CRE 101 · deweyluong.realtor

Percentage Rent Explained: How a Georgia Retail Tenant Pays Rent on Sales — and Why the Breakpoint Decides Everything

Percentage rent makes a retail tenant pay a stated percentage of its sales above a breakpoint, on top of base rent — the landlord shares only after sales pass a line set in advance. On the made-up example on this page, a 2,500-square-foot Georgia retail tenant at $30.00 per square foot pays $75,000 a year in base rent, and at 6% its natural breakpoint is $1,250,000: a strong year produces $36,000 of percentage rent, a negotiated lower breakpoint costs $15,000 more, and a low year below the breakpoint produces $0. By Túy “Dewey” Luong, CCIM — Founding Broker, SERHANT. Atlanta · 318 closed sales / $281.2M career volume · 678-707-2498 · dewey.luong@serhant.com · https://deweyluong.realtor

The worked example uses a made-up tenant and sales figures so every figure can be checked by hand. Real leases turn on the exact words signed. This page is general education only, not legal advice — have your attorney review any percentage rent clause before signing.

What percentage rent is

• Base rent plus a share of sales: the tenant pays fixed base rent every month, plus a percentage — the percentage rent rate — on gross sales above a stated level called the breakpoint. Below the breakpoint, no percentage rent is owed at all.
• Common in retail, rare elsewhere: percentage rent appears in shopping centers, restaurants, salons, and specialty retail, where sales are rung up on site and the location helps produce them. It is rare in office or industrial leases.
• Three numbers decide everything: the base rent, the rate, and the breakpoint. A friendly rate with a low breakpoint can cost more than a higher rate with a high one, so negotiate it as a package, alongside the NNN lease charges and the term.
• It is additional rent: usually paid monthly on reported sales, reconciled after year end, with underpayments treated like unpaid rent.

Natural vs artificial breakpoint: the line that decides when the landlord starts sharing

• The natural breakpoint is arithmetic: it is the sales level at which the rate, applied to all sales, would exactly equal the base rent. Divide annual base rent by the rate and the line falls out.
• Why “natural” matters: above it, total rent is simply the rate multiplied by sales — the landlord collects the stated percentage of every sales dollar, with base rent as the floor.
• An artificial breakpoint is a negotiated line: the lease sets the breakpoint below — or occasionally above — the natural figure. A lower line means the landlord shares sooner, and the tenant pays more at the same sales and rate.
• Read a low breakpoint as a rent increase: a landlord who concedes on base rent but cuts the breakpoint has often taken the money back through the percentage clause. Model both lines on expected sales before signing.

The worked example, part one: the breakpoint math

• The tenant: a made-up Georgia retail tenant in 2,500 square feet at $30.00 per square foot. Annual base rent is 2,500 × $30.00 = $75,000 a year — $6,250 a month.
• The rate: percentage rent is 6% of gross sales above the breakpoint. Only sales above the line are charged — the rate never applies to the first dollars below it.
• The natural breakpoint: $75,000 ÷ 0.06 = $1,250,000 in annual sales — $1,250,000 ÷ 2,500 = $500 per square foot, the sales productivity the store must reach before the landlord shares anything.
• Check the identity: at exactly $1,250,000 of sales, 6% of sales is $75,000 — precisely the base rent. At the natural breakpoint the two rent systems meet, and above it they merge into one.

The worked example, part two: the strong year, the artificial breakpoint cost, and the low year

