Location, location, location are the three key ingredients to a successful franchise. In the past, when indoor malls thrived, it was relatively straightforward and obvious where to put your new business. Over the last several decades, enclosed malls dominated the retail shopping experience and retail giants like Macy’s, JC Penny’s, and Sears served as “anchor” stores. With a large brand name retailer as an anchor store, hundreds of other stores and smaller boutiques were attracted and retail space was soon at full capacity. Malls immediately became the prime retail location to put your fast food or other franchise. Even if you could not get into the mall per se, you could put nearly any kind of franchise business near or around the mall hub and take advantage of the shopping traffic flow into and out of the mall.

Times, however, have changed and there is a seismic shift underway that is moving the traditional mall shopping experience and towards online shopping. Time magazine titled a recent feature article “A Third of American Malls Will Soon Close.” The piece describes the accelerated pace of brick and mortar store closures and what impact that will have on those stores that remain. Retail analyst Jan Rogers Kniffen thinks that the retail shopping bubble that has built up since the 1970’s is about to burst. One-third of all US malls is the equivalent of 400 stores out of about 1100 total enclosed shopping malls. When just a few key stores within a mall close down, those that remain are faced with rent and other cost increases to make up for the difference which in turn causes a chain effect that will lead to more stores closing and prices are driven up. Kniffen also predicts that only 250 of the roughly 700 malls that remain will stay profitable. Another reason for the closures is that in the US mall space per capita is 2 times as great as any other country. Kniffen states that we are just “over-stored.” As demand has shifted to online shopping from home for items like clothing, home furnishings, and other retail staples, mall anchor stores such as Macy’s, JC Pennys, and Sears have been forced to cut back on their mall presence. Other retail analysts have even gone as far as to blame Facebook as replacing the mall as the hangout of choice for tomorrow’s consumer, today’s youth. Macy’s, JC Pennys, and Sears have closed 40, 40, and 200 stores respectively since 2015.

Understanding and anticipating this tsunami of change that is sweeping consumer buying dynamics can have an effect on your ability to successfully negotiate a consumer lease. You may choose to negotiate a lower monthly payment with a mall, or perhaps go for a six-month or one-year rent waiver by stating the mall’s risks given other mall closings. You may even want to steer clear of today’s high shopping traffic locations that could very well become ghost towns overnight.