CRE 101 · deweyluong.realtor

Radius Restriction Explained: How a Georgia Landlord Stops a Retail Tenant From Opening Next Door — and What a Breach Really Costs

A radius restriction is a lease clause that bars a retail tenant from opening or operating a competing store within a stated distance of the shopping center for the lease term. Landlords use it to protect percentage rent: on the made-up example on this page, a 2,000-square-foot Georgia tenant at $30.00 per square foot pays $60,000 a year in base rent and $24,000 of percentage rent on $1,400,000 of sales; when it opens a second store two miles away inside a five-mile radius, the first store's sales fall 25 percent to $1,050,000, percentage rent collapses to $3,000, and the landlord loses $21,000 a year — unless the lease's remedy counts the second store's sales, which on these numbers produces $51,000 of percentage rent instead. 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, center, and prices so every figure can be checked by hand. Real restrictions turn on the exact words signed. This page is general education only, not legal advice — have your attorney review any radius restriction before signing.

What a radius restriction is

• A promise about where else the tenant will trade: the tenant, and usually its affiliates and franchisees, agree not to open, own an interest in, or operate a similar business within the stated radius — commonly three to ten miles, measured from the center — for the lease term and sometimes a tail period after it.
• It exists because of percentage rent: in a center where the landlord shares sales through percentage rent, a second store nearby does not just compete with the landlord's other tenants — it diverts the very sales the landlord is paid on. The restriction protects a revenue stream, not just a feeling about competition.
• Different from an exclusive use clause: an exclusive use clause stops the landlord from leasing to the tenant's competitors inside the center. A radius restriction runs the other way: it stops the tenant from competing with its own store outside the center. Sophisticated retail tenants negotiate both, as a pair.
• Different from a non-compete in a business sale: a sale non-compete is governed by its own Georgia statute and sale context. A radius restriction is a lease covenant between landlord and tenant, and it is read as written — which is why the definitions below matter more than the label.

The five terms that decide what the clause actually catches

• The distance and how it is measured: five miles as the crow flies from the premises, from the center's boundary, or by road miles are three different circles. On a map of Gwinnett's arterial roads, the measurement method can move a target site in or out of the restricted area.
• The restricted business: the clause only bites if the second store is the same or a similar business as the lease defines it — same trade name, same concept, or any business of the type operated in the premises are progressively wider nets. A tenant's different concept may fall outside the clause entirely.
• Who is bound: the named tenant only, or also its principals, affiliates, subsidiaries, and franchisees. A clause that binds the tenant but not its franchisee leaves the most common second-store route — franchising the territory to someone else — wide open.
• The carve-outs: stores already open at signing are normally listed and excluded; so are stores acquired in a chain acquisition above a stated size, stores inside stated venues, and a replacement store if the first one closes. Every carve-out is negotiated, none is automatic.
• The remedy: the clause is only as strong as what happens on a breach — counted sales, a stated payment, termination, or nothing but a damages claim the landlord must prove. This term decides the worked example below.

The worked example, part one: the store the landlord underwrote

• The tenant and the rent: a made-up Georgia specialty retailer leases 2,000 square feet at $30.00 per square foot. Base rent is 2,000 × $30.00 = $60,000 a year — $5,000 a month.
• The percentage rent: the lease adds percentage rent of 6 percent of gross sales above a natural breakpoint. The breakpoint is $60,000 ÷ 6% = $1,000,000 of sales, or $500 per square foot.
• A healthy store: the store sells $1,400,000 a year — $700 per square foot. Percentage rent is 6% × ($1,400,000 − $1,000,000) = $24,000. Total rent is $60,000 + $24,000 = $84,000, exactly 6.00 percent of sales. That sales level is what the landlord underwrote when it granted the space, and the radius is five miles.