• The strong year, defined sales: the store reports $1,900,000 of gross sales, less $50,000 of defined exclusions — returns and refunds — for $1,850,000 of defined gross sales, or $740 per square foot.
• Percentage rent at the natural breakpoint: the excess is $1,850,000 − $1,250,000 = $600,000. Percentage rent is 6% × $600,000 = $36,000. Total rent is $75,000 + $36,000 = $111,000.
• The teaching point: above a natural breakpoint, total rent always equals the rate times sales — 6% × $1,850,000 = $111,000 — so occupancy cost is $111,000 ÷ $1,850,000 = 6.00% of sales, exactly the stated rate.
• The artificial breakpoint cost: at an artificial breakpoint of $1,000,000, the excess is $1,850,000 − $1,000,000 = $850,000 and percentage rent is 6% × $850,000 = $51,000 — $15,000 more than the $36,000 at the natural breakpoint. Total rent becomes $126,000; occupancy rises to $126,000 ÷ $1,850,000 = 6.81%. The line alone cost $15,000.
• The low year: sales fall to $1,100,000, or $440 per square foot — $150,000 below the natural breakpoint. Percentage rent is $0; total rent is the $75,000 of base rent only. Occupancy cost is $75,000 ÷ $1,100,000 = 6.82%, because fixed base rent is spread over fewer sales dollars.

What counts as gross sales: the definition is the clause

• Start with the lease's definition: “gross sales” means whatever the lease says — usually all revenue from the premises, minus a negotiated list of exclusions, as the worked example subtracted $50,000 of returns and refunds.
• Returns and refunds: standard exclusions — a sale that is unwound was never really a sale — but only when the lease says so in words.
• Taxes and pass-through amounts: sales tax collected for the state is the customer's money in transit, not revenue. Negotiate its exclusion expressly.
• Gift-card sales until redemption: a gift card sold in December is cash, not a completed sale; the sale happens when the card is redeemed for goods. Negotiate that gift-card receipts count on redemption, not on purchase, so the same dollars are not counted in the wrong year.
• Online orders shipped from the store: the modern fight. Landlords argue an order shipped from the premises is a sale of the store; tenants argue it is a channel sale the store merely fulfilled. Settle store-fulfilled online orders, buy-online-pick-up-in-store orders, and department or subtenant sales in writing.

Reporting and audit rights: how the landlord checks, and how the tenant proves

• Monthly statements: the tenant typically reports gross sales monthly, within a stated number of days after month end, paying estimated percentage rent with the report when sales run above the breakpoint.
• Annual certification: after the lease year closes, the tenant delivers a certified annual statement — often signed by an owner or officer — and the parties reconcile estimates against it.
• The landlord's audit window: the lease gives the landlord a stated period — commonly one to two years after the statement — to audit the tenant's sales records. After it closes, the statement is generally final.
• Records retention: the tenant must keep sales records — register reports, tax filings, bank deposits — for at least the audit period and produce them on request. Above a stated understatement threshold, many leases shift the audit cost to the tenant and add interest or a penalty.

Why landlords want it, and why tenants accept it

• The landlord's upside: percentage rent aligns the landlord with the tenant's success and captures rent the base rent missed when a location outperforms. That participation also supports value when the property is sold on its income.
• The landlord's information: monthly sales reports show which tenants are thriving or failing, long before a default.
• The tenant's reason to accept: a lower base rent in exchange for percentage rent shifts risk to the landlord in weak years — at or below the breakpoint the worked-example tenant owes no percentage rent at all —
• The tenant's discipline: percentage rent is a claim on the tenant's best years, reported monthly, with audit rights behind it. Price it as carefully as rent — the breakpoint choice alone was worth $15,000 in one year of the worked example.

Percentage rent vs base-rent-only, and vs percentage with a cap

• Base-rent-only: the tenant pays fixed rent and keeps every sales dollar. Strong operators often prefer this certainty — and pay for it in higher base rent.
• Percentage rent, uncapped: the worked example's structure. Rent floats with sales above the breakpoint without a ceiling, so an exceptional year produces an exceptional bill.
• Percentage rent with a cap: the lease caps percentage rent, or total rent, at a stated amount, converting an open-ended claim into a bounded one. Landlords trade it for a lower breakpoint, higher rate, or longer term.
• Compare on occupancy cost: divide total rent by expected sales at weak, expected, and strong levels. The worked example produced 6.82% in the low year, 6.00% in the strong year at the natural breakpoint, and 6.81% at the artificial breakpoint — three numbers that show what each structure does.

