Rent multiplied by eight?

Prospective tenants often ask: what is a reasonable lease for a restaurant, hotel or inn? There is a well-known rule of thumb in gastronomy: rent × eight. But what exactly does this mean, and where are its limits?

Tip: Before signing any lease, consult a broker specialising in gastronomy real estate. An experienced, well-informed catering broker knows the history of the property and can research it seriously and thoroughly – helping you judge whether the lease is appropriate. They also assist with negotiations when leasing catering real estate.

Rule of thumb: "Rent × Eight"

In the industry there are approximate guide values that can be used to calculate the lease. Since the value of a catering property depends on a large number of factors, these are often not sufficient on their own to determine the true value or the sales potential of a restaurant, hotel, café or inn.

If a restaurant is available for lease, a rate between 8–12% of annual net turnover is considered economically reasonable. For hotels it is between 15% and 25%. The general rule of thumb for restaurateurs is "rent times eight": if the currently generated or forecast annual net sales are approximately eight times as high as the annual rent, the rent is appropriate. In normal cases, very high lease rates are hardly achievable; they can only be justified in locations with a unique location advantage and enormous sales volume – for example, rest stops on busy motorways, at international airports, or at major sports and event venues.

Condition is crucial

In addition to the turnover, future tenants should check the condition of the property, the equipment and upcoming investments they would have to accept in addition to the lease.

Tip: Check the structural condition of the property carefully. Are repairs or extensions due soon? How good are the devices, equipment, furniture and other items included in the lease? If you are unsure, consult a catering broker who can expertly assess the condition, quality and sustainability of the property.

Reasonably high catering lease

Have you found an offer you like but that seems very expensive? Some restaurants or hotels for lease appear to have a very high lease rate at first glance – but if you look closely, there are often good reasons that justify this price. Is demand particularly high because the clientele may be particularly well-funded? Does the gastronomy have a unique characteristic that no other restaurant, hotel or inn can offer?

Rarity value, uniqueness, monopoly position or a conceptual orientation towards a recurring, very well-off clientele are all reflected in the amount of the lease. For example, a hotel in Munich specialising in Arab guests who regularly spend the summer in the Bavarian capital can command a premium through this tailor-made specialisation – beginning with the furnishings, the culinary offerings and even specially trained staff.

Important before signing the lease

What do future tenants have to consider before signing the lease? To assess the profitability of the business, ask the previous lessee to show you the profit and loss accounts, and look into why they are leaving. Check whether there are any special requirements at the location or property that could limit your operation.

When negotiating, pay attention to the following: Is the location suitable for the planned concept? Are there location-related requirements that restrict business operations? Ensure that all parts of the contract are clearly regulated – especially the lease property with all associated areas (warehouse, garage), the lease purpose, the lease period (limited or unlimited, with or without extension options), and the rent. There are different variants: fixed lease, turnover lease, graduated lease and indexed lease. Check all costs including rent, ancillary costs and deposit, and clarify how contract duration, option rights and termination are regulated.

How high is the broker's commission?

Potential tenants often turn to hospitality real estate agents because the process is complex. Brokers have the best market overview of available catering establishments, can estimate the appropriate lease rate and help with contractual preparations. A commission is usually due for this service, which can be negotiated relatively freely within legal limits. The broker's added value – market knowledge, network, and negotiation support – typically far outweighs the cost.