Most people are familiar with the popup concept and it’s become a great way to increase the profile of your business, test out the waters in a potential location and, crucially, make those all important sales.
Sometimes a popup is a one day special, others may be for a set period of time and there is often a move to an open ended contract where the you can work towards a monthly or quarterly roll and agree to monitor the outlet’s performance mutually, with the option to move on when the tenant feels it’s the right time or a permanent store wishes to take over the premises.
Whether you’re thinking about testing out a popup for your product or service or simply enjoy visiting these independent outlets, you may be under the impression that it’s a low-risk venture and, to a degree, it certainly carries a lower risk than taking out a long-term lease (as many an established company or chain of stores can do). The realities can be in stark contrast to what you may be thinking and BrandM.A.D.E. has uncovered some of the realities that no-one ever tells you, from both sides of the popup experience.
Running a popup
Contracts are essential
People in the management team may be a dream to work with and completely on your wavelength but that’s never an excuse to proceed without a clear and legally binding contract that protects both parties. Lawyers acting on behalf of the property owners will act in the best interests of them and not you (surprise!) and it’s not uncommon for you to discover something was hidden in the various points that hold you responsible for upkeep of equipment or monies due for an ongoing contract relating to the space which you may not have been aware of.
Examples include anything from window cleaning to fire safety equipment maintenance and even if it’s a short contract, you could be the liable party and no-one wants a nasty surprise in the form of an unexpected bill.
Insure it, even for just one day
Don’t ever consider doing a popup without insurance, even for just a day and if the proprietor says that they are fully insured don’t take it for granted that this includes you. Again, they are protecting themselves but not necessarily their tenant. Even the most pedantic of insurance cover questions must be answered or it could turn out to be a costly mistake. Do your homework and take quotes from a wide variety of sources (examples for one of our popups ranged from a yearly insurance quote of hundred of pounds per year to over £20k for the same provisions!).
Utilities and running costs can add up quickly
Short term contracts might have utilities and basic running costs included, but don’t take this for granted and be sure that you’re not paying over the odds or leaving yourself liable to an unexpected invoice at a later date. Even if the proprietor say’s they take care of something, if it’s not in writing you could leave yourself exposed to risk at a much later date. Utilities you need to consider are electricity, telephone and internet connection costs, water rates (even if you don’t have running water or a toilet, you’ll still be expected to pay drainage costs), security contributions, service charges (in certain centres and buildings) and possibly more.
Don’t forget VAT will be added on to all of these and it’s not unusual, even as a temporary popup, to be expected to contribute to the building insurance and any maintenance works that all tenants have to agree to (anything from car park upgrades to lift maintenance; it can be costly and you may be bound to your contribution regardless of your permanency).
Government regulations and yes, it’s Business Rates!
There are multiple government regulations that you have to adhere to and as every shop is different, it’s your responsibility to do your homework and make sure that you’re following local legislation. You can’t claim you didn’t know as the standard response will always be that ignorance is not an excuse and as much as this can be a frustrating catch-22 (how can you adhere to a rule you didn’t know existed and therefore didn’t know to research?), we’ve heard it all, so do yourself a favour and research both online and in person to ensure that you don’t fall foul of an unintentional error.
Phone calls to local authorities can be essential in the set up of any popup and remember to log everything with dates, names of contacts and a basic description of what took place. This can be gold dust evidence if there is ever a confusion about dates, invoice amounts and discrepancies in charges.
Are you under the impression that business rates don’t affect popups? Think again. Business rates are a form of tax designed to bring money in to the treasury from performing businesses but the new reforms will likely spell the closure of many a small business, lead to a decrease in National Insurance contributions while simultaneously seeing an increase in benefits claimed by those freshly unemployed. Those who can maintain a premises will likely have to use cash reserves and those spending will no doubt see price increases, may have to re-think their own spending choices and, as a result, could choose to shop elsewhere or cap their total spending. This cascade effect could result in a tough time all round for businesses and consumers alike.
Even if you are exempt from business rates, do yourself a favour and prepare a strategy which takes into account these current issues.
On 18th February 2017 BBC Breakfast discussed the UK wide business rates review and statistics quoted by their guest from the Federation of Small Business included over 1 million calculated rates challenges and counting, which the government had hoped to work through but can now expect to see spike once more now that the re-assessments have been released (check out the Federation’s website for more information).
So why should you be concerned if you’re a popup premises and not a permanent tenant?
- Popups in prime locations could get very expensive, even out of reach for you if you’re currently managing but about to see a significant increase in your monthly outgoings.
- If you want to lease a premises for a popup within your budget, you might have to accept that it can’t be where your key shopping clientele go anymore.
- Your rates may decrease - congratulations if they do! Everyone is hopeful that small independents will see these challenges through and if you are rates exempt then thankfully you are not affected. It’s not all bad news but the reality of the situation is that there is a very rocky time ahead for small commercial ventures.
Next time you’re in your local town centre or high street scouting for a potential popup space, count the number of empty retail units and check to see who was previously the occupier. If it was a small business that’s always a sad sight to see, but if it was formally a major retailer then start to worry as it means that they left for very good reasons and you could be in for a very bumpy ride.
Unfortunately we can expect to see an increase in units which have sadly fallen into disrepair and stay permanently closed. If you believe that you can turn a location around with your popup and have the research and statistics to back-up your plans then push for those meetings and aim for a deal which benefits all involved parties. Be prepared that some won’t budge while others are open to calculated risks. If you don’t take risks you won’t grow your business and if you do your due diligence and listen to your gut, you could achieve those dreams and the success you deserve.
Next time… Participating in a popup, how to achieve a solid presence and secrets used by independents to stand out from the competition.