Noncompete clauses are par for the course
Queens street food favorite Arepa Lady won’t be able to sell coffee when it moves into its new building in Jackson Heights — turns out a non-compete clause from coffee giant Starbucks bans any neighboring restaurants from selling java.
DNAinfo reports that the famed arepa restaurant from Maria “Arepa Lady” Cano wants to get a liquor license partly because they can’t sell any coffee or tea due to the Seattle-based corporation’s lease with the property.
Sounds nuts — a mom-and-pop restaurant, with a menu dictated by a corporation! — but putting clauses in leases to prevent the landlord from renting to a competing business happens frequently.
Cano’s son Alejandro Cano, who is trying to open the restaurant at 78-31 37th Avenue with his wife Nelly Klinger, says he didn’t see it as a hindrance to opening in the location. The former street cart was forced out of its original brick-and-mortar after the building got slated to be razed, and it was more important to find another solid space in the neighborhood than to sell coffee, Cano tells Eater.
“If the landlord has more than one commercial space available, he wouldn’t sell to someone else who sells arepas,” he says. “That’s normal.”
The menu at the new outpost will otherwise be the same, including the legendary arepas. Eater has reached out to Starbucks for comment.
Though it’s common for businesses to write in noncompete clauses in their leases, it’s not necessarily a detail that’s known to the wider dining public. It’s a way for businesses to make sure the landlord doesn’t rent to two tenants that offer the same service, but most landlords want to have a variety of options in their developments, anyway.
As an attorney explains on Law360, a landlord would agree to giving a coffee shop a noncompete clause exactly for that reason:
[From] a practical standpoint, another coffee shop might be reluctant to come to a location where it would face direct competition, and it might be more profitable for the landlord to provide shoppers with a more diverse tenant mix.
A big business like Starbucks — which is a safe bet for a landlord — has more bargaining power when negotiating a lease for clauses like this.
Occasionally though, things get more testy. In 2014, McDonald’s was sued for blocking Starbucks from opening in a shopping center in Massachusetts. The fast food burger chain had a noncompete clause in its lease that the company claimed prevented a Starbucks from joining, and the landlord wanted to add an outpost of the coffee chain.
For Cano’s purposes, everything is chill. The new Arepa Lady doesn’t open until 11 a.m. anyway. “The landlord was up front with it,” he says. “We’re looking for something in the area. That space is a really great space. That was our decision.”
Source: NYC eater
Starbucks’ Ban of Arepa Lady Coffee Sales Is Totally Normal