McDonald's Sues to Keep Place on Champs-Elysees as Rents Soar

McDonald's Sues to Keep Place on Champs-Elysees as Rents Soar

By Ladka Bauerova
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May 20 (Bloomberg) -- McDonald's Corp., a symbol for the spread of U.S. culture around the world, has found common cause with French cinemas and brasseries.

The fast-food chain is suing its landlord to avoid being priced off the Champs-Elysees after the rent for its outlet on ``the world's most beautiful avenue'' doubled in five years. The restaurant serves 1.5 million meals a year, making it one of McDonald's top venues in France.

``We don't want to leave the Champs-Elysees,'' said Sebastien Perochain, spokesman for the Oak Brook, Illinois-based company's French unit. ``It's a very prestigious location. But the rise in rent has been spectacular.''

Surging rents risk putting an end to affordable dining and nightlife on the 2.5-kilometer (1.6-mile) avenue that stretches from the Arc de Triomphe to the Place de la Concorde. The Champs- Elysees is the world's third-most expensive commercial property location, after New York's Fifth Avenue and Hong Kong's Causeway Bay, according to Cushman & Wakefield Inc.

Average annual rent on the Champs-Elysees is 7,364 euros ($11,415) per square meter, compared with 11,983 euros on Fifth Avenue and 9,688 euros on Causeway Bay, the real-estate broker said in a November report.

Brasseries, movie theaters and independent shops on the Champs-Elysees have been gradually replaced by chains such as the Disney store, Adidas and Gap since the 1980s. The last post office on the avenue isn't expected to renew its contract, according to the mayor of Paris's 8th arrondissement, Francois Lebel.

Planet Hollywood Shuts

``We Parisians don't feel at home here anymore,'' said Roselyne Briere, 57, as she turned the corner of Avenue George V. ``Now it's only for the rich who can afford a Vuitton dress or for the tourists who want to be reassured by seeing the same clothing stores they have at home.''

Now even some global brands are deciding the cost isn't worth it. Planet Hollywood, the restaurant chain backed by actors Bruce Willis and Sylvester Stallone, closed its doors a block from McDonald's at the end of February.

Property owners, including insurers Axa SA and Assicurazioni Generali SpA, charge 10,000 euros or more annually for each square meter of prime street-level space on the Champs-Elysees, according to Georges Dahan, chairman of Thed International, a tourism consulting firm in Paris.

``Demand is still on the rise, so the surge in rents is far from over,'' said Thierry Bonniol, who oversees commercial property at Paris real-estate broker Atisreal. ``The Champs- Elysees is very coveted given the sheer number of tourists that visit it.''

Historic Scene

Perochain declined to disclose what McDonald's pays for rent, the name of its landlord or any details on the lawsuit. The restaurant sits on the former site of the 1872 Rothschild mansion. It became home to what the French call ``MacDo'' in 1988.

Designed by Andre Le Notre, the landscape architect and gardener of King Louis XIV, the Champs-Elysees has a special place in France's collective consciousness. German troops marched there in June 1940 to mark the country's fall. Four years later, U.S. troops did the same to signal France's liberation.

Jean-Jacques Schpoliansky, the third-generation owner of independent cinema Le Balzac just off the Champs-Elysees, said about half the neighborhood's 65 movie theaters have shut down in the past 30 years. Rent at his cinema rose 17-fold in the period.

``You would think the most beautiful avenue in the world would deserve commerce with identity and soul,'' he said. ``But to maintain variety, we need political will.''

`Uniquely French'

Local politicians have started regulating who can set up shop on the avenue. Lebel earlier this year blocked Hennes & Mauritz AB, Europe's second-largest clothing chain, from opening an outlet on the Champs-Elysees, saying there were too many apparel stores.

A law approved by the French Parliament in January allows any municipality to preemptively rent a space while choosing a tenant it believes best represents the country, Lebel said.

``We would prefer a uniquely French -- or even better, Parisian -- business like a luxury chocolatier or a wine merchant to a T-shirt seller,'' said Lebel, 64. ``Global brands can be found in any city or country in the world.''

Finding independent retailers able to match rents paid by the likes of Nespresso, Nestle SA's upscale coffee division that recently opened a boutique opposite McDonald's, may not be easy.

``We can't legislate rents on the Champs-Elysees,'' Lebel said. ``It would be like going back to the Soviet regime.''

Back on the upper level of McDonald's, overlooking the Louis Vuitton store, Sophie Martin eats her lunch while taking in the crowds streaming past in the afternoon sun. She said she would be sorry to see the restaurant go.

``It's not expensive, it's convenient and you get a superb view,'' said the 31-year-old accountant from Clermont-Ferrand in central France. ``It's a real luxury to be able to afford a meal on the Champs-Elysees.''