What is likely to happen as a tenant's business grows in the context of a percentage lease?

In a percentage lease, the tenant pays a base rent along with a percentage of their sales revenue to the landlord. As the tenant's business grows and generates more sales, the percentage payment increases, leading to higher overall rent. This structure is designed to align the interests of both the landlord and the tenant; as the tenant succeeds and profits, the landlord benefits through a proportional increase in revenue.

This type of lease is particularly common in retail and service-based industries where sales may fluctuate significantly. A growing business indicates success and higher sales volumes, which directly affects the total amount payable under this lease structure. Therefore, when considering the dynamics of a percentage lease, it is clear that an increase in business performance correlates with an increase in the percentage rent component.