Normal for commercial lease to require sharing quarterly sales?
This language is not specifically in the lease but the landlord of a lease I am looking at assuming has mentioned he requests quarterly sales reports. Is this normal?
[{"id": "ifulrmn", "text": "Retail percentage rents \n\nhttps://www.metrocommercial.com/news/what-is-percentage-rent-in-retail-leasing-and-how-does-it-work/", "replies": [{"id": "ifulybv", "text": "This is what I am afraid of. The lease does not include % rent. So I\u2019m wondering if I show my cards are sales are up when it\u2019s time to renew in two years if the increase would be higher than a market increase ?", "replies": [{"id": "ifumajg", "text": "This is for a new lease? \n\nUsually you will look at 3-5 years of tax returns to qualify the tenant to make sure they can afford to pay and have a business that is growing. It may be that.\n\nGot it, for your existing landlord. Yeah kinda weird. If you have renewal options, you can exercise those and it will be whatever language was in the lease. \n\nIf you don\u2019t have much term left, And this would be a new lease he would be giving you, I would start looking around for your options in case there are shenanigans. \n\nRetail spots are a pain because they depend so much of parking and traffic, and finding a new space in a panic is a sure way to make a bad decision.", "replies": [], "depth": 3}, {"id": "ifx0obk", "text": "Indirectly yes, an owner would bump rent if sales per square foot are up a lot over the course of the lease. But a tenant also has leverage in telling the landlord they will go down the street and move into a nice newly renovated space for lower market rent.\n\nAs a tenant, they should negotiate longer term renewal options so short term sales aren't much of a factor. \n\nSales can also work in a tenants favor. They are more likely a more profitable company and better credit to demand better rent than a new business concept that might be bankrupt in a year.", "replies": [], "depth": 3}, {"id": "ifxxskx", "text": "This is the right concern, but I would t stress over this too much.  I\u2019m a retail landlord and I use tenant sales for a lot of things:  identifying trends between location/categories, assessing risk of tenant failure, and yes as negotiating leverage.    I have metrics on healthy rent/sales ratios for all retail/food/service categories, and if I have a tenant renewing at a very low (relative to healthy) sales ratio, the rent is definitely going up.     \n\nThe good news is I have no incentive to jack the rent up to the point the tenant is not making money, and it only happens if the tenant is very successful, so focus on running a good operation and hope your successful enough that your landlord can pressure you.   \n\nOn a side note, so it\u2019s not all bad news, we do use sales to measure how successful we are at managing the property.   Rising sales for our tenants equals success (because rising sales means rising rents), and when we make changes in one location that results in increased sales, we roll that change out in other locations.  So retailers can actually benefit from reporting sales.\n\nAlso as a non-economic part of a lease it\u2019s the first thing a commissioned leasing agent will drop in the negotiation, so push back on it if your worried.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ifuphps", "text": "Quarterly sales is a bit much. Annual sales are what most of my national tenants report.", "replies": [{"id": "ifutgk3", "text": "Plenty of retail tenants report monthly. It\u2019s just gross sales, so unless you\u2019re running cash receipts it\u2019s a pretty quick report.", "replies": [], "depth": 2}, {"id": "ifwk40p", "text": "I have quarterly P&amp;L for the unit for a Buffalo Wild Wings property. Not uncommon.", "replies": [{"id": "ifwkgh8", "text": "Franchisee or corporate?", "replies": [{"id": "ifyjmen", "text": "Corporate lease guaranteed by the Corporate. All my contacts inside the company are in Company HQ.", "replies": [{"id": "ifzi8gq", "text": "Wow good to know", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ifupw0a", "text": "Yes this is pretty normal in retail. Some of the bigger tenants will fight this clause and often win, but since you\u2019re posting here I\u2019m guessing you don\u2019t have that kind of clout. The purpose is for the LL to know how you\u2019re doing and the likelihood that you will renew at lease expiration. Not necessarily to jerk you around on a renewal rate though, hopefully you have options with fixed rates built into the lease. Also, if the LL ever decides to sell in the future, potential buyers like to see that the tenant is doing well so they include the clause to ensure they have access to that information. If it\u2019s a minor concern to you, you could always negotiate to have the clause burn off after a few years, that way they can see/demonstrate you are doing well but won\u2019t be required to give the data in perpetuity.", "replies": [], "depth": 1}, {"id": "ifv523y", "text": "Thanks everyone this was helpful!", "replies": [], "depth": 1}, {"id": "ifvruan", "text": "Yes", "replies": [], "depth": 1}, {"id": "ifvrvne", "text": "We have most smaller businesses report monthly, we don't have any percentage rent component.  \n\nIt's become more difficult to get tenants to agree to that though.  LL's use that to calculate if you are able to afford more rent so it can be used against Tenants in that way.", "replies": [{"id": "ifvsdt0", "text": "If it\u2019s not in the lease do you have to comply? Of course I want to be accommodating to get the lease extension when it\u2019s up in two years", "replies": [{"id": "ifw09u8", "text": "Honestly, they are probably only asking so they know how much rent you can afford on your rent increase so it will work against you.  I would politely say that it's confidential information.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ifw6inq", "text": "If your landlord is insisting, I would counter that only upon an event of default or sublease/assignment you will provide upon written request. This should cover their credit concerns.", "replies": [], "depth": 1}, {"id": "ifwjz2h", "text": "I own a Buffalo Wild Wings restaurant. I get quarterly profit and loss statements of the unit every quarter and at the end of the year. The statement is quite exhaustive - has sales of food, alcohol, credits given, net sales, labor, ad spend... you name an expense category, it is there. So, yeah, landlord asking those details, if that's what was negotiated during the ease, is not uncommon.", "replies": [], "depth": 1}]