Shopping Centre Council says mandatory store fit-outs necessary to protect bricks and mortar from online

The Shopping Centre Council has rejected calls by the Franchise Council of Australia to cap the amount retailers are compelled to spend on store fit-outs, saying attractive stores are integral to combating the threat of online retail.

"Successful retailers say you have to be prepared to spend money to inspire customers to engage in the bricks and mortar experience," the SCC, which represents shopping centre owners and managers, says.

"Australian franchisors want regulated limits on how much they have to spend."

The SCC is responding to the FCA's plans for a voluntary code of conduct for landlords and tenants, designed to stem disputes between the two.

The FCA, which represents franchisors and franchisees, says the code is designed to address "extreme behaviour" such as "excessive" rent increases and "unreasonable and costly requirements in relation to shop fit-out and signage".

FCA executive director Steve Wright says the ball is rolling on the code of conduct.

But the SCC says that successful international retailers "stress the need for store fit-outs and store-fronts to be exciting, modern and seductive for customers."

"They also stressed the need for shopping centre environments to be constantly refreshed so they remain an ongoing magnet for customers."

According to the SCC, shopping centre owners have no incentive to make unreasonable fit-out demands of their tenants.

"Shopping centre owners fully understand that fit-out requirements are a delicate balance: on one hand, there is the need for shops to be exciting, fresh and seductive to customers; on the other, the amount spent can't be so much that it jeopardises the retailer's business plan and they can't afford to pay the rent," the SCC says.

"After all, the money spent on fit-outs does not end up in the owner's pocket."

But the Franchise Council of Australia says shopping centre fit-out requirements are expensive, too frequent and an unfair imposition on tenants who have leases for as short as five years.

"The problem is, the shopping centre management or owner is trying to turn the thing in to an art gallery instead of a retail precinct," the FCA says.

This article originally appeared on SmartCompany.