Thanks to a programme of government support, ‘pop-up’ shops are being lauded as the saviour of the traditional British high street.
But what does it take to be successful as a pop-up shop entrepreneur and what are the legal implications? Harrison Drury’s Roger Spence explains.
Dwindling footfall on the high street is an issue that’s dominated news headlines for years, and one that prompted the so-called ‘Portas Pilots’ of 2012 when 12 UK high streets were earmarked for significant investment and reinvigoration.
The idea behind the scheme was to make use of the amount of empty shops cluttering the high street and trying to make it more user friendly environment. Nelson in Lancashire, which is local to Harrison Drury, was one of the towns selected to be in the pilot and some shops have been brought back into use.
Despite not being nominated as one of the 12 high streets, Preston city centre, where our head office is located, has undergone significant investment in the last two to three years and has seen major improvement to its street furniture and a filling of empty shop spaces.
What’s driving the pop-up shop phenomenon?
Pop-up shops is a term given to the practice of setting up a temporary retail outlet. They are often used by businesses and entrepreneurs to sell seasonal items, get rid of excess stock, or to test the market before opening a more permanent operation.
While pop-up shops are by no means a new concept, an important factor in their recent success has been a Government-backed scheme for ‘pop-up’ retailers.
It’s estimated that the pop-up retail sector is now worth up to £2.3 billion annually with shoppers spending on average £124 a year at pop-up retailers.
Research conducted by the phone company, EE, earlier in 2015 suggested that 11.6 million people plan to start their own business in the next two years, with 29 per cent of those planning on starting as a pop-up, equating to just over 3.3 million people.
What are the legal considerations when establishing a ‘pop-up’ shop?
In the run up to the notoriously busy Christmas shopping season, here’s a more in depth at the nature of the pop-up business and those legal factors that need to be taken into consideration when considering ‘popping-up’.
As any business owner will tell you, it’s all about ‘Location, Location, Location’. Fortunately for pop-up businesses getting a premises may never have been easier, thanks to government and local councils offering business rates relief for small businesses.
As a starting point, if the business only uses one property and has a rateable value of less than £12,000 then you will be able to qualify for relief. This operates on a sliding scale up to £12,000, so if your rateable value is £6,000 or less then you will qualify for 100 per cent relief and between £6,001 and £12,000 this will gradually decrease from 100 per cent to 0 per cent. This is a short term deal only, and at present is due to end on 31 March 2016.
Planning consent laws have also been relaxed in an effort to encourage more businesses to take advantage of the empty high street shops. Previously, obtaining planning consent for a change of use has been fairly time consuming and costly. From May 2013 it has been possible for pop-up retailers to use a property, for up to two years for retail, financial services, restaurants or cafés if the class of property was in use for retail, financial services, restaurants, pubs, takeaways, offices, leisure and assembly previously.
If the pop-up is to be there for less than 28 days in a single 12 month period, then there is no requirement to obtain planning permission for any use of the property.
The pop-up shop concept has its advantages for both the landlord and the tenant. The landlord is able to fill their premises on a short term basis if there is a current lull in demand. This also allows the landlord to consider offering a longer term lease to the tenant if the business is a success. Likewise, a tenant is able to obtain a short term opportunity to test his or her product on the market without being committed to a cumbersome lease.
Despite the short term nature of pop-up retailers, this does not detract from the need for formal legal relations created between the landlord and tenant, normally taking the form of a short term lease.
Despite the pop-up shop being temporary by its nature, there needs to be consideration given to the status of anybody employed by the business. For instance, if the business is to be operating for a fixed-term then it may well be that employees will need to be given fixed-term contracts, or hired as designated part-time workers.
The business will have to be registered with HMRC as an employer, even if the business is only operating with one employee, i.e. you! This will need to be done well in advance of an employee’s first pay day.
Employers will be under an obligation to consider the implications of the impending changes to the minimum wage in April 2016, which will change to the National Living Wage for employees over 25 and will be £7.20 per hour, and likely to rise year-on-year.
Insurance can be tricky for those retailers who are only intent on being around for the short term. Most insurance policies are taken out on an annual basis meaning that retailers may have to suffer the consequences of paying large cancellation fees or increased premiums.
As the pop-up industry continues to grow, more insurers are becoming alert to this and are beginning to offer more flexible policies so it is certainly worth shopping around to find a policy which will cover you for the time you are solely in business.
It is of course only compulsory under law for you to have employer’s liability insurance, but it is considered to be good business practice to have a public liability insurance policy too to cover you for accidents had by members of the public on your temporary premises.
Always make certain that you scrutinise the terms of your policies to ensure the cover is to the level you require. There are of course many other policies of insurance that you may wish to take out, and these should be reviewed independently and tailored to the specific needs of your business.
Seeking legal advice as a pop-up retailer
This blog is by no means a definitive review into the pop-up retail sector and there are many other areas a retailer needs to consider, ranging from health and safety to financing.
By their very nature, a pop-up shop will be unique in its business and in its specific legal requirements. Failure to seek specialist legal advice could quite easily result in a quick deflation of a business’ pop-up model.
Roger Spence heads up Harrison Drury’s Leisure, Tourism and Retail sector team which can offer tailored advice for any pop-up retailer looking to grow and expand their business. For more information, contact Roger on 01772 258321.