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Popping up on a high-street near you: key considerations when opening a pop-up shop

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20/10/2016

In recent years, the run up to the Christmas shopping season has become a prime period for pop-up shops to appear on high streets, each taking advantage of the surge in demand for gifts, decorations, and festive attire. Pop-up shops are ideal for online businesses that want to test the waters for a physical retail presence, or for more established businesses which are looking to take advantage of a new location or seasonal trend or capitalise on a major event.

In addition to pop-up shops, there has also been a significant increase in the number of pop-up restaurants, bars, salons and galleries lining our streets. They have the flexibility to take advantage of newly vacated spaces in areas with significant footfall, and can generate a strong buzz due to their short term presence. However, business owners looking to open up a pop-up need to consider a multitude of factors and planning stages to ensure that the whole process operates smoothly.

Commercial and legal requirements

Whilst pop-up ventures are, by their very nature, only intended to exist temporarily, this does not negate the need for careful and timely preparation not least because there will only be a very slim window of opportunity in which to trade. As such, all parties involved must be prepared to proceed on the basis that there cannot be any delays to the timetable. Deadlines cannot be ignored. Similarly, due to the period of trade being limited, set-up costs must be kept to an absolute minimum in order to maximise profit and ensure the venture is lucrative.

Various practical and commercial issues must be considered early on in the process. The key question is whether there is a sufficient market for the business in the area, which extends to a consideration of footfall and competition from other retailers and pop-ups. Commercial agreements formed with suppliers and partners should be tailored to take into account the short-term, one-off nature of the venture, but which allow for flexibility should the pop-up continue to trade.

Licensing issues must be considered at the outset, particularly for restaurants or bars looking to sell hot food or alcohol. Compliance with building regulations will be necessary for any works undertaken, such as for internal fit-out. In addition, planning consent for change of use may be necessary, particularly if there is any extensive physical development involved, however where there has been previous retail, restaurant or cafe use with only temporary interruption, it is likely planning permission would not be required for this use to continue. Correspondingly, as of 2013 the often costly process for obtaining planning permission for a change of use has been relaxed to allow small (i.e. less than 150 sq m) pop-ups to trade for a period of up to 2 years for certain uses including, retail, restaurants and leisure. This is provided there is just a single use at any one time and the local planning authority is notified.

Flexibility in terms of occupation is crucial for pop-ups. Low rents are appealing and tenants will expect their lease or licence to contain few or no onerous obligations.  The benefit to landlords of agreeing to such flexible terms is that empty premises are filled, albeit temporarily, and business rates liabilities are thereby reduced.  Occupation will generally be via a short form lease or licence with the latter form of documentation often being preferable for both parties to reflect the transient nature of the arrangement.  In addition to standard terms such as payment of rent and rates, length of term, permitted use, repair and termination any fit-out changes which are to be made to the premises need to be documented and obligations relating to reinstatement agreed.

WM Comment

The real estate industry seems to be welcoming these rapid, temporary arrangements with open arms. With the exemption of certain pop-ups from planning requirements, and with approximately 10% of town centre spaces being vacant and available, pop-up stores have numerous benefits for landlords, tenants and consumers. If you’re thinking about opening up a pop-up business, please get in touch in with us for a full and frank discussion about how we can help you to move things forward.

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