The tenant's right to change the trade name of its store in a shopping center during the term of a lease is often hotly contested in lease negotiations. It is such a controversial issue because what trade name is used on a retail store affects the business of both the landlord and the tenant.
The tenant's trade name is one of its most important assets. Consumer recognition of and identification with a particular trade name translates directly into dollars for the retail tenant. The tenant's trade name is also an important asset to the landlord. Because landlords merchandise their shopping centers not just with tenants, but with "trade names," landlords will want to control any changes to those trade names. Thus, shopping center leases not only require tenants to use their premises for certain stated purposes; they also require specific trade names. A change to a trade name is usually prohibited without the landlord's consent.
Playing musical monikers Of course, tenants will want flexibility to operate their businesses without a landlord's dictates. Tenants want to change the trade names under which they operate their retail stores for many reasons. The tenant may believe the existing trade name is not generating sufficient consumer interest and recognition. The direction of the tenant's business may have changed, requiring a make over of the trade name as well. The tenant may have merged with, or sold its retail stores to, another company, and the new company's trade name is to be used on all retail stores after the merger or sale. The tenant may operate different types of stores under a number of trade names; it may want to change the store to one of its other operations.
Landlords can provide some flexibility without totally giving up control. Instead of requiring a single trade name, the lease can recognize a list of likely trade names the tenant can use during the term. This is particularly important for the tenant that operates the same use under somewhat different trade names in different regions of the country, with plans to expand outside those regions.
If the business operated in the premises is part of a chain of retail stores, the lease can permit the tenant to change the store's trade name if all the stores in the same chain change to the same new trade name. A landlord will want to say "all stores" of the chain, because this assures the store in the landlord's center will continue to be part of the recognized chain of stores. The tenant, on the other hand, will want to preserve its right to sell only a part of the chain in a particular region, and change the trade name of only those stores.
The change of the trade name because of a change in the use of one store poses more difficulty. The use clause and the trade name clause are intimately linked in the shopping center lease. Landlords can control what uses the tenant operates by limiting the right to change the trade name.
A landlord may be willing to permit a broad use clause if the store is going to be operated only under a specified trade name. Permitting a tenant to both change the use and trade name leaves a landlord little control over what kind of store will be operating in the premises. A national tenant which operates a number of different chains of retail stores under different trade names could elect to change the type of store in the premises, even to an operation that has no history of success or name recognition.
Laying down rules for the name game Where a tenant with leverage insists on this kind of flexibility, certain limits can be imposed. The lease could limit the number of times during the term that the trade name can be changed, and control the intervals. For example, a trade name change could be permitted only once every three years, and not more than twice during the term.
The tenant could also be prohibited from operating more than one of its trade names in the shopping center. This is particularly important in large shopping centers with many national tenants who operate multiple stores under different trade names and uses in the center. If the shopping center has zones with specific merchandise mixes, the lease could prohibit certain trade names (and thus certain uses) to be operated in a particular zone.
Overall, a good trade name clause in a shopping center lease will be carefully crafted to protect the interests of both the landlord and the tenant in the tenant's trade name.