What is a fair Restaurant rent?
Posted, July 12th, 2021
What is a fair restaurant rent is a question that I get asked on a regular basis. In summary, the short answer is?it depends.
Generally, a figure between 8 to 12% of turnover is regarded as a fair rental.
What Rents are Restaurants & Cafes paying?
In a recent survey by Restaurant and Catering Australia conducted on their members, the average rental was around 8-12 % of turnover. This compares with a figure of 6.5% from the survey conducted on restaurants and coffee shops around 3 – 4 years ago.
In summary, in many restaurants and coffee shops that I have seen over the last 6 to 7 years, I have found that this percentage varies dramatically. From as low as 5% to a high of around 20% of turnover.
Additionally, the actual rent is determined by the market value for retail in that particular area. Whether it be a restaurant, cafe, hairdresser, shoe shop or gift shop. The landlords objective is to ensure that they achieve the highest possible rent for the particular retail area.
How to determine a reasonable restaurant rent?
The bottom line is to make sure when looking to buy a restaurant or cafe is to ensure that the rental is;
A. Within the industry averages to ensure a consistent level of profit.
B. A fair market rent for the area. The best way to do this is to see how the rent compares with other surrounding commercial retail of similar position, condition and size. For example, a hairdresser who pays the same rent for a similarly sized area but has a much lower turnover.
Otherwise, you will have to be very confident of increasing the business turnover high enough to fall within the industry averages or better.
We will cover rent and leases in future blogs.
Feel free to contact Con Tastzidis on 02 9882 2221 if you would like a free rental appraisal.