CARBON TAX BEGINS TO IMPACT RETAIL LEASING

Written on the 14 May 2012

CARBON TAX BEGINS TO IMPACT RETAIL LEASING

THE founder of one of Queensland’s fastest growing franchises is warning other business owners about the small print in the Federal Government’s Carbon Tax, saying it will impact leasing rates when it comes into effect from July 1.

Zarraffa’s Coffee CEO kenton Campbell (pictured) says recent lease negotiations with one of Australia’s prominent retail property groups had special conditions inserted, which stated: “The Lessor may pass this carbon or greenhouse gas emission related charge onto and recover the same from the Lessee at cost”.

“If one of Australia’s largest retail property groups has started planning for a rise in costs, others will soon follow suit,” he says.

“Carbon Tax adds insult to injury, by not delivering a long-term solution to the carbon issue and indiscriminately weakening businesses across all industries that will not be able to carry increased costs on top of Federal Pay Reforms and other recent hikes in levies and taxes.

“In our industry it won’t be long before coffee is an expensive commodity as we shoulder Carbon Tax impacts across transport, power, rents and so on. The tax will have a compounding effect as each link in the chain to providing a simple cup of coffee costs that bit more.”

Shopping centre giant Westfield has reportedly included an explicit ‘Carbon or Greenhouse Gas Emission Charge’ clause in lease agreements with 11,885 retailers across Australia.

Campbell has already announced plans to withdraw his stores from major shopping centres should leasing negotiations not satisfy franchisees.

He says he will not play tit-for-tat leasing games with potential competitors for prime sites as he prepares to roll out a further 10 stores in the next year.

“We have seen with our drive-thrus that competitors think they can do it too and are willing to pay double the rent for spots that we are trying to negotiate,” he says.

“The challenge for us is making sure we don’t follow some of these guys who are gazumping us to pay any rent, because we can’t. Garden City [at Upper Mount Gravatt] is a perfect example; they were paying $180,000 rent for a kiosk and now they are paying $60,000. It doesn’t take a rocket scientist to know that over time, that business is going to be more viable.”

Zarraffa’s Coffee is a 55-store operation, with head offices and a roastery based on the Gold Coast. The company employs around 800 staff. Campbell says the tax will cause staff cutbacks as businesses protect their bottom line.

“I know how hard it is to get through a financial year as a new business and my first five to 10 years were tough. Expecting businesses to slog it out for an entire year for a rebate that doesn’t even start to cover the new costs imposed by the tax is just ludicrous,” he says.

“Shouldering the difference between the Carbon Tax costs and a nominal rebate is really the difference between making it for many business owners and their families – period.”

Campbell warns the Carbon Tax may be the final undoing of many small to medium businesses.

”We acknowledge that landlords are only making a business decision to pass on the impacts of the tax to ensure their own viability and the real truth is that most businesses will have to do the same, with the Australian people wearing the end result,” he says.

“Essentially the Carbon Tax is an inflationary measure and a graft and the government needs to start talking to business owners who will be most affected by it.

“There are other ways to cut emissions. Within our company, we have been changing our operations and corporate culture over the past five years to great effect, making both carbon and cost savings in our business.”

Campbell says the Federal Government needs to use the ‘carrot’ not the ‘stick’ approach to make a real difference in the carbon issue.

“Incentives for power reduction are just one strategy to motivate businesses to embrace carbon reductions. The solution does not have to be a penalty system; it’s possible that a rewards-based scheme  can do more to shape standards of practice and business culture, with regards to emissions, in the longer term,” he says.

In response to the Government’s promise of a tax rebate to businesses in order to offset carbon costs, Campbell says what was being proposed is a ‘token gesture’.


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