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Rent as a %
How much rent / mortgage payment do you guys pay a month as % of
gross sales? what is an ideal amount
(apart of as little as possible :0 ) to shoot for.
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7 Replies
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The range that I have heard most often is 4% to 6% of gross sales.
But, if the building is in such a great location that you can take 2%
off your marketing budget, then 6% to 8% makes sense to me.
The reverse is also true. A weak location could require an additional 3%
in the marketing budget. In that case 1% to 3% would be about right.
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Very helpful, thanks.
Lee
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Interesting information. Does anyone have a variable rent/lease agreement based on a percentage of gross sales? We do not, but it is an interesting concept.
Andy
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Andy,
Over the last 2 years I have looked at leasing several spaces and on 2 of them I drew up a tiered lease that based the lease amount to our gross sales. I had a hard time selling it to the property owners. We just moved into our new location Jan 2nd of this year and for this place I did a tiered lease but with fixed amounts. I used the average $/sqft over the lease term and checked it against the estimated gross sales that we should be able to do, trying to keep the lease in the 4 – 7% range. With 2 years of “research” under my belt as I looked and priced several different locations and shops I felt comfortable moving and know that I am getting great value for the money.
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Thanks for your information Joe. We are up for renewal soon and this may help us negotiate a better lease.
Andy
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We pay a lot for rent. Most say too much. You can cut back on advertising, but you can’t cut back on rent. 50 million vehicles drive by our shop each year (137K/day).
Before you say $8300/mo. is way too much for 3K sq. ft. of shop space, consider this: Our 4 bays crank out $1.5M/yr. on a 5 day work week after being open for only 4 years.
I got the idea from Roy H. Williams in Austin. You can either read the article or play the audio at:
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My location is on an excellent street, according to the DMV I get almost 175,000 impressions a week from traffic. I inevitably hear “I drive by here all the time” but my business name gets in the way of getting as much business as I’d like to. I have 4000 sqft, and this years lease is about $3500. That puts my rent on the extremely high end of those “suggested numbers” but is very fair for rent prices in my suburban Raleigh location. One of my competitors in town is paying about double the price per sqft, and admits he’s been “had” by the landlord.
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