Mall Managers Hold Keys to Kiosk Profitability
Shopping centers have been benefiting from a proliferation of kiosks and carts selling everything from hair styling tools to cell phone accessories to skin care products. Why have kiosks taken off in recent years? Kiosks have a low cost but a great potential to reap benefits. The cost of renting to a kiosk as compared to an in-line store is minimal. In fact, you can charge a high minimum fee. And, because a kiosk needs only a small amount of space, it can afford to pay more per square foot than other tenants. The kiosk uses not just its space, but also the browsing space around it, entitling you to ask for more than its share of common area maintenance (CAM) costs.
But before you jump to the conclusion that kiosks are right for your center, keep in mind that they’ll create more challenges for your property manager. Discuss the issue with your shopping center’s manager and make sure that a kiosk will result in high revenues and not a low point in your center’s operations.
Use License to Get Rights Over Kiosk
Whether a kiosk is worthwhile for your shopping center depends to a large degree on the rights you have over it. Problems that arise from leasing to a kiosk tenant can be time-consuming and eat up any profits you make on the kiosk, because leases give the kiosk tenant a “leasehold interest” in the space. It then has all the rights of a tenant in a typical lease, such as going to court if there’s a problem. For instance, if you sign a lease with a kiosk and subsequently need to terminate its tenancy, you’ll have to take lengthy legal steps to reclaim the area. Licenses are a much better choice because they give you flexibility.
As soon as you decide to license space to a kiosk, start working together with your property manager to keep it under control and make it profitable for your center. Make sure that you share the terms of the license agreement with the manager. That way, it’ll be easier for him to know if the kiosk is violating any of its obligations. For example, the manager will be able to stop a kiosk from selling products other than those it has agreed on with you, enforce its requirements like providing its own janitorial service, and enforce signage rules.
Provide Flexible Options for Manager
Kiosks generally are meant to be temporary, so you don’t want to give them rights that make it hard for you or your property manager to move them to a different area, or remove them altogether when you want or need to. Licenses allow you to relocate kiosks due to any circumstance. Basically, a license for a kiosk tenant is just an agreement for a defined period of time to use space that can be changed from time to time in the mall. Licenses are still a good option even for long-term kiosk tenants interested in three- to five-year terms.
Aside from the portability and flexibility that licenses allow, they’ll also free your manager from worrying about accidents, such as a shopping center fire. If the building burns down, the kiosk license is over, as opposed to leases with in-line tenants requiring their stores to be rebuilt. And, unlike in-line tenants, kiosk tenants (with the exception of national franchises) generally aren’t sophisticated in terms of contracts. As a result, they may not even question the use of a license agreement instead of a lease.
Warn Manager about Liability
Although licensing to a kiosk seems to be a great solution, you need to know your liability and protect your interests. All of the things you would worry about with an in-line tenant, you worry about with a kiosk, but in-line tenants are set back behind glass doors, whereas a kiosk is right out in the open.
A liability factor that you should discuss with your manager is that kiosks are mingling among the public. The manager should take extra precautions to make sure the kiosk tenant is subject to the same rules and regulations as the other tenants are for getting and keeping appropriate insurance. Urge your manager to stay on top of this issue.
Most Important Kiosk Aspect
You should stress to your manager that the biggest management responsibility for a kiosk is appearance. Property managers should be concerned with how kiosk tenants treat the outside of their space, because it’s in a common area where customers are constantly walking by. Policing a kiosk’s appearance includes monitoring the noise level, the way it looks, what items it sells, and how it operates. Poor management of a kiosk can undermine the manager’s efforts to make the rest of the center attractive.