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Starbucks has asked a number of landlords for its corporate-owned store locations for a year of rent relief as it contends with a downturn in sales during the coronavirus pandemic, according to a report Wednesday.
The Seattle-based coffeehouse chain’s chief operating officer, Roz Brewer, sent the request in a letter last week, Restaurant Business reported. In the letter, Brewer requested relief starting June 1 “to support modified operations and adjustments to lease terms and base rent structures, so we can withstand this uncertainty together.”
“None of us know the full extent of the challenges ahead, but it’s clear the value of commercial real estate has changed,” Brewer wrote, according to the report. “We understand what we ask of you may not be easy, and our commitment is to be fair in our discussions.”
Starbucks is seeking rent negotiations as it ramps up U.S. store reopening following weeks of limited operation. The company expects to reopen about 90 percent of corporate-owned stores by early June. The extent of operations varies according to local public health guidance, ranging from drive-thru service and delivery to contactless pickup and in-store, to-go orders.
While some of Starbucks’ U.S. stores remained operational with limited service through March and April, the company experienced a significant decline in sales as shelter-in-place orders kept potential customers indoors. U.S. same-store sales declined 3 percent in the second quarter. Revenue dropped 5 percent to $6 billion.
When asked for comment on Brewer’s letter to landlords, Starbucks referred to Chief Financial Officer Pat Grismer’s comments on store leases during its April 28 earnings call. At the time, Grismer said Starbucks was “quite proud” that it maintained timely rent payments throughout the crisis.
“We are having ongoing conversations with our landlords in various markets regarding what may be commercially reasonable lease concessions in the current environment,” Grismer said. “So we've not yet confirmed those arrangements and it's really premature to indicate what that relief may look like. But it is something that we are pursuing.”
Starbucks operates about 8,800 company-owned stores. It’s unclear whether Starbucks is pursuing rent relief at part or all of its company-owned store footprint.
Executives have expressed optimism about Starbucks’ outlook as local authorities begin to relax shelter-in-place measures. Starbucks CEO Kevin Johnson noted that about 80 percent of all orders were already placed to-go before the pandemic began.
However, Starbucks withdrew guidance for fiscal 2020, citing uncertainty related to the pandemic.