Continuous operations clauses require a tenant to keep its business open and operating during the days and hours specified in the lease. These provisions are common in retail and shopping center leases, where landlords rely on tenants to attract customers and maintain the vitality of the center. Under a strict continuous operations clause, a tenant who “goes dark,” even temporarily, could be considered in default, giving the landlord the right to terminate the lease, recapture the premises, or impose higher “go-dark” rent.
A fair and balanced lease should limit or qualify the continuous operation obligation. The lease should allow reasonable exceptions for closures caused by repairs, remodeling, refurbishment, casualty, force majeure events such as natural disasters or government-mandated shutdowns, or temporary interruptions required by a franchisor for remodeling or image upgrades. In some cases, tenants may also be permitted to close briefly for inventory resets, rebranding, or other operational needs, so long as the closures are reasonable and consistent with comparable businesses in the area.
For franchise and quick-service restaurant tenants in particular, it is important to coordinate the lease’s operating requirements with franchisor standards to avoid conflicts between the two agreements. When negotiating, tenants should seek to remove any automatic termination right for failure to continuously operate, request a reasonable notice and cure period before any default or recapture right arises, and, where possible, limit the landlord’s remedy to continued payment of base rent during any temporary closure rather than termination of the lease.
In short, a well-drafted continuous operations clause balances the landlord’s interest in maintaining an active and vibrant center with the tenant’s legitimate need to close temporarily for business, operational, or regulatory reasons.