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McDonald’s Heads to Court Over Times Square Arches

MANHATTAN (CN) - With a lucrative LED advertising contract in mind, a Times Square landlord is giving McDonald's a hard time over its Golden Arches, the chain claims in court.

McDonald's says its lease at 1560 Broadway, its location for the past 31 years, was automatically extended for another 10 years on June 1, 2014.

Annual rent for the extended term remains uncertain, however, because the chain has not been able to reach an agreement with the landlord, 1552 Broadway Retail Owner, according to the complaint filed Monday in New York County Supreme Court.

McDonald's blames the disagreement on the "giant LED screens" that cover neighboring buildings in Times Square, "presumably generat[ing] substantial revenues if they have been let or sublet to other parties for general advertising or marketing purposes."

"Without any contractual basis, Landlord seeks to charge McDonald's for and separately value the appearance and placement of McDonald's trademarked 'golden arches' signage that exists on the exterior ground and second floor walls, which 1552 Broadway's predecessor-in-interest had approved and for which McDonald's has never paid, agreed to pay, or been asked to pay separate rent," the complaint says.

McDonald's claims that its "landlord essentially wants separate rent equivalent to that which Landlord could obtain from placing and letting a large LED billboard" outside the restaurant.

Pursuant to the lease, two arbitrators set out to determine future rent, but they failed to do so within 60 days, according to the complaint.

"A third arbitrator has not yet been appointed," according to the complaint.

McDonalds says valuing "a hypothetical LED billboard" will cause it to expend time and resources arbitrating an issue that is not arbitrable to begin with under the lease.

The chain wants an injunction staying the arbitration until the court resolves the "fundamental disagreement as to what precisely is being valued and the standard to be applied in determining" fair-market rent.

McDonald's is represented by Stuart Glick with Thompson & Knight.

The complaint notes that McDonald's landlord has a net lease on the property from the superior ground tenant, 1560 Broadway Co. That company is not a party to the action.

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