Is a Taco a Sandwich?

Many commercial leases of rental space in a strip mall include an “exclusive use” clause of this type:

“Landlord shall not enter into a new Lease in the Shopping Center which permits a restaurant (including, without limitation, so called carryout, delivery, or sit-down service) to sell pizza, Italian cheese-bread, and chicken wings.”

This language is designed to protect a tenant. In this example, the restaurant can be assured that it will not face future competition from another pizza restaurant in the same shopping center.

But what if these terms are not well-defined? A recent Indiana court case required a judge to determine whether tacos and burritos were similar to sandwiches because the lease terms were not well-defined.

The Fort Wayne, Indiana shopping center lease in question permitted “a sandwich bar-style restaurant whose primary business is to sell ‘made-to-order’ or ‘subway-style’ sandwiches.” The lease gave examples - Subway and Jimmy John’s were permitted, while McDonald's, Arby's and Wendy's were excluded.

But was a made-to-order taco restaurant permitted? In interpreting the lease, the Indiana judge determined that made-to-order restaurants serving gyros, banh mi, naan wraps, or tacos were not excluded by the lease’s language: [“T]acos and burritos are Mexican style sandwiches, and the original Written Commitment does not restrict potential restaurants to only American cuisine-style sandwiches."

In this case, the legal dispute may have been avoided by a well-drafted contract with more clearly-defined terms. If you need assistance reviewing and negotiating your commercial lease, please contact our office today.