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Why 'Combining' Holiday
Percentage Rent Makes Sense

Dear Friend,

In a recent update, I offered a brief explanation of the basic 'rent structure' for carts or kiosks.

For those of you that missed the basic explanation of 'Base Rent' and 'Percentage Rent', you can check out THAT update here:

http://www.kioskexpert.com/percentage-rent-081106.htm

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Now, I'll be the first to admit that 'Rent Structure' is NOT the most EXCITING topic to discuss in the world of carts and kiosks.

But it IS important to UNDERSTAND how the rents work, and the IMPACT 'Rent Structure' can have on your bottom line...

... so that you can ultimately put yourself in the BEST POSSIBLE situation to make your venture a WINNING and PROFITABLE one.

Brady Flower has FREE Kiosk Profit tips for you!
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Typically malls package TOGETHER the November and December months into a single 'Holiday Package'. 

Some malls, ESPECIALLY ones that are in great demand, may require October or January (or both) in the package. But in MOST situations, it's November and December that are packaged together.

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Now, many malls will structure the rent so that TOTAL base rent for the two month period is COMBINED into one rent payment... and percentage rents are figured on that combined total.

For example, a mall might charge a base holiday rent of $9000 for the two months... November and December... and a percentage rent of 15% over $60,000 in sales.

So you owe $9000 'up-front'... and if your sales are OVER $60,000... you owe 15% on the amount over. (Remember how this works?)

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Suppose your sales were exactly $60,000. How much rent would you owe?

Remember, the malls typically want AT LEAST a flat percentage of your sales... in this case at least 15%.

$60,000 x 15% = $9000

So you owe a total of $9000. But you've ALREADY paid $9000 in base rent 'up-front'. You are all paid up! Good scenario

***
However... and THIS is the point of the update today... some malls will SPLIT the holiday rent into two SEPARATE payments, and charge SEPARATELY for the two months.

So... instead of $9000 for the two months... it'll be $4500 for November, and $4500 for December.

This doesn't SOUND like a problem for you at first glance. But let's examine this scenario a little more closely.

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Your ACTUAL sales for the two months probably WON'T be broken down evenly between the two months.

Your December sales are likely to be MUCH higher than your November sales.

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Let's suppose my $60,000 holiday sales are broken down like this... $15,000 in November, and $45,000 in December.

And suppose that the % rents are figured on each month separately.

***
November:

$15,000 x 15% = $2250

You have already paid $4500 so you owe nothing extra.

***
December:

$45,000 x 15% = $6750

You owe an extra $2250 ($6750 less the $4500 you already paid for December.

Net Result:


You end up paying $6750 + $4500 for a total of $11,250... which means an extra $2250 when percentage rents for the two months are figured separately!

And instead of paying 15% for rent, you're now paying 18.75%!

***
So, if you are going in for the two holiday months, you want to ask for the mall to COMBINE rents for the two months together... for the purposes of calculating your percentage rent.

With some developers, you may have to get the deal approved by a higher up... but in many situations, it is the only realistic way you have of keeping your rent cost down to 15%!

***
So that's the update for today!

Keep on being profitable!


Brady Flower
The Kiosk Expert


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