Determining rent based on a business’s gross sales involves a specific formula. For example, a base rent might be $1,000 per month, with an additional 5% of any revenue exceeding $50,000. If the business generates $75,000 in sales, the additional rent would be 5% of $25,000 ($75,000 – $50,000), or $1,250. The total rent for that month would be $2,250.
This approach offers advantages for both landlords and tenants. Landlords can participate in a tenant’s success, potentially earning higher returns when businesses thrive. For tenants, it can offer lower initial rent during the establishment phase, reducing financial burdens when sales are less predictable. This practice has historical roots in sharecropping and similar agricultural arrangements, evolving to suit the modern commercial landscape.