The worked example, part two: the second store two miles away

• The breach: in year three the tenant opens the same concept two miles away — inside the five-mile restriction, with no carve-out that covers it. The new store is a lease breach on the day it opens, before any sales figure is known.
• The cannibalization: the first store's sales fall 25 percent, from $1,400,000 to $1,050,000 — $525 per square foot. The customers did not leave the brand; they moved to the closer store. That is the precise harm the clause exists to prevent.
• The landlord's loss: percentage rent is now 6% × ($1,050,000 − $1,000,000) = $3,000. The landlord loses $24,000 − $3,000 = $21,000 a year of percentage rent, every year the diversion lasts, while base rent is unchanged at $60,000. Proving that $21,000 in a damages fight means proving which sales were diverted — an argument about trade areas, not arithmetic.
• The counted-sales remedy: this lease states the cleaner remedy: sales of a violating store inside the radius are counted as gross sales of the leased store for percentage rent. The second store sells $800,000. Combined sales are $1,050,000 + $800,000 = $1,850,000, and percentage rent is 6% × ($1,850,000 − $1,000,000) = $51,000 — instead of $3,000. The remedy converts a $48,000 dispute about diversion into a reporting obligation: $51,000 is simply what the formula produces when both stores' sales are counted.
• Read the three outcomes together: no breach, $24,000 of percentage rent. Breach with a damages-only clause, $3,000 collected and $21,000 to argue about. Breach with a counted-sales clause, $51,000 by formula. Same stores, same sales — the remedy sentence in the lease is worth more than the radius number itself.

Remedies: what the lease can actually do about a breach

• Counted sales: the worked example's remedy. The violating store's gross sales are added to the leased store's gross sales for percentage rent purposes, with reporting and audit rights to match. Self-executing, proportional, and the remedy landlords who understand the math ask for first.
• Termination: some leases let the landlord end the lease of a tenant that trades inside its own radius. Termination punishes the breach but kills the base rent too — $60,000 a year in the worked example — so landlords hold it as leverage rather than use it.
• Damages and injunctions: without a formula remedy, the landlord sues for the percentage rent it lost and must prove diversion store by store, or asks a court to close the second store — slow, expensive, and uncertain. A tenant pricing a second location should assume the fight itself is a cost even when it wins.
• What is not a remedy: a clause with no stated consequence and no percentage rent behind it gives the landlord little measurable loss to recover. Tenants' counsel read radius clauses for exactly this gap; landlords' counsel close it with counted sales.

How tenants negotiate the radius down to something livable

• Shrink the circle and the clock: a three-mile radius for the first five years only is a materially different promise from ten miles for the whole term plus renewals. Distance and duration are both negotiable, and both should be priced against the percentage rent rate the landlord is getting.
• List every existing store: schedule the stores open at signing — including franchisee stores — as permitted exceptions. An unscheduled existing store two miles away is a breach the tenant brought with it on day one.
• Carve out acquisitions and relocations: a chain the tenant later buys should not put it in breach for stores it never chose to open; a standard carve-out covers acquired stores above a threshold and lets the tenant relocate the leased store inside the radius if the original closes, the mirror image of a relocation clause.
• Define the business narrowly: tie the restriction to the trade name and concept actually operated in the premises, not to any business the tenant or its affiliates ever touch. A tenant group with a second, different concept should not need the landlord's permission to grow it.
• Cap the counted-sales remedy: if sales are counted, negotiate that they are counted only while the second store operates inside the radius, and that the tenant can cure by closing or divesting it. A remedy that survives the cure is a penalty wearing a formula's clothes.

