Shopping malls thrive only when they are buzzing like a hive. Mall operators rely on the fact that customers attracted to diverse offerings linger, looking for the joy of discovery.
Shuttering 379 Teavana locations, many in malls already experiencing reduced foot traffic, could trigger other retailers to exercise their co-tenancy rights, claiming that mall traffic declined, according to Simon Property Group, America’s largest mall operator.
Simon is suing Starbucks to prevent the closure of 77 Teavana outlets at its properties. “Starbucks is a thriving company … that simply believes it can make more money if it violates the leases than if it honored the contractual promises and obligations,” Simon alleged in a suit filed Aug. 21 in Indianapolis, Ind. The complaint asserts that “shuttering stores prematurely results in a ripple of negative, adverse economic effects in each shopping center’s community.”
Starbucks already has closed its 54 Teavana locations in Canada and intends to abandon all its storefronts during spring 2018.
The mall operator is not accusing Starbucks of failing to pay what it owes for the remainder of its leases. Instead it is claiming that Starbucks "put its stock price above its contractual obligations, the viability of Simon and its Shopping Centers, other retailers and consumers who count on the Teavana stores," USA Today reports.
Starbucks said that it is “responding to the lawsuit and are working to resolve this dispute.” Court papers show Starbucks has agreed to not close any Teavana stores at Simon malls in the next 45 days as both sides hash through the litigation which calls for the court to issue temporary and permanent injunctions to prevent Starbucks from closing stores before its leases are up. No court date has been set.
The New York Post reports the outcome will be closely watched.
“There are others that are looking at this case to determine what they’ll do,” said bankruptcy attorney Richard Weltman of Weltman & Moskowitz. “If there’s a favorable outcome for Simon, you’d better believe that other mall operators will follow them.”
The Seattle Times reported that Teavana operated about 300 mall-based tea shops and intended to expand beyond malls when Starbucks purchased the company in 2012 for $620 million. Teavana shops can be found at six Northwest Pacific Coast mall locations operated by Simon.
Teavana beverages will continue to be sold at Starbucks stores, and the brand’s bottled teas will continue to be sold in grocery stores. The Teavana.com online shop closed December 1 following the sale of tea and tea ware at 50 percent off the list price. Starbucks continues to sell Teavana tea online through its mobile ordering platform.
Source: Seattle Times, New York Post, Starbucks, USA Today