Shopping mall landlords charging 'crazy rents', says franchisor Stan Gordon

Shopping centre landlords are charging retailers “crazy” rents, franchise operator Stan Gordon has said, while urging landlords to be realistic or retailers would quit their malls in droves.

Gordon is managing director of Franchised Food Company, which has more than 200 outlets across brands like Cold Rock, Whippy, Pretzel World and Trampoline.

"The retail market is not fantastic, it's very tough. All we are asking for is fairness. We can't be in malls just to break even while making the shopping centre owners rich," Gordon was cited as saying by The Australian Financial Review.

He said the owners of Chadstone Shopping Centre in Melbourne (Vicinity Centres and the Gandel Group) asked three of its franchisees "crazy rents" when they were given the opportunity to move back in after refurbishments. 

"We told them we cannot make it work at these rents," Gordon said. 

A spokeswoman for Vicinity Centres declined to comment.

Gordon said retailers are being held for ransom by some shopping centres that had annual rent increases of 5 per cent, almost 3 percentage points more than inflation.

"Yes, these shopping centres are often undergoing multimillion-dollar upgrades – another reason for the unsustainable increases in rent – but this is only in response to the rise of online shopping," he told the AFR.

Fast-food franchise SumoSalad put two of its 20 companies into administration in June to force landlord Westfield to negotiate on rents and is close to a lower rent agreement, according to recent developments.

Gordon pointed out that staff penalty wages should drop if retailers are to remain profitable in the high-rent environment.

Claims that shopping mall landlords are oversaturating their centres with food outlets were rebutted by Peter Allen, the chief executive of Westfield landlord Scentre Group.

Allen said while retail space allocated to "food catering" was growing by 4.5 per cent, food sales were increased by 6.8 per cent.