News site of the year

Business
  1. Home
  2. Business
  3. Retail
Save
Print
License article

Salad days no more: SumoSalad tells Westfield to cut rent or it'll move out

Madeleine Heffernan
2,166 reading now
Show comments

Shopping centres are promoting food venues as department stores and specialty fashion chains struggle for foot traffic and sales.

But one fast food chain, SumoSalad, says it is so angry by the stampede of food stores into shopping centres over the past few years that it has put two of its companies into administration in order to force landlord giant Scentre to cut rent.

Up Next

ASX winners and losers - a snapshot

null
Video duration
00:43

More BusinessDay Videos

null
Video duration
00:22

Scentre Group results
null
Video duration
00:43

ASX winners and losers - a snapshot
null
Video duration
01:37

Network Ten in trading halt
null
Video duration
02:09

RBA not moving, but monetary policy is
null
Video duration
01:08

Jeff Immelt to retire as General Electric ...
null
Video duration
01:08

Tech pulls Wall Street lower
null
Video duration
01:19

Uber board to discuss CEO absence
More videos

Scentre Group results

Manager of Westfield malls, Scentre Group reports a rise in after tax profit despite a decline in revenue.

Co-founder and chief executive Luke Baylis said SumoSalad had tried unsuccessfully for about six months to get a significant rent cut or to walk away from its leases without paying "millions and millions" in outstanding rent.

Voluntary administration will enable SumoSalad's franchisees to move out without paying out the remainder of the lease, if Scentre does not agree to reduce the rent. 

"We're going to say, 'This is what we need to make the site viable.' If the landlord doesn't feel it's in their best interests to enable us to trade in a viable manner, then we're going to repudiate the leases," Mr Baylis said. "Yeah, we'll move out."

"It's not our objective to walk away from sites ... but unfortunately we are forced into this position."

Advertisement

Scentre said: "Scentre Group works closely with its retail partners in an effort to resolve trading issues."

SumoSalad was founded in 2003 and has 104 mostly franchised stores that generate almost $80 million in sales, he said.

Mr Baylis said the company had previously enjoyed a great relationship with Westfield shopping centres.

"But obviously the retail environment has changed dramatically and food, pardon the pun, is the flavour of the month," he told Fairfax Media.

"Landlords are seeking desperately to find answers on a declining fashion mix and declining department stores, and food their only real answer.

"Typically there was only a food court within a shopping centre ... whereas [now] there's fresh food precincts, there's fast casual precincts, there's restaurant precincts, there's entertainment precincts, there's cafes spread throughout the mall...

This is what we need to make the site viable.

Luke Baylis

"There needs to be more consideration given to their existing retailers and the cannibalisation effect of putting up to 300 per cent more competition in the same trade environment."

Mr Baylis said while there was nothing in the contracts that enabled tenants to be compensated for greater competition, landlords give "abatements all the time."

"It's just whether they formally write it into the lease or whether they put it through as a promotional allowance or as a rental abatement," he said.

"We are definitely aware that compensation can be made available if the landlords want to support our brands and have us re-establish growth."

Australians landlords have enormous access to their tenants' data, such as sales and profitability, and Mr Baylis said there would be a "trend towards retailers de-risking and taking much shorter leases [than 5-8 years], which is currently happening in America."

But one investor said the influx of food chains at supermarkets was simply part of the risk of running a small business, and landlords are obligated to maximise foot traffic and spending.

3 comments