Florida Broker Practice Exam

In the percentage lease formula, what do you subtract from gross sales?

1. Cost of goods sold

2. Sales tax

3. Sales threshold

4. Insurance expenses

The correct answer is: Sales threshold

In a percentage lease formula, the concept revolves around calculating the rent based on a tenant's gross sales. The subtraction of a sales threshold from gross sales is critical because it delineates the point at which the landlord begins to receive a percentage of the sales as part of the lease agreement. The sales threshold is typically a predetermined amount of sales revenue that the tenant must achieve before any percentage rent is owed. This structure is designed to provide tenants with a level of security, ensuring they can cover their costs and generate profit before paying a share of their sales to the landlord. By subtracting the sales threshold from gross sales, landlords can accurately assess how much rent is due based on actual performance above that minimum threshold. This approach encourages tenants to increase their sales while protecting them from paying a percentage on their entire gross revenue, which could be financially burdensome, especially in the initial stages of a business.