Starbucks Pushes for Lower Lease Rates

Starbucks Pushes for Lower Lease Rates
June 01, 2009

Taking advantage of a declining real estate market, Seattle-based Starbucks Corp. is pushing some of its U.S. landlords for as much as a 25 percent decrease in lease rates, according to Bloomberg.com. New York-based Prudential Douglas Elliman's retail leasing, marketing and sales division is advising about a dozen landlords to work with Starbucks after receiving letters seeking rent reductions of 20 percent to 25 percent. Starbucks began rent-reduction efforts in January as part of a plan to trim overall expenses, Starbucks spokeswoman Tara Darrow told Bloomberg. Around the same time, the company also said it would close about 300 stores this year and cut as many as 6,700 jobs. “We’re taking advantage of the opportunity in as many cases as we can,” Darrow said. “We feel like it’s a positive program for us. Most of the landlords we’ve worked with have felt it is a mutually beneficial situation.” The rent-reduction program covers the U.S. stores operated by Starbucks, a number that totaled 7,035 as of March 29. The effort doesn’t include the more than 4,400 U.S. stores in airports, supermarkets and other licensed locations, Darrow said. Starbucks had cut $195 million in labor, food and other costs through the first half of fiscal 2009, and in April, the company said it was on pace to lower total costs by $500 million in the fiscal year that ends in September.