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Rent % and such

our rent & CAM fees are approx $3,600/mo…
in the old glory days, when we were doing $5 pies & 500K/yr, our rent % was 8.64%
(3600x12/500K=8.64%) - use net sales
 
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steveo922:
Sorry to bump up and old thread, but I’m wondering…

Just want to make sure I’m getting this correctly… If my rent is $2,100/month, does that mean I need to be doing $21,000/month to achieve the 10%?
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That is correct math. Be sure to include any other care/maintance/other fees charged by the landlord. We call them “Operating Costs” in our leases. Insurance/taxes/property upkeep and such.

My shop is right at 9.3% right now projected through 1st quarter. Last year we hit about 10.1%.
 
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NicksPizza:
That is correct math. Be sure to include any other care/maintance/other fees charged by the landlord. We call them “Operating Costs” in our leases. Insurance/taxes/property upkeep and such.

My shop is right at 9.3% right now projected through 1st quarter. Last year we hit about 10.1%.
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Woah, another downer around the corner… I said we would be happy to double our sales, but now I need to quadruple my sales to achieve 10%? :shock:

Holy moly. We are paying way too much rent…
 
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steveo922:
Woah, another downer around the corner… I said we would be happy to double our sales, but now I need to quadruple my sales to achieve 10%? :shock:

Holy moly. We are paying way too much rent…
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And/or making too little money. You see why a couple of us are not being cheerleaders so much as giving answers to the questions as best we can. At the risk of opening any old wounds . . . did you havea business plan that projected sales and rent costs and such? How much did you project in sales per month in your 1st 6 months?
 
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Nah, we don’t have a business plan b/c we’re family. (I know, I know)… But as far as the rent part compared to sales is concerned, we definitely didn’t do our research.

EasyG- Our rent is $2100 which includes c.a.m. for 1152 sq ft.
 
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I’m afraid this thread is being hijacked, so I apologize for contributing to it, but…

$2100 x 12 = $25200 / 1152 sq ft. = $21.875 per sq ft.21.875 per sq ft.

We’re currently (including CAM) paying $26.85 per sq ft, much more than you. But, our rent including CAM is 10% of our sales. So, the moral of the story is that our rent is high but we are in an area that can support the volume.

Your problem is not rent. $21 per square foot is not the best deal on the market, but still doable, assuming you’re in a decent location. Your problem is sales. If I calculate correctly you’re doing $5000 per month, and it’s going to be impossible to survive on $5k per month, no matter what the rent. By the time you take out food and labor you only have $1750 left, even if your rent was only $500 per month, you still are only paying yourself $1250 per month, which is $15,000 per year. That’s not even factoring in other overhead like utilities, linens, credit card processing, advertising, insurance, etc. etc. etc.

My point is that rent is not your problem, sales are your problem.
 
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Easygoer13:
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bodegahwy:
Just to clarify a bit,

When you are posting your “rent” are you using your base rent or your “occupancy cost” which would include common area expenses like insurance, taxes, maint? (insurance and maint are only for the building)

Our base rent (paid to myself) is 7.5%. Occupancy cost is 8.8%. This is on 1620 square feet.

The above mentioned 9% guidline is just that. As you can see, many folks pay less and less is obviously good. On the other hand, when occupancy is above 10% it becomes very difficult to survive. There just are not a lot of places to make up the lost points. One of the place is marketing. If your occupancy is 13% but your location provides such traffic that you need no marketing then 13% is probably OK.

As one consultant that posted here for a while a few weeks ago pointed out, there are deals to be had out there right now where lower occupancy is possible. Long term, however, lower than 7% is pretty hard to find and higher than 12 is pretty hard to survive.
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Please forgive my ignorance but am I correct that your rent based on above example (9%)…is just under $1500.00 a month…Not to single you out…your just the last post… 🙂
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I am sorry for being slow…but what is everyone basing this on…can someone help me out here…
 
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sorry, we currantly are doing approxmatly $32,000 a month, our rent and cam is 2500 a month or approx 8 percent of our gross sales
 
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Prime Costs (food/labor to make the product) target under 60%
Occupancy target +/- 10%

Try to take 10% profit for owner???

That leaves 20% +/- to pay all the rest of the costs. All the pieces and target %'s need to work together to make the cash flow and business profitable. you start hitting 15% for occupancy, and you start eating into either bills or owner proft or both. If you have lean Prime Costs, then you get some flexibility. If you do massive volume, you get the value of scale.

It really is more art than science. But “those who know” say 10% is the key level to watch for.
 
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