Rockland County, New York is an area served by our firm. Surprisingly, this area has become a hotbed of competition for the hot dog consuming customer. Perhaps the contestants in the annual 4th of July hot dog eating contest sponsored by Nathan’s could even practice for the big event in Rockland.
All kidding aside, there is a classic commercial leasing issue that has arisen in this area. A fast food restaurant known as Dawg House developed and was enjoying financial success selling its popular hot dogs. Recent news outlets have reported that the large national chain Shake Shack is planning to lease space in the same center where Dawg House is located. Dawg House engaged skilled counsel when it negotiated its lease. This issue was foreseen and an exclusivity clause was included in the final lease.
In this case, the exclusivity clause provided that the landlord was forbidden from leasing another space in the same center to a tenant whose primary business is the sale of hot dogs and wieners. Certainly, Shake Shack sells hot dogs. However, it also sells burgers, chicken sandwiches, french fries, frozen desserts and particular alcoholic beverages, which menu items Dawg House also sells. These overlapping menu items are not necessarily forbidden by the exclusivity clause, but common sense dictates that the businesses of Dawg House and Shake Shack overlap. It may be a matter of litigation as to whether the overlapping menu items as opposed to the primary business in selling hot dogs and wieners triggers the exclusivity clause and its ramifications.
Most likely, the landlord sees an opportunity in renting to Shake Shack, such as an even more financially secure tenant who may be able to pay a higher rent than Dawg House. The tenant will most likely hire an experienced attorney who could possibly negotiate a lease termination agreement with the landlord. Then, the tenant will most likely find another location as well as an attorney who will negotiate a lease for the new location, which should include an exclusivity clause with penalties for the landlord’s violation thereof (such as relocation expenses if necessary), among other provisions.
We look forward to inquiries concerning lease provisions and their interpretation and enforcement.