Percentage Rent For Restaurants
Description
How to fill out Shopping Center Lease Agreement - Percentage Rent Option?
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FAQ
In most cases, the industry's collective experience shows that the lease cost should total no more than 5 to 8 percent of the restaurant's total revenues.
The Natural Breakpoint is the minimum annual base rent divided by the percentage rent. For example, if the minimum annual base rent is $100,000 per year and the percentage rent is 5%, then the Natural Breakpoint is $2,000,000.
Sales are influenced by the number of seats you have, and rent is influenced by the price per square foot (SF) you are paying. The important formula is that restaurant rent percentage should be no more than 10% of your sales (some restaurateurs feel 8% is the right number).
The formula for calculating percentage rent with a natural breakpoint is: (Gross Sales ? Natural Breakpoint) x Agreed-Upon Percentage = Percentage Rent. (Gross Sales ? Artificial Breakpoint) x Agreed-Upon Percentage = Percentage Rent. Gross Sales x Agreed-Upon Percentage = Percentage Rent.
As a general rule, your total occupancy cost should be 6% to 10% of your gross sales. Occupancy costs include rent, common area maintenance (CAM) fees, property taxes and insurance. CAM fees, like parking lot maintenance or janitorial services, should add no more than 2% to 3% to your base rent.