Flexible spaces

30 May, 2019

Food service businesses operate from a diverse range of properties – from pop-up kitchens to warehouses to office spaces – but whatever the area, a key concern will be balancing the need for a settled location against the desire for flexibility to adapt as the business changes over time. Simon Schipper, legal director at Cripps Pemberton Greenish, reviews some of the options.

Most commercial kitchens, warehouses and office spaces will be occupied under a traditional lease arrangement, the precise terms of which will determine the level of flexibility a tenant has.

If you, as tenant, are able to negotiate one into your lease, a tenant’s break clause gives you the option to terminate before the end of the term while allowing you to remain at the premises longer term if you so choose. This is important if you have invested in fit-out works, for example, or if you have a retail food and drink offering, where a good, stable location is key.

Although break clauses are increasingly being negotiated into leases, smaller businesses may not be in a strong enough position to negotiate one without onerous conditions. An alternative may be to consider entering into a shorter term lease.

As well as allowing an earlier exit without the conditions often imposed on the operation of break clauses, shorter leases – which are increasing in popularity – also mean a lower or potentially no stamp duty land tax (SDLT) bill. They may also reflect better on the balance sheet than a longer lease liability. However, this could be less reassuring to food businesses in need of a stable location because it will mean accepting less security of tenure (unless the lease is protected by the Landlord and Tenant Act 1954, which gives the tenant a right to remain in the property after the lease has expired, and subsequently to request a new lease).

Other ways to make your lease more flexible include relaxing the landlord’s control over the tenant’s ability to assign or underlet the property and/or to use it for other purposes. The rise in online platforms like Spacegrab and Liquidspace are making it cheaper and easier for tenants to assign or sub-let their properties.

Street food “markets” and pop-up stalls in shopping centres offer perhaps the most flexible solutions. The growth in mobile payment capabilities means businesses are no longer restricted to traditional bricks and mortar establishments. Shipping container “villages” have sprung up in cities around the UK in response not only to increasing rents, perceived “onerous” leases and planning restrictions, but also to meet consumer demand for new and different dining experiences. Innovative solutions like Deliveroo’s Editions and Rooboxes are also offering flexible “kitchens”.

Serviced office space, although more expensive, may be a potential for at least some of the space required. The rise of “incubator spaces” could enable start-ups or new ventures to explore concepts without significant commitment. The increasing use of mobile technology also means food service businesses can need much less traditional office space, and are able to change administrative locations more easily as their needs grow.

It’s important to review current and future business requirements to see if your business could benefit from the increased flexibility that is now available. For more information, contact Simon Schipper on 01892 506033, email simon.schipper@crippspg.co.uk.

This article appeared in B&I Catering in May 2019.