1. DRIVE FOR DATA—NOT JUST YOUR GUT: Not every retailer collects every piece of customer data: addresses, shopping frequency, in-store and on-line purchase amounts, but that’s ok. Augment the data you do have with in-store customer satisfaction surveys, and consider tapping into customer loyalty programs and purchasing psychographic and GIS data. By harnessing this data correctly, it can be analyzed against store performance to help you understand your portfolio, reduce risk and guide your optimization strategy.
2. CREATE A WIN-WIN ON RENEWALS: Developing a “scorched earth” strategy that threatens landlords with closures or relocations in order to obtain a rent reduction is a strategy that ultimately will come back later to haunt a retailer. The best strategy is a “win-win” for both the Landlord and the tenant. Offer landlords longer terms, store renovations, a “cost-free” transaction (no commissions, no improvement allowances) in exchange for a rent reduction. A cost-free renewal even with a rent reduction can sometimes yield a better return for a landlord than the original lease
3. BLEND AND EXTEND: Before launching a disposition program, evaluate your remaining leasehold obligations and determine the buyout threshold for each location. Today, landlords are less willing to agree to lease terminations without receiving 50 percent or even up to 100 percent of remaining lease obligations. Consider the cost to surrender the premises. Lease requirements to ‘white box’ the space, or hold FF&E’s in storage, may outweigh the reduction in occupancy costs.
4. TREAD CAREFULLY WHEN CONSOLIDATING: Following an acquisition or merger, retailers operating multiple trade names may wish to consolidate underperforming stores into high performing locations to reduce occupancy costs and build singular brand recognition. However, retailers need to evaluate any conflicting lease clauses that may impact the ability to consolidate brands. All Exclusive Rights and Radius Restrictions should be thoroughly examined to ensure that real estate strategy does not conflict with existing lease agreements.
5. DON’T CLASH, COLLABORATE: Too often, the real estate department’s optimization goals clash with those of store operations. If real estate is proposing an operating expense reduction by closing, relocating or even transferring stores (and their costs) to franchise partners, those plans must be supported by store operations. A long-term renewal, in exchange for a reduced rental rate, sounds like a good idea, but only if operations agrees. Collaborate early with store operations (and finance) to mutually develop and propose optimization plans.