Top retail and restaurant brands in Delhi's high street locations switch to revenue share model



According to industry executives, average rentals in Khan Market till last year were Rs 7-10 lakh a month, or Rs 1,400-2,700 per sq ft, but things have changed drastically in the wake of the coronavirus pandemic.

NEW DELHI: Many marquee retail and restaurant brands in high street locations like Delhi’s Khan Market have stopped paying rentals and switched entirely to revenue-share models amid continuing uncertainty over a revival in business, industry executives told ET.

Town Hall, a marquee restaurant brand in Khan Market which is among the world’s most expensive high-street retail locations, will run entirely on a revenue-share basis instead of paying rentals “till things are back to normal”, its owner, Navneet Kalra, said.

According to industry executives, average rentals in Khan Market till last year were Rs 7-10 lakh a month, or Rs 1,400-2,700 per sq ft, but things have changed drastically in the wake of the coronavirus pandemic.

AD Singh, the managing director of Olive Group that runs Olive Bar and Kitchen, SodaBottleOpenerWala and The Grammar Room in Delhi-NCR, Mumbai, Goa and Bengaluru, said: “Our rentals have been waived in at least five locations including Khan Market since we have long-term associations with landowners. We are also seeking complete removal of minimum guarantee post reopening since footfalls will be significantly impacted for a while.”

Singh said the group was renegotiating deals with all other landlords. “If you’re running half the restaurant, how can you pay the full rental? Social-distancing norms, shutting down at 9 pm and restrictions on alcohol have made our business entirely unsustainable,” he said.

Premium locations such as Delhi’s Connaught Place and Mumbai’s Linking Road are seeing rentals crash as much as 80%. Three top industry executives said various retailers were working on the following arrangement with landlords — entire waiver of rentals for the April-June quarter when the lockdown was most stringent, an 80% discount on rentals in the July-September quarter and 60% and 30% discounts in the third and fourth fiscal quarters, respectively.

DLF Malls has offered tenants no minimum guarantee and no rentals from the time the lockdown started till June 15, a 75% waiver in the remaining weeks of June, and subsequently 50%, 25% and 10% waivers till the fourth quarter sequentially.

Popular chain The Big Chill owner Aseem Grover told ET: “Our rentals for the period of lockdown have been waived in some high-street locations and discounted rates of rent for the rest of the year are being worked out. As far as the malls are concerned, we have told them that while their proposals for the July-September quarter is workable, further increment in rent cannot be based merely on a pre-defined time period since no one can predict when footfalls will normalise … we are discussing this further.”

Premium retail brands Levi’s, Nike and Sketchers are exiting stores in plum areas like Delhi’s Connaught Place and Mumbai’s Linking Road, industry sources said. “Levi’s is moving to a lesser expensive outlet within CP,” said one of them. “Bigger stores are now available at lower rentals there.”

Bollywood actor Salman Khan’s family is learnt to be renegotiating the rental for a 25,000 sq ft property it has leased out to the Future Group on Mumbai’s Linking Road, an industry executive directly aware of the development said. The Future Group declined to comment, while Khan's property agent, JLL, said: "Discussions are still on with the existing tenant."

Khan Market Welfare Association President Anshu Tandon said while some retailers had agreed to revenue sharing, others were negotiating. “There are no standard operating procedures or manuals; where both parties are reasonable it is possible to strike a balance, so different models have been worked out between different tenants and landlords.”

Tandon, who is also the landlord of the popular Big Chill restaurant, said the latter has been given a reduction in rent for the full year.

“We are telling landlords and tenants this is not the time to go for watertight contracts as litigation is not in the interest of either party. It’s best not to form cartels and instead engage in dialogue. The government also needs to reach out and give financial support to the sector,” Tandon said.

The chief executive of a prominent brand who retails at Khan Market and switched to no-rent during lockdown and revenue share for future said everybody kept talking about going back to normal but it was unlikely rents would move back to 2019 levels.

“It’s a real crisis. The shift is happening in a more permanent way; some of this will revert to original levels but there will be lot of new things emerging. If we continue to not open and delay, more businesses will go to ecommerce channels and there is already a massive shift towards that.”

Minimum guarantees too won’t work till uncertainty stays, industry executives said. “If the (Covid-19) positive cases increase and there is another lockdown or alcohol isn’t allowed and restaurant timings doesn't get extended, we don't have an option but to renegotiate again with the landlords,” a person who runs four high-end fine-dine brands said.

Brands such as Smoke House Deli, Cafe Turtle, Full Circle, Sidewok, Harry’s Bar, Coffee Bean & Tea Leaf and Smokey’s are exiting Khan Market.

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