HTD 500 Chapter 12: ARTICLE 12 RESTAURANT RENT--HOW MUCH IS TOO HIGH
5 Dec 2016
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Two largest controllable costs (prime costs): cost of goods sold (cogs, labour. These costs combined cannot exceed 62% to 68% of gross sales. All other expenses combined (rent, occupancy costs) should range between 24% to 32% of gross sales if the restaurant is to run at a profit. Full service restaurants grossing less than 1,000,000 to ,500,000 annually in revenue typically have difficulty operating profitably after paying rent and all expenses incurred in the operation of the business. Percentage rent is calculated as a % of sales more than a specified breakeven sales volume. Rent is a variable cost once percentage rent started to exceed minimum base rent. When a restaurant operator is considering rental space, he or she should have a target. Roi in mind prior to signing a lease & investing in the restaurant business. Real estate appraisers consider different types of rent definitions when valuing the leased fee interest (landlord interest) in real property:
