Business Idea: Renting Space for a Percentage of Profits

I see more and more little stores having to move locations due to high rent fees. I hear stories about a local mall that raises the rent during Christmas time, which coincides with the time of year when stores are finally making their profit for the year. And apparently, the raise is too high making it difficult for the stores to survive.

I have been reading articles such as how communities are working together to promote business and better lives for the folks that live in the community. For instance: How Seattle Made Dark Alleys Safer and how one company is helping its workers own homes in just a few years. These are examples of thinking outside of the box and coming up with awesome solutions.

What if business property owners charged a percentage of your profits instead of a set rate? So, when you are just starting out, your rent is low – say $100 a month. There should be some kind of minimum based on the area. Then, once a percentage of what you make exceeds the base rent, you would add that on to what you pay.

For instance, say the base rent is $100 a month and you agree to pay the $100 a month or 10% of your profits, whichever is greater. By month 3, you are making $2000 a month in profit. Now you are paying $200  a month.  In month 4, you make $5000 in profit, then you would pay $500.  Say that month 6 is slow and you only make $3000, then you would only pay $300.  It seems to me that in the long run, this would be a good business model for property owners and store owners.

It would give store owners a varying amount of capital to increase their business with based on how well their business is doing. This would help prevent businesses that are successful overall to fold due to a few bad months. It would also benefit property owners as it would make the sky the limit. Your profit will rise as the profits of the store increases. And it would make property owners more responsive to the needs of their store. If a store owner says…hey, our profits would be better if you improved the lighting in the store – the property owner then becomes a bit more invested as the store owner’s profits directly affect him.

Probably never happen…just a thought I had.

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