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Starbucks Forced To Continue Operating Teavana (For Now)

In July, I wrote about Starbucks announcement that they were shuttering all 379 Teavana units by the end of 2018. The roots of that story were more firmly centered on Starbucks dubious success in acquiring companies with Teavana costing them $620 million in 2012.

Teavana’s tea bar. Photo Credit: McMillanDoolittle

An interesting side story to this news was Simon Property suing Starbucks to keep the 77 stores operating within Simon shopping centers until their leases expire. Simon argued that the closure of Teavana stores could trigger additional store closures in its malls at a time when shopping centers are already under pressure from falling foot traffic and widespread retail bankruptcies. Simon went further to state that the announcement caused “irreparable harm” to Simon’s reputation.

I dismissed this news as a fascinating but frivolous lawsuit. A retailer can’t be forced to keep their doors open, right?  Well, in a surprise ruling, a judge in Indiana’s Marion County Superior Court granted a preliminary injunction to halt Starbucks from closing and conducting any going-out-of-business sales in its Teavana stores in 77 retail locations owned by Simon.

While this decision will ultimately be appealed, the long-term impact if the ruling is upheld could be fascinating. With 2017 as a year of record closures already, 2018 is shaping up to be more of the same, as some potential high-profile bankruptcies could drive even further closures. Clearly, shopping centers have a right to be concerned, and the domino effect of store closures could be significant within a particular center.

However, it doesn’t take a lot of imagination to picture a retail store that is “forced” to remain open. While many centers insist on a continuously operating clause that asks that retailers maintain certain standards, enforcing it could be tricky. What kind of labor levels, inventory standards and maintenance would that store have? And, if a center was forced to sue again to ensure that a store maintains “standards”, it will keep the courts busy for many years.

While this may be a small story today, it could have enormous implications in the future.

Neil Stern for Forbes


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1 Comment
  • Jeff Skoke

    December 7, 2017 at 2:19 pm Reply

    I wonder if this could have been avoided by negotiating a more “favorable” break-lease settlement? Simon appears to be overstating the impact of losing a minor tenant, but this surely keeps plenty of attorneys busy billing exorbitant rates.

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