Negotiate it at signing: a five-step sequence

• Step 1 — run your own sales forecast first: put weak, expected, and strong sales years next to the clause first. The clause cannot be priced without the sales it will be charged on.
• Step 2 — anchor on the natural breakpoint: compute it yourself — annual base rent divided by the rate — and treat any lower, artificial breakpoint as the rent increase it is — dropping the line from $1,250,000 to $1,000,000 cost $15,000 in one strong year.
• Step 3 — negotiate the gross sales definition line by line: returns, taxes, gift cards until redemption, and online orders shipped from the store. Every excluded dollar escapes the rate in every year.
• Step 4 — bound the reporting and audit burden: negotiate a defined audit window, a matching retention period, and a threshold before audit costs shift. Then check the package against your effective rent math.
• Step 5 — raise it in the letter of intent: rate, breakpoint, exclusions, and cap belong in the letter of intent, before drafting. Then have your attorney conform the final language.

Cho nhà đầu tư và chủ doanh nghiệp người Việt

Tiền thuê theo phần trăm doanh thu (percentage rent) là cơ chế trong đó người thuê bán lẻ trả tiền thuê cơ bản cố định, cộng thêm một tỷ lệ phần trăm trên phần doanh thu vượt qua một ngưỡng gọi là điểm hòa vốn (breakpoint). Điểm hòa vốn tự nhiên (natural breakpoint) không phải con số đoán mò: lấy tiền thuê cơ bản hằng năm chia cho tỷ lệ phần trăm. Điểm hòa vốn nhân tạo (artificial breakpoint) là ngưỡng do đàm phán đặt ra, thường thấp hơn mức tự nhiên, và mỗi đô la hạ ngưỡng đều làm tăng tiền thuê mà người thuê phải trả dù doanh thu và tỷ lệ không đổi. Vì vậy, khi xem hợp đồng, đừng chỉ nhìn tỷ lệ phần trăm — hãy tính điểm hòa vốn và so sánh với doanh thu dự kiến của chính mình.

Ví dụ minh họa của trang này: người thuê bán lẻ ở Georgia thuê 2.500 foot vuông với giá $30,00 mỗi foot vuông, tức tiền thuê cơ bản $75.000 mỗi năm hay $6.250 mỗi tháng, và tỷ lệ phần trăm là 6%. Điểm hòa vốn tự nhiên là $75.000 ÷ 6% = $1.250.000 doanh thu, tương đương $500 mỗi foot vuông. Trong năm kinh doanh tốt, cửa hàng báo cáo doanh thu $1.900.000, trừ $50.000 hàng trả lại và hoàn tiền theo định nghĩa đã thỏa thuận, còn doanh thu tính thuê là $1.850.000, tức $740 mỗi foot vuông. Phần vượt ngưỡng là $1.850.000 − $1.250.000 = $600.000, tiền thuê phần trăm là 6% × $600.000 = $36.000, và tổng tiền thuê là $75.000 + $36.000 = $111.000 — đúng 6,00% doanh thu, vì trên điểm hòa vốn tự nhiên, tổng tiền thuê luôn bằng tỷ lệ nhân với doanh thu. Nếu hợp đồng đặt điểm hòa vốn nhân tạo ở $1.000.000, phần vượt là $850.000 và tiền thuê phần trăm là $51.000 — nhiều hơn $15.000 — tổng tiền thuê $126.000, tương đương 6,81% doanh thu. Trong năm yếu, doanh thu chỉ $1.100.000, tức $440 mỗi foot vuông, thấp hơn điểm hòa vốn tự nhiên $150.000, nên tiền thuê phần trăm bằng 0 và người thuê chỉ trả $75.000 tiền thuê cơ bản, dù tỷ lệ chi phí thuê trên doanh thu vẫn là 6,82% vì tiền thuê cố định chia cho doanh thu thấp hơn. Khi đàm phán, cần chốt rõ định nghĩa doanh thu tính thuê: loại trừ hàng trả lại và hoàn tiền, thuế bán hàng thu hộ, thẻ quà tặng chỉ tính khi khách đổi thẻ lấy hàng chứ không tính lúc bán thẻ, và các đơn hàng trực tuyến được gửi đi từ cửa hàng phải được liệt kê rõ là tính hay không tính. Hợp đồng cũng quy định báo cáo doanh thu hằng tháng, chứng nhận doanh thu cuối năm, thời hạn chủ nhà được kiểm tra sổ sách, và thời gian người thuê phải lưu giữ chứng từ. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý; hãy nhờ luật sư xem điều khoản tiền thuê theo phần trăm trước khi ký hợp đồng thuê.

