Quote:
Originally Posted by BrianL99
Where do people come up with this stuff?
"Urban Legend" ???
Commercial Leases for retail & restaurants, are typically based on (or include) a percentage of the gross revenue of the business. That's how commercial leasing works.
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Quote:
Originally Posted by Bogie Shooter
Is that a fact in Villages leases?
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I doubt every lease in TV is the same. Percentages based on gross sales is a negotiating point, like everything else in a commercial lease.
A restaurant (like any other business) can justify a given rent, based on their projected sales volume (restaurants usually run about 6% - 12%).
A percentage rent is particularly useful, when leasing a restaurant with an unknown or unquantifiable history. The more successful the restaurant is, the more they pay in rent (or the opposite).
Take for example, the 1812 House (I think that's the name of the place in Spanish Springs that recently closed?). That location has a poor track record. Perhaps it's the location or perhaps it's mismanagement.
A potential operator comes to look at the site and says, "no one has been successful in this spot, because it's a lousy location ... I want cheaper rent".
TV Leasing agents says: "It's not the location, it's been mismanaged by previous operators".
Mr. Potential Operator says: "OK, fine. You want $30 sf. and I want to pay $25/sf. If you take the $25/sf, I'll pay you 3% of my gross revenue after the 1st $1,000,000 in revenue".
The owner (Lessor) and the business owner (Lessee), become responsible for each other's success.
Given the # of restaurants FMK has in TV, including operating some country clubs' F&B, I would bet the farm, their rents are based on a % of volume. I don't think there's any other practical way to do it.
Win - win for everyone.
[I have no clue what the going rents are in TV per square foot. That's just an example of how it works in the commercial leasing business].