A dispute over a “keep open” clause in a licensing agreement between Tesco Ireland Ltd and Choice Stores, an independent homewares retailer, is set for an expedited hearing in the High Court, according to court filings. The case centers on a Tesco superstore in Poleberry, Waterford city, where Choice Stores operates an in-store outlet.
Tesco initiated legal action seeking an injunction to prevent Choice Stores from closing its 13,239 square foot location within the Poleberry superstore. Choice Stores, trading as Multi Home Retail, began removing stock on the weekend of , following notification to Tesco of its intention to cease operations at the site. Tesco alleges this constitutes a breach of a ten-year licensing agreement originally signed in .
The core of the dispute revolves around a “keep open” clause within the licensing agreement. Such clauses are increasingly common in retail leases and licensing arrangements, designed to maintain foot traffic and a diverse tenant mix within larger retail spaces. They typically obligate the tenant to continue operating for a specified period, even if the business is underperforming. Tesco argues that Choice Stores’ decision to close violates this obligation, potentially damaging the overall commercial viability of the Poleberry superstore.
Choice Stores, however, disputes Tesco’s interpretation of the agreement. The company claims the licensing agreement contains provisions allowing for termination under certain circumstances, a claim Tesco refutes. The financial implications of this disagreement are significant. Choice Stores currently pays an annual license fee of €214,000 for the space, representing a substantial revenue stream for Tesco. Beyond the direct financial impact, Tesco contends that a vacant unit in a prominent location within the superstore would negatively impact its reputation and attract fewer customers.
During a court hearing on , Andrew Fitzpatrick, representing Tesco, and Joe Jeffers, representing Choice Stores, informed Judge Brian Cregan that temporary undertakings requiring Choice Stores to remain open had been adhered to. Both parties expressed a desire for an early hearing date to resolve the matter. Judge Cregan indicated he anticipates setting a date for the hearing next month.
The licensing agreement also includes a “break option” allowing Choice Stores to terminate the agreement in the fifth year of the ten-year term. While this provides a potential exit strategy for Choice Stores, the timing of their attempted closure – well before the fifth-year break option – is central to Tesco’s claim of breach of contract. Tesco reportedly approached Choice Stores with proposals aimed at preventing the closure, but these efforts were unsuccessful.
The case highlights the increasing tension between large supermarket chains and independent retailers operating within their stores. While these in-store partnerships can offer benefits to both parties – providing independent retailers with access to a wider customer base and enhancing the overall shopping experience for consumers – they also create potential for disputes over contractual obligations and business strategy. The “keep open” clause is designed to protect Tesco’s investment in maintaining a diverse retail offering, but Choice Stores appears to be prioritizing its own financial considerations.
The outcome of this case could set a precedent for similar disputes between retailers and independent concession operators in Ireland. A ruling in favor of Tesco would likely strengthen the enforceability of “keep open” clauses, providing greater security for supermarket chains seeking to maintain a consistent tenant mix. Conversely, a ruling in favor of Choice Stores could embolden independent retailers to challenge such clauses, particularly if they can demonstrate legitimate business reasons for terminating their agreements.
The dispute also raises questions about the broader health of the homewares retail sector. While no specific financial difficulties for Choice Stores have been publicly disclosed, the decision to wind down operations at the Poleberry location suggests potential challenges. The retail landscape remains competitive, and independent retailers often face pressure from larger chains and online competitors.
Further details of the case, including the specific arguments presented by both sides regarding the interpretation of the licensing agreement, are expected to emerge during the full hearing next month. The High Court’s decision will be closely watched by the retail industry in Ireland, as it could have significant implications for future licensing agreements and the relationship between supermarket chains and independent retailers.
