Lease terms we review before projecting margin

Base rent is the number everyone fights over. In our experience, it is rarely the number that kills the business. The clauses buried further in the lease — common area maintenance, percentage rent triggers, exclusivity restrictions and assignment rights — are where operators lose money they never see coming.

Common area maintenance charges can add twenty to forty percent on top of base rent, and they are often not capped. We look for a cap on CAM increases, or at minimum a right to audit the landlord's CAM calculation. Percentage rent kicks in above a sales threshold and can turn a great year into a mediocre one; we model the breakpoint against realistic revenue before signing.

Exclusivity works both ways. We want the landlord to guarantee that no direct competitor opens in the same center, and we want the right to assign the lease if the business sells. Without assignment rights, a profitable establishment is worth less to a buyer because they cannot assume the location.