Negotiate it at signing: a five-step sequence

• Step 1 — map it before you sign: draw the actual circle on the actual map, by the lease's own measurement method, and mark every site your business might want in the term. In the worked example, the two-mile second store was inside a five-mile circle by any method — no map would have saved it, but the map is what tells you that before the deposit is paid.
• Step 2 — trade radius for rent knowingly: a landlord granting a low percentage rate or a long term will ask for a wider, longer radius. Price the pair together: $21,000 a year of percentage rent was the landlord's stake in the worked example, and that number is the honest size of the promise being bought.
• Step 3 — write the carve-outs as a schedule: existing stores, venues, acquisition thresholds, and relocation rights belong in an exhibit with addresses, not in a recital. What is not scheduled is not carved out.
• Step 4 — settle the remedy in the same paragraph: counted sales with reporting and audit rights, a cure by closing the violating store, and no termination for a first breach the tenant cures. A radius clause negotiated without its remedy is half negotiated.
• Step 5 — raise it in the letter of intent: distance, duration, the restricted business definition, carve-outs, and remedy belong in the letter of intent alongside any exclusive use the tenant is asking for — the two clauses are opposite sides of the same protection and are traded against each other. Then have your attorney conform the final language.

Cho nhà đầu tư và chủ doanh nghiệp người Việt

Điều khoản giới hạn bán kính (radius restriction) là điều khoản trong hợp đồng thuê bán lẻ cấm người thuê mở hoặc vận hành một cửa hàng cạnh tranh trong một khoảng cách quy định tính từ trung tâm thương mại, trong suốt thời hạn thuê. Lý do chủ nhà đặt điều khoản này là tiền thuê theo phần trăm doanh thu (percentage rent): nếu người thuê mở cửa hàng thứ hai gần đó, doanh thu bị chia sang cửa hàng mới và chủ nhà mất phần tiền thuê tính trên doanh thu, dù tiền thuê cơ bản không đổi. Năm điểm quyết định phạm vi của điều khoản là: bán kính và cách đo (đường chim bay hay đường xe chạy, tính từ cửa hàng hay từ ranh trung tâm), loại hình kinh doanh bị giới hạn (cùng thương hiệu, cùng mô hình, hay bất kỳ kinh doanh nào cùng loại), ai bị ràng buộc (chỉ người thuê hay cả công ty liên kết và bên nhận nhượng quyền), các ngoại lệ đã thỏa thuận (cửa hàng đang hoạt động khi ký, cửa hàng mua lại theo chuỗi, quyền dời cửa hàng), và biện pháp xử lý khi vi phạm — đây là điểm quan trọng nhất. Điều khoản này khác điều khoản độc quyền sử dụng (exclusive use), vốn cấm chủ nhà cho đối thủ của người thuê vào trong trung tâm; còn điều khoản bán kính cấm chính người thuê cạnh tranh với cửa hàng của mình ở bên ngoài.

Ví dụ minh họa của trang này: một nhà bán lẻ ở Georgia thuê 2.000 foot vuông với giá $30,00 mỗi foot vuông, tiền thuê cơ bản là $60.000 mỗi năm hay $5.000 mỗi tháng. Hợp đồng cộng thêm tiền thuê phần trăm 6% trên doanh thu vượt mức hòa vốn tự nhiên $60.000 ÷ 6% = $1.000.000, tức $500 mỗi foot vuông. Cửa hàng đạt doanh thu $1.400.000 mỗi năm, tương đương $700 mỗi foot vuông, nên tiền thuê phần trăm là 6% × ($1.400.000 − $1.000.000) = $24.000 và tổng tiền thuê là $84.000. Bán kính giới hạn là năm dặm. Sang năm thứ ba, người thuê mở cửa hàng thứ hai cùng mô hình cách đó hai dặm — nằm trong bán kính và không thuộc ngoại lệ nào — nên vi phạm ngay từ ngày khai trương. Doanh thu cửa hàng đầu giảm 25% xuống $1.050.000, tức $525 mỗi foot vuông; tiền thuê phần trăm chỉ còn 6% × ($1.050.000 − $1.000.000) = $3.000, và chủ nhà mất $21.000 mỗi năm. Hợp đồng trong ví dụ có biện pháp xử lý rõ ràng: doanh thu của cửa hàng vi phạm trong bán kính được tính vào doanh thu của cửa hàng thuê để tính tiền thuê phần trăm. Cửa hàng thứ hai đạt $800.000, doanh thu gộp là $1.050.000 + $800.000 = $1.850.000, và tiền thuê phần trăm là 6% × ($1.850.000 − $1.000.000) = $51.000 thay vì $3.000 — chênh lệch $48.000 được giải quyết bằng công thức thay vì tranh cãi về việc doanh thu bị chia đi bao nhiêu. Khi đàm phán, người thuê nên thu hẹp bán kính và thời gian áp dụng, liệt kê mọi cửa hàng đang hoạt động vào phụ lục ngoại lệ, xin ngoại lệ cho cửa hàng mua lại và quyền dời cửa hàng, định nghĩa hẹp loại hình kinh doanh bị giới hạn, và thỏa thuận quyền khắc phục bằng cách đóng cửa hàng vi phạm. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý; hãy nhờ luật sư xem điều khoản bán kính trước khi ký hợp đồng thuê.

