Issue link: https://viewer.e-digitaleditions.com/i/319176
The importance of negotiation How you handle a lease negotiation will have a negative or positive impact on your business for years to come, so it's essential to get it right early on WORDS: BRUCE ENGEMAN The Australian retail pharmacy industry is facing a challenging outlook. First, the Pharmaceutical Benefits Scheme (PBS) reforms are significantly reducing the pharmaceutical dispensing revenue. Second, the degree of competition has intensified with the extraordinary growth of the big-box discounters. In such a climate it is incumbent upon all pharmacy operators to reduce their occupancy costs wherever possible. It is surprising that in many cases pharmacy operators don't oppose proposed increases to already high occupancy costs. All pharmacy operators need to be asking themselves if they have achieved the best commercial terms possible. The lease negotiation process is an important stage that is often overshadowed by its stressful and time-consuming nature. It is made even more difficult by the imbalance of experience and knowledge that often exists between the pharmacy operator and the leaser. On one hand, landlords such as Westfield, Lend Lease, GPT, AMP and Federation dominate the shopping centre landscape and have a huge bank of marketing intelligence and information available to them. They know what the different pharmacy banners are paying in terms of their occupancy costs across the country; they also have expert retail negotiators at their disposal. On the other hand, pharmacy operators might be part of a major negotiation every five years, and they generally aren't doing enough research and homework as part of the lease negotiation process. In fact, many pharmacy operators are guilty of leaving the entire lease negotiation process to the last minute. It's no surprise, then, that they end up achieving a very mediocre result. If you fail to plan, you will plan to fail! The three most valuable pieces of advice for pharmacy operators are as follows: 1. Engage professionals with retail pharmacy industry experience to help you with the lease negotiation process, because you need to ensure you're achieving the best possible commercial terms for your business. 2. Read and understand the contents of the lease, as this incorporates your entire commercial and legal relationship with your landlord. Much of a lease document deals with complex clauses and myriad fees. Ask these questions: Are all these clauses mandatory? Does your lease document comply with the relevant retail legislation in your state or territory? Are the proposed fees excessive? 6 Industry Focus HEALTHCARE