Dusty, sparsely stocked shelves, top-selling products nowhere to be found, customers left unattended. These are a few of the myriad complaints retailer Kitson has about its two stores at Los Angeles International Airport.
The West Hollywood boutique isn’t happy with how a joint venture led by Hudson Group of East Rutherford, N.J., is operating the airport locations, and it’s taken its anger out by waging an unusual public campaign against Hudson, Los Angeles Mayor Eric Garcetti and others, posting social media messages and even store window signs asking if Garcetti “condones corruption and collusion at LAX.”
Predictably, that’s made things worse. Now, Hudson executives say they plan to terminate their deal with Kitson and close the two LAX stores next month.
Welcome to the business of airport retailing. While Kitson’s complaints and its very public campaign against Hudson represent an extreme case, disputes between airport concession operators, such as Hudson, and licensors, such as Kitson, are common.
Businesses within airports – whether a McDonald’s or a local business – are typically run by a concession operator through a licensing agreement. Those agreements can be lucrative, but they come with a big catch: Licensors often have little control over how shops and restaurants bearing their name are run, and a careless operator can hurt a brand’s reputation.
On the other hand, the licensees can feel hectored by the brand, which might insist the store operator do time-consuming or money-wasting tasks. Brands can be divas that can interfere with the operations of what are, after all, small shops.
As LAX, still finishing a $4 billion renovation project, continues to bring in new retailers and restaurants, especially local ones, Kitson’s fight with Hudson is a cautionary tale of what can happen when a company gives up more control than it’s willing to part with, said Jerry Prendergast, a restaurant consultant with West L.A.’s Prendergast & Associates.
“You want to control your product, but once you license to those companies, you’re not controlling your product anymore,” Prendergast said. “So, there’s always going to be that give and take.”
Taking off
The first Kitson store at LAX opened in Terminal 7 in 2012; the second, in the Tom Bradley International Terminal, opened the following year. Kitson founder Fraser Ross said Hudson approached him about the possibility of bringing Kitson to LAX.
“We thought it would be a great idea because we’re an L.A. lifestyle,” Ross said.
The company sells a number of L.A.-branded items and often collaborates with local designers such as Toms Shoes of Playa Vista on exclusive merchandise such as T-shirts, sweaters, children’s clothing and shoes. Those are among the items sold at Kitson’s airport stores.
Under its deal with Hudson, Kitson was responsible for supplying most of the merchandise to the airport stores, while Hudson was responsible for staffing and day-to-day operations.
The relationship between the companies began to deteriorate almost from the beginning, said Courtney Saavedra, Kitson’s director of marketing and public relations.
Saavedra, who makes regular visits to both LAX stores, said she started noticing problems early on. Small ones at first. For instance, boxes of “I Love L.A.” chocolates were supposed to be stocked in front of the cash register, but were instead hidden on a shelf below the register. Also, Kitson claims that Hudson’s airport shops were selling See’s candies past their expiration dates.
“Retail is detail,” Saavedra said. “At first you think, ‘Well, it’s growing pains. They’re going to learn.’ But then it’s like, ‘OK, I’ve addressed these things quite a few times now.’”
Then there were other problems, too, such as understaffing, dusty shelves and out-of-season merchandise still on display, she claimed.
Beyond that, Kitson hints at problems that were more than mere neglect. In an affidavit, a former LAX Kitson store manager said Hudson contacted Kitson vendors in an apparent attempt to stock Hudson’s other airport stores with items normally found at Kitson.
Ross said he’s complained to Hudson about these problems and more, but he feels he’s been ignored.
Last month, he tried to put pressure on City Hall – LAX is owned by the city of Los Angeles – by putting up signs in Kitson boutique windows, calling on Garcetti to meet with Kitson representatives and saying the mayor “cares more about NJ business than about LA business,” in an apparent reference to Hudson’s home state. Other signs and posts on Kitson’s social media accounts have gone after Gina Marie Lindsey, executive director of LAX operator Los Angeles World Airports, and Earvin “Magic” Johnson, whose Magic Johnson Enterprises is one of the local firms in the Hudson joint venture that runs airport shops and restaurants.
Airport officials and Garcetti’s office declined to comment about the spat, saying it’s a contract dispute between private parties.
Stores closing?
Mike Mullaney, Hudson’s executive vice president of strategy and business development, said Hudson, Kitson and representatives from LAX and Garcetti’s office met in December – before Kitson started its media blitz. At that meeting, Hudson’s people said they wanted to end the contract early.
“We indicated to Kitson the relationship is not working and we’re going to replace them with some fabulous local brands and move forward,” Mullaney said. “We have given notice to Kitson that the stores will be closing on March 31.”
He would not comment about specific terms of Hudson’s license agreement with Kitson or how the agreement can be terminated.
But Kitson seems intent on staying.
Kitson Chief Executive Chris Lee told the Business Journal, “As of now, we don’t have a signed termination agreement.”
Mullaney said Kitson will definitely be out at the end of next month, and called the company’s recent actions an attempt to create a media or PR frenzy that it hopes will play to its advantage.
Mullaney said he finds many of Kitson’s mismanagement allegations suspect, and flatly disagrees with others. He said his company works closely with licensees to make sure airport shops and restaurants closely match a brand’s other locations, but he acknowledged sometimes things can’t be matched up perfectly.
“With someone like Fred Segal, they only have a couple thousand square feet (in LAX),” Mullaney said. “You can only translate some of what Fred Segal is in the airport or even Kitson, you can only do some.”
But he also acknowledged that Hudson, like any store operator, has its failings.
“As a retailer, will I say we are 100 percent perfect? We are not,” he said. “There are days where you have an employee scheduled and they call off sick. Things happen in retail, especially in airport retail.”
Risk free, almost
For restaurants and retailers, having a location at LAX is an attractive proposition. Tens of millions of passengers – a huge captive audience – pass through the airport each year. And airport locations amount to a nearly risk-free revenue stream, said restaurant consultant Prendergast.
“You have no capital risk,” he said. “You’re not putting any money up. You have a big company who is guaranteeing you a percentage of revenue and they’re taking all the liability.”
But, as the Kitson-Hudson drama shows, problems remain. Licensors give up the ability to hire and train staff, and in the case of restaurants, the ability to make sure their food tastes just as good as its regular locations. And while Kitson has been unusually vocal about its complaints – Mullaney said he’s never seen anything like it – the retailer isn’t alone in its apprehension about what airport operators end up doing with its brand.
Grill Concepts Inc. of Woodland Hills faced some challenges of its own when it licensed its Daily Grill concept at LAX, which has been closed for more than a year after its contract timed out.
A representative from the company, who spoke on condition of anonymity because they were not permitted to speak to the press, said maintaining quality control is the hardest part about an airport operation.
“We can’t control the staff and directly control the brand and product quality and some of the menu items,” the representative said.
Grill Concepts often received customer complaints about the quality of the food at the LAX Daily Grill, but that was food prepared by employees of the concession operator – not of Grill Concepts.
The company is exploring an opportunity to license a different restaurant concept, but the representative said based on its last experience, it’s something the company will approach with caution.
“We no longer have a location at the airport – which should be a clue,” the Grill Concepts representative said.
