P.F. Chang”™s China Bistro, an international chain of more than 300 “authentic Asian” restaurants, is “losing customers and sales to Little Buddha” and wants out of its lease at Ridge Hill shopping center in Yonkers.
Chang”™s sued Yonkers Associates on Aug. 10 in Westchester Supreme Court claiming the landlord violated its exclusive rights to serve Chinese or Asian food at Ridge Hill.
Little Buddha serves traditional Japanese hibachi and sushi cuisine, according to its website, as well as Pan-Asian fusion dishes. It opened in 2014, more than four years before P.F. Chang”™s.
P.F. Chang”™s agreed in 2018 to lease more than 8,000 square feet for at least 10 years. The base annual rent now is $273,938, and the chain must also pay $57,769 in real estate taxes, fees for maintenance, and marketing and, if gross annual sales exceed nearly $6.1 million, 4% of sales.
The Scottsdale, Arizona-based chain also negotiated an exclusivity covenant. So long as it remains open and operates a full-service, sit-down restaurant serving Chinese and Asian cuisine, no one else, according to the complaint, may serve Chinese or Asian food. If a tenant violates the restriction and the landlord fails to stop that tenant for more than 12 months, P.F. Chang”™s may terminate the lease.
P.F. Chang”™s claims it has held up its part of the bargain, and last summer it invoked its exclusive covenant in a letter to Yonkers Associates, citing competition from Little Buddha.
QIC, an Australian investment firm that owns Yonkers Associates, responded that a former P.F. Chang”™s employee had agreed to exclude Little Buddha from the covenant. The landlord conceded “there was some miscommunication” and that the understanding was not incorporated in the lease.
“Little Buddha is taking customers from P.F. Chang”™s,” the chain responded in a December 2019 letter, “and therefore we intend to enforce tenant”™s rights and remedies.”
P.F. Chang”™s declared that it would pay an alternative rent, 3% of gross sales, retroactive to July 2019, until QIC enforced the covenant.
QIC challenged P.F. Chang”™s right to unilaterally pay a lower rent in a July 10 letter and demanded $289,276 in back rent.
The allegation that the landlord violated the exclusive covenant “is without merit,” Cleveland attorney Jared E. Oakes stated in the letter.
P.F. Chang”™s was aware of Little Buddha when it signed the lease, according to Oakes, and the restrictive covenant was forward looking.
P.F. Chang”™s chose not to negotiate terms that included existing tenants, he stated. It has no right enforce exclusivity on a tenant that has been there for years.
The fact that Little Buddha”™s lease predates P.F. Chang”™s lease by several years “is of no consequence,” San Francisco attorney Marco Quazzo stated on behalf of QIC in a July 27 letter to Oakes.
Nothing in the lease states that exclusivity applies only to future leases. Yonkers Associates “is acting contrary to the plain language of the exclusive covenant,” Quazzo stated.
P.F. Chang”™s is asking Westchester Supreme Court to declare that Yonkers Associates violated its lease by continuing to lease space to Little Buddha, and to declare that the lease will terminate on Oct. 25.
The lawsuit was filed for P.F. Chang”™s by Quazzo and by New York attorneys Joshua H. Epstein and Allyson B. Hooper.
