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So I'm only hearing one side of this story, but the council run country park near us has apparently tried to put up the lease on the cafe at the site from £18k to £30k, and then added a clause to get an additional amount on top depending on profit.
Its a long standing family owned cafe, employs half a dozen permanent staff and a simar number of weekend staff. Been there 20 years and now saying tbey will close, which is a shame, their scones were epic.
As i say, only getting one side but never heard of a landlord changing terms to ask for a share of profits?
Sounds like they want to have their cake and eat it.
I wouldn't agree to that. Would they conversely contribute if the company lost money and ended the year in the red? Might have a case under the unfair contract terms act 1977, I doubt the 66% uplift can be justified by inflation, market rate increases etc.
It's pretty common with sales of council land to have a clause based on profits from development. Seems sensible to make sure they aren't letting assets go too cheaply. Does seem a bit odd in this context but again it's important for the council to get good value for money. If they can find someone who'll take it on like that then good for them. If they can't then maybe the current tenant can get it at a better price.
If they can’t then maybe the current tenant can get it at a better price.
This is the final best offer from the council after some negotiation. Be interesting to see how quickly someone takes it on in tbe New Year.
In answer to OP question, it's not uncommon to add % profit clause, also a lot of other factors we would need to know to review a valuation, but yes not unusual for commercial premises.
Happened to a cafe on my local route a few years ago, albeit a charity not a council. The lady had had the lease for quite a while and the charity decided to up the rent by well over double making it not possible for her to continue. Luckily the charity opened their version of the cafe after she left… and it’s now staffed by volunteers
There's an easy fix. Owners register a company that owns the naming rights. Café company pays a licensing fee to rights owning company to use the name smd brand rights, equivalent to the profit. Job done.
Good enough for the multinationals, good enough for anyone else too 👍
There’s an easy fix.
There will likely be clauses in the lease to avoid such shenanigans.
In regards to the original question, quite common for these kind of setups.<br />Either percentage of profit, or even percentage of turnover. Some agreements even only have a nominal fixed rental fee, with the vast majority based on a percentage.
In regards to the original question, quite common for these kind of setups.Either percentage of profit, or even percentage of turnover. Some agreements even only have a nominal fixed rental fee, with the vast majority based on a percentage.
Thanks for clarifying it, I'd just never heard of it.
I'm surprised % of profit is common. Profit is a conclusion of accountabcy and any business ought to be able to arrange to run at zero profit if it tries hard. If I was a landlord I would go for a % of turnover. Or pasty.
That's where external audits come in.
I've never personally been involved in profit related leases, but did put together a tender that was mostly based on a percentage of turnover.
Generally percentage of profit will be subject to external auditors, with various clauses, and will gauge if the profit is realistic and that you're not (mis)managing things to avoid profit.
As i say, only getting one side but never heard of a landlord changing terms to ask for a share of profits?
Its a bit of an attempt to have cake and eat it on the Council's behalf - putting the rent up by such a large margin is going to reduce / eliminate profits unless the council is planning on doing something in the park that is expected to change in the cafe's fortunes.
I guess a question for the cafe is - what benefit is the park to the cafe? Is the cafe the principal attraction - a great cafe with a park attached? Or is it a fantastic park that the council actively manage and promote, driving customers to the cafe's door? Would a really rubbish, over priced, underwhelming cafe still be busy and lucrative because the park is such a fabulous attraction?
Their question to the council would be what are you doing / planning to do that is going to result in the cafe being more profitable that you're not doing already? Conversely what value or benefit is the cafe to the council? Would there be a toilet available to visitors if the cafe closed down for instance? Would the council cut off its nose to spite its face if the drove the cafe out of business.