Wal-Mart has reportedly spent six years trying to find a place to build in Escondido, California. But its most recent plans to build a 140,000 s.f. store seemed like a done deal, until a competitor stepped in and quashed the plan. That’s the version of the story told in the North County Times this week. City officials bent over backwards to give Wal-Mart everything they wanted, but they were apparently caught off-guard when the supermarket chain Ralph’s unplugged the plan. The newspaper claims that Ralph’s didn’t like the idea of sharing a shopping mall with Wal-Mart, and invoked a noncompete clause with their landlord, who had to get Ralph’s to sign off on the deal. “I am very disappointed,” Mayor Lori Pfeiler told the newspaper. “It looks like the private sector controls a lot more than we would like to admit sometimes.” The Wal-Mart store at the Escondido Village shopping center would have been located right behind a Ralphs supermarket. The site Wal-Mart wanted has several retailers on it currently, plus the Escondido school district’s administrative offices. Local officials believed that a new Wal-Mart would bring them half a million in new sales taxes. They had no study to conclude that, just a press release from Wal-Mart, leaving off the sales that would be lost elsewhere in Escondido. But property owner Norm LaCaze could not get the approval of Ralphs, which has a noncompetition clause in its lease. The city is already at work trying to find Wal-Mart another site, so it can set up shop and take sales away from existing merchants as soon as possible. One city official said she had spoken to Ralphs officials a few weeks ago, trying to convince them that Wal-Mart would be a plus for the shopping center. The official claims that Wal-Mart was willing to eliminate all grocery items from their new store. Now that Wal-Mart is leaving the deal, the school district has to stay in its current location, because the city is unwilling to give them a new space without the Wal-Mart coming to town. The city is now going to sell the land the school district wanted.
Would the Mayor of Escondido be surprised to learn that Wal-Mart has a standard clause in its contracts for its “used” buildings (they have at least 350 dark stores right now) that says anyone buying or renting former Wal-Mart properties cannot use them for a discount store, grocery store, or other competitive uses? This time, Wal-Mart got stung by a standard non-compete clause, similar to the ones it uses to keep competitors out of its way. Wal-Mart works hard to restrain competition near its stores. Ralph’s did the same thing to Wal-Mart. All’s fair in retail war. Meanwhile, Escondido city officials seem to have learned nothing from the deal, and still think Wal-Mart is a form of economic development.
