort to your lease remedies—such as termination.

Why is this drastic measure necessary? Because if a food court tenant doesn't sell all of its menu items—for instance, if the sole pizzeria stops selling pizza in favor of pasta dishes—it could end up severely hurting your food court's success.

Model Lease Language

Any failure to sell any of the items on the Menu or any substitution for or addition to such Menu without Landlord's specific written approval shall be deemed an Event of Default pursuant to Clause [insert #] of this Lease, and in addition to any other rights or remedies pursuant to this Lease, Landlord shall specifically have the right to terminate this Lease if Tenant violates this Paragraph.

Protection #4: Require tenant's employees to wear uniforms. To keep the food court looking professional, have food court tenants require their employees to wear uniforms and to be well groomed. Poorly dressed and badly groomed employees could give customers a bad impression of your food court. Get the right to approve the uniforms. (But let each food court tenant make its own arrangements with its employees about buying the uniforms.)

To police the requirement that food court employees always wear their uniforms while on duty, get the right to have the tenant require an employee who doesn't cooperate to change into uniform or leave the food court.

Model Lease Language

Tenant's employees shall at all times be required to present a clean and well-groomed appearance. Tenant's employees shall be required to wear uniforms, the color and style of which are to be subject to Landlord's prior, written approval. Tenant may make such arrangement with its own employees as it deems appropriate regarding the purchase and maintenance of standard uniforms.

Tenant shall require the standard uniform to be worn by all of its employees at all times while on duty in the Premises. Landlord may, at any time, direct Tenant to require any of its employees not so attired to immediately conform to these requirements or leave the Food Court.

Protection #5: Require regular trash removal. To keep insects and rodents from becoming a problem, require the food court tenant to regularly collect and remove its trash from its space and to use special trash containers. Keep the right to set the schedule for trash removal. And make it clear that the food court tenants will pay all trash removal costs.

Model Lease Language

Tenant shall store its garbage, trash, and other refuse in rat-proof and insect-proof containers inside the Premises, and remove the same frequently and regularly and, if directed by Landlord, by such means and methods and at such times and intervals as are designated by Landlord, all at Tenant's sole cost and expense.

Protection #6: Get right to clean and maintain seating area. Properly cleaning and maintaining the food court's seating area is vital, not only to reduce hazards and pest infestations but to make the food court a more inviting location for potential customers. To ensure proper cleaning and maintenance, give yourself the right to clean and maintain—as well as police and repair—the food court's seating area, in a manner that you find appropriate.

Model Lease Language

Landlord shall clean, police, repair, and maintain the Food Court Seating Area during business hours and otherwise, in a manner deemed by Landlord to be appropriate and in the best interests of the Premises.

Protection #7: Get right to change food court. Get the right to change the size and nature of the food court. This is important because you may be required to increase or shrink the food court, or make other changes, to comply with customer demand or federal, state, or local laws.

Model Lease Language

Landlord shall at all times have the right and privilege of determining the nature and extent of the Food Court, and making such changes, rearrangements, additions, or reductions therein and thereto from time to time which in its opinion are deemed to be desirable and in the best interests of a significant number of the persons using the Food Court, or which are made as a result of any federal, state, or local environmental or other law, rule, regulation, guideline, judgment, or order.

Protection #8: Get right to change seating area. Even though you'll have the right to change the food court, specify that you also have the right to change the size, shape, or location of the food court's seating area and the amount of equipment and property located in that area. This will help you avoid disputes with food court tenants if you decide to relocate, enlarge, or reduce the seating area.

Model Lease Language

Landlord shall have the right to make changes from time to time in the size, shape, and/or location of the Food Court Seating Area and in the number, type, and style of any or all aspects of the facilities, equipment, and other property therein.

Insider Source

Carole L. Pechi, Esq.: Laude Pechi Law, LLC, Glen Ellyn, IL; claudepechi@laudepechilaw.com.