Frequently asked questions

What is percentage rent in a retail lease?

Percentage rent is additional rent equal to a stated percentage of the tenant's gross sales above a sales level called the breakpoint, charged on top of fixed base rent. Below the breakpoint, no percentage rent is owed. In the worked example on this page, a 2,500-square-foot Georgia retail tenant at $30.00 per square foot pays $75,000 a year of base rent — $6,250 a month — plus 6% of defined gross sales above the breakpoint. The rate, the breakpoint, and the lease's definition of gross sales together decide what the clause actually costs.

What is a natural breakpoint, and how is it calculated?

The natural breakpoint is the sales level at which the percentage rate, applied to all sales, would exactly equal the annual base rent: annual base rent divided by the rate. In the worked example on this page that is $75,000 ÷ 0.06 = $1,250,000 of sales, or $500 per square foot on 2,500 square feet. Above a natural breakpoint, total rent always equals the rate times sales, so occupancy cost equals the stated rate — 6.00% in the strong year on this page. A breakpoint set below the natural figure is an artificial breakpoint, and it raises the rent at the same sales and the same rate.

What counts as gross sales for percentage rent?

Whatever the lease's definition says — usually all revenue from the premises, minus the exclusions the parties negotiate. In the worked example on this page, reported sales of $1,900,000 less $50,000 of defined exclusions for returns and refunds produce $1,850,000 of defined gross sales, and only that figure is measured against the breakpoint. The exclusions worth negotiating expressly include returns and refunds, sales tax collected for the state, gift-card receipts until the card is redeemed, and online orders shipped from the store, which landlords and tenants routinely treat differently unless the lease settles the question in writing.

What happens in a year when sales stay below the breakpoint?

No percentage rent is owed, and the tenant pays base rent only. In the worked example on this page, sales of $1,100,000 — $440 per square foot — fall $150,000 below the $1,250,000 natural breakpoint, so percentage rent is $0 and total rent is the $75,000 of base rent. The fixed rent does not shrink with sales, though: occupancy cost in that low year is $75,000 ÷ $1,100,000 = 6.82% of sales, higher as a share than the 6.00% the same tenant pays in the strong year above the natural breakpoint, because the same fixed dollars are spread over fewer sales dollars.

Tiền thuê theo phần trăm doanh thu (percentage rent) là gì, và điểm hòa vốn (breakpoint) quyết định điều gì cho người thuê bán lẻ người Việt ở Georgia?

Tiền thuê theo phần trăm là khoản tiền thuê cộng thêm, bằng một tỷ lệ phần trăm trên phần doanh thu vượt qua điểm hòa vốn, ngoài tiền thuê cơ bản cố định; dưới điểm hòa vốn, người thuê không phải trả khoản này. Điểm hòa vốn tự nhiên bằng tiền thuê cơ bản hằng năm chia cho tỷ lệ phần trăm. Trong ví dụ của trang này, người thuê 2.500 foot vuông giá $30,00 — tiền thuê cơ bản $75.000 mỗi năm — với tỷ lệ 6% có điểm hòa vốn tự nhiên là $1.250.000; trong năm doanh thu tính thuê đạt $1.850.000, tiền thuê phần trăm là $36.000 và tổng tiền thuê là $111.000, trong khi điểm hòa vốn nhân tạo $1.000.000 làm khoản này tăng lên $51.000, nhiều hơn $15.000. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý.