What might be a disadvantage for a tenant in a percentage lease?

In a percentage lease, the tenant pays rent based on a percentage of their sales revenue, which can lead to unpredictable rent expenses. This structure means that as a tenant's sales fluctuate—whether they experience a peak during a seasonal high or a dip during slower periods—the rent will also vary. This unpredictability can make budgeting and financial forecasting challenging for the tenant, as their monthly expenses are not fixed and can change significantly based on their sales performance.

Understanding this aspect of percentage leases is crucial for tenants who must be prepared for the potential financial variability that can result from their sales trends. This can impact their overall profitability and cash flow management. This variability is a clear disadvantage compared to fixed leases where the rent remains consistent regardless of the tenant's sales performance, allowing for easier financial planning.