From Entrepreneur.com
Percentage rent clause Herb Weitzman, CEO of Weitzman Group and Cencor Realty Services in Dallas, says tenants agree to pay higher rent when their sales exceed a certain threshold. The International Council of Shopping Centers publishes rent guidelines--a supermarket can pay 2 percent of gross sales to its landlord and make a profit, a pizza parlor can pay 10 percent and so on. Your broker will negotiate an initial rent below that; then, once you start making money, it will go up. Be careful. As Hein says, "Retail sales can have big swings. We negotiate that percentage rent doesn't start until our tenants have hit their sales figures for 12 months in a row."
Read more: aaa.entrepreneur.com/article/205996#ixzz2PpB19Vfa
Older article from the Times:
aaa.nytimes.com/2006/03/22/realestate/commercial/22grocer.html?pagewanted=all&_r=0
Supermarkets are a low-margin business, in part because a large proportion of their stock consists of perishable goods. A decade or so ago, a supermarket would pay an amount equivalent to 2 percent of its sales in rent in affluent neighborhoods, Mr. Catsimatidis said. Now, it has to pay as much as 8 percent of sales, he said. To hold onto a store on University Place and Eighth Street, Mr. Catsimatidis said, he had to agree to twice the previous rent.
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