Running a Restaurant/restaurant leases

Advertisement


Question
What percent of sales against a fixed minimum rent will a chain like Lone Star,  Red Lobster, Chilis,
etc., pay on a long term lease? And would such a lease be enough protection against inflation for
a landlord?

Answer
Each chain and each location is obviously different.  You basically pay for what you get, as an example I am currently involved in a lease in a casino that I am paying 11% of sales and I would never do that in a strip mall.  This particular lease has the CAM (Common Area Maintenance) rolled into the 11% and it is a prime location so I don't mind paying it.

Typically I look for 6-8% of sales as a good range to target for base rent %.  You can certainly tie in an inflation clause but that may bring resistance.

Hope this helps.
Tony

Running a Restaurant

All Answers


Answers by Expert:


Ask Experts

Volunteer


Tony Figurelli

Expertise

I am well versed on all aspects of the restaurant industry. I have been President of a national chain of full-service restaurants, have operated in fast food, casual and fine-dining segments as well. I have opened(and successfully sold)my own restaurant and have opened over 35 restaurants in one capacity or another. I currently operate a consulting business, Meridian Hospitality Associates and can be reached at tonyfig@msn.com.

Experience

Over 30 years, see description above.

Education/Credentials
BA - Kansas State University

©2016 About.com. All rights reserved.