On May 24, 2014 the VCSFA published an article called ‘Yet Another Prestigious Blenz Closes: Pacific Centre on Granville’ about the sudden disappearance of the landmark Blenz Coffee at Pacific Centre at 609 Granville Street. At that point it was rumoured that another clothing retailer had won the prized retail location ousting Blenz in a similar leasing situation as what occurred at Robson and Burrard. Both of these locations were high volume, and high visibility locations for the Vancouver brand.
For the owners (Franchisees) of these locations, they witnessed the entire value of whatever amount of goodwill they paid for their respective locations, evaporate before their eyes, leaving them with nothing more than whatever street value their aged and depreciated equipment was worth at the moment of loss – Not a pretty picture for their ‘franchise partners’ as Blenz likes to call them.
Some assumed that the loss of these prime locations and subsequent appearance of a new retailer was a deal agreed upon between Blenz corporate, the Blenz Franchisee, and the new retailer. The assumption, namely because there weren’t any indications otherwise, was that perhaps all stakeholders in the deal agreed that these locations were not well suited for coffee. Our new reports reveal that they may have assumed incorrectly and the now-stranded Franchisees may not have been involved in the lease negotiations at all. Now wouldn’t that be a tad unfair to their ‘partner’?
Blenz Coffee, as do other Vancouver franchises, sets itself up as direct tenant in their commercial leases. In this common franchise-model arrangement, the Franchisee is then responsible, by means of a sub-lease agreement, for cutting rent cheques directly to the landlord. The Franchisee assumes this agreement is in place so that the Franchisor (in this case Blenz) can wield their powerful branded sword forcing the landlord into obedient submission resulting in the acquisition of prime retail locations (in this case Robson/Burrard and Pacific Centre) at rates that allow for a profitable business. A green Franchisee typically does not understand these complex commercial arrangements and therefore trusts their Franchisor to be looking out for their mutual best interest. In law this is called ‘to act in good faith‘ or ‘responsibility of good faith’. In the case of Blenz, failing to renew a lease, or failing to secure a lease rate that is competitive and/or reasonable in the marketplace would equate to the fast destruction of the investment.
All eyes are now on Pacific Centre. Will it become another Lulu Lemon situation like at Burrard and Robson where a retailer from a totally separate industry takes over?
If it becomes a clothing retailer, or something completely removed from the food and beverage sector, then Blenz Coffee might be able to explain to this former (and probably rather upset) Franchisee that this location is not well suited for a retail coffee business, or their coffee brand or that the person who won the space had higher profit margins than them and are therefore able to justify doing business in Pacific Centre. It would be difficult for the former franchisee to have enough know-how to fight that battle.
If something like a Tim Horton’s were to open at 609 Granville, the Franchisee would then be able to present a good argument that Blenz Coffee just ‘let’ another similar business come in and ‘take’ their space, leaving them with nothing. However, Blenz might then be able to say something like ‘Well, Tim Horton’s is different. It’s more of a food-based model with cheaper price points – much different from the ideal Blenz customer.’
But if something were to open in the same space like a Waves Coffee, Starbucks, Take Five, Caffe Artigiano, or any other similarly-branded Italian-style coffee shop (especially those our Francouver list) with the standard espresso-based offerings and a few pastries spattered on the side, then the question will quickly become: How hard did Blenz the Canadian Coffee Company negotiate with the Pacific Centre landlord to maintain their prized location and assure the longevity of the Franchisee’s investment?
How hard did Blenz the Canadian Coffee Company negotiate with the Pacific Centre landlord to maintain their prized location and assure the longevity of the Franchisees investment?
If the answer turns out to be ‘not very hard’, then the next logical question would be “why not?”.
But only time will tell as the lease-hold improvements take place behind the boarded up windows at 609 Granville Street.