Is a Radius Clause Reasonable or an Illegal Restraint of Trade?

Many shopping center leases include “radius clauses” banning tenants from opening similar businesses within a certain radius of the leased location. The idea is to prevent tenants from establishing essentially identical establishments to siphon off revenues and thereby minimize gross sales subject to percentage rent under the lease. Although protecting gross rent revenues is a legitimate business interest, radius clauses are frowned on because they stifle new business and competition.

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