QFO: Food-Court Leases

Questions from Operators

We are more than happy to answer business or hotel questions from operators on any issue here on the “How We See It” blog. Today’s question comes from Mike concerning his lease on a mall’s food-court location.

I have a burger/fries business in a mall’s foodcourt.  My current rent is 1000.00/month and 10% of my sales over $10,000.00/month so a straight 10% of my sales.  The mall pays water, electric, garbage.  I pay gas.  My first years sales were $200,000.  I have seen you talking about rent being around 6-8% and sometimes around 10% so I guess I’m confused.  Is that a good lease?

I also budget for 30% Food Cost, 25% Labor Cost, and 10% for Misc Cost (Gas, Phone, Insurance, Payroll taxes, Pest Control, Linen, Credit Card Fees, and Upkeep.  Does all that sound reasonable?

So our answer is:

  1. Your total occupancy costs (everything it cost you to be in your location…rent, CAM, utilities, etc…) should total no more than 6-8% of gross sales. Since your effective occupancy rate is over 16%, I’d say this is definitely a bad lease situation.
  2. Payroll taxes go into Labor Cost.
  3. Without knowing more details about your concept or your product mix and looking at your P&L, it’s hard to say anything further.

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Jeffrey Summers - Founder/Principal, Summers Hospitality Group
Jeffrey Summers - Founder/Principal, Summers Hospitality Group
Jeffrey has spent over 3 decades in various Marketing, Operations and Business Development roles in corporate, franchise and independent concepts. He is widely recognized by his peers as one of the leading voices in the Foodservice/Hospitality industries. As a hospitality business expert, Jeffrey now devotes most of his time to helping owners/operators and their organizations both create and achieve their business objectives. Jeffrey's clients include: fast food, QSR's, casual full-service, fine-dining, private clubs and banquet facilities, hotel/foodservice, resorts, sports facilities, corporate dining. catering businesses and retail concepts. About Jeffrey. 
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