I have noticed a change in lease terms being offered to newsagents in shopping centres by some landlords. A couple of landlords who were being inflexible on rent are now offering at a more competitive rate. Their approach suggests to me that they better understand the typical newsagency operation and have now factored this into their lease pricing model for our type of business.
This change, if it is more than a one or two off, would be a good news indicator for newsagents and would-be newsagents.
The other change I have noticed is that landlords are more interested than ever in what a tenant will bring to the centre in terms of retail offer and new traffic. They are listening to and considering this. They are starting to discern a difference between the various newsagency banner groups as well as the difference between a newsagency unbranded and one being part of a group.
Is there a rule of thumb or formula that the leasing gurus use to set a rental based on turnover or sales. Sometimes a business is not profitable simply because the tenancy is to big and the rent kills it. If the size were reduced and the sales maintained or are reduced by 10% or so the business will become viable. can anyone help.
Wally, we recently reduced our premises by 12% thus saving (prior to sharing a fair portion of the costs involved) 12% of rent.
We still have a very large newsagency for a shopping centre, 250 sqm, but would struggle to fit into anything smaller and retain our current range. Our rent is very reasonable and on of the things the centre owners have taken into account is the promotional value to the centre gained due to our branding and this has been beneficial to our regarding outgoings. Our rent was above the 10-12% max of turnover considered right for our industry but will now be close to that figure and we expect that by fully utilising the promotional opportunites available thre a banner group, GNS etc, we will lift sales to a point where our rent ratio is favourable.
If you can reduce the size of your shop without impacting sales and use some of those saving in promoting the business then things should turn around. From our experience there is a short term impact on sales and a lot of hard work and long hours in such a change but we are sure that the next major seasonal event will reap the benefits at that it should be full steam ahead from there.
Hope it goes well for you Wally
Thanks Brendan. 10-12% of annual turnover=annual rent? What happens in regard to Lotto sales i would assume they would not be included in total turnover.
Wally the goal for a newsagent needs to be an occupancy cost of 11% or less.
wally has asked a very good question. Basically commission sales (Tatts or otherwise) are gross margin. So is the rule of thumb 11% of gross margin or not. If it isnt how do you treat commission sales when applying the rule of thumb?
Barry, as covered many times here: any time sales is used, it is sales of products and commissions on agency lines like transport tickets, event tickets, lottery products and phone recharge.
Landlords accept this approach as well.