Frequently asked questions

What is a radius restriction in a commercial lease?

A radius restriction is a lease clause that bars a retail tenant from opening or operating a competing store within a stated distance of the shopping center, usually three to ten miles, for the lease term. It protects the landlord's percentage rent: in the worked example on this page, a 2,000-square-foot Georgia tenant at $30.00 per square foot pays $60,000 a year in base rent and $24,000 of percentage rent on $1,400,000 of sales, and the five-mile restriction is what keeps those sales in the store the landlord is paid on.

What happens if a tenant opens a store inside the restricted radius?

The second store is a lease breach from the day it opens, and the consequence is whatever remedy the lease states. In the worked example on this page, the new store two miles away cut the first store's sales 25 percent, from $1,400,000 to $1,050,000, and percentage rent fell from $24,000 to $3,000 — a $21,000 annual loss to the landlord. Because this lease counts a violating store's sales as the leased store's sales, the second store's $800,000 brought combined sales to $1,850,000 and percentage rent to $51,000 by formula instead.

How is a radius restriction different from an exclusive use clause?

An exclusive use clause restricts the landlord: it stops the landlord leasing space in the center to the tenant's competitors. A radius restriction restricts the tenant: it stops the tenant operating a competing store outside the center within the stated distance. In the worked example on this page, the restriction is what stopped the tenant's own second store two miles away; an exclusive use clause would have done nothing about that store, because the landlord did not lease its space.

Can a tenant negotiate a radius restriction down?

Yes — distance, duration, the definition of the restricted business, carve-outs, and the remedy are all negotiable at signing. The standard tenant asks are a shorter radius for a shorter period, a scheduled list of existing stores as permitted exceptions, carve-outs for acquired chains and for relocating the leased store, a restriction tied to the trade name actually operated, and a right to cure a breach by closing the violating store. In the worked example on this page, a three-mile radius would still have caught the store two miles away — which is why the map, drawn by the lease's own measurement method, comes before the negotiation.

Điều khoản giới hạn bán kính (radius restriction) là gì, và người thuê bán lẻ người Việt ở Georgia cần chú ý điều gì?

Điều khoản giới hạn bán kính cấm người thuê bán lẻ mở hoặc vận hành cửa hàng cạnh tranh trong một khoảng cách quy định tính từ trung tâm thương mại trong thời hạn thuê, nhằm bảo vệ tiền thuê phần trăm doanh thu của chủ nhà. Trong ví dụ của trang này, người thuê 2.000 foot vuông giá $30,00 trả $60.000 tiền thuê cơ bản và $24.000 tiền thuê phần trăm trên doanh thu $1.400.000; khi mở cửa hàng thứ hai cách hai dặm trong bán kính năm dặm, doanh thu cửa hàng đầu giảm 25% xuống $1.050.000, tiền thuê phần trăm còn $3.000, và vì hợp đồng tính doanh thu của cửa hàng vi phạm vào doanh thu cửa hàng thuê, doanh thu gộp $1.850.000 cho ra tiền thuê phần trăm $51.000 theo công thức. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý.