Permanent location fee

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Ruff84
Posts: 17
Joined: Mon Jan 15, 2018 4:55 pm

Permanent location fee

Postby Ruff84 » Mon Jul 09, 2018 3:46 am

I am talking to a local business to be set up at their location selling my shave ice to their customers and we are negotiating a monthly fee. I was curious to what others on here are doing. They are new to the area and the business is new as well. Is it best to just pay a flat fee each month or to base it off of sales. I can see the upside of doing each, just trying to see what the norm is. This is in a town of 18k people at a go cart track open from Thursday-Saturday. Business hasn't opened yet so traffic is undetermined as of yet.

They started negotiations saying they have "a friend" in Michigan that has a taco truck that gives 40% of sales to their land owner. I scoffed at 40% and told them shaved Ice is different than a taco truck and I wouldn't be getting anywhere close to 40% of sales. We then discussed a flat monthly fee. They wanted $75.00 a week (flat fee) I said we could do a $50.00 a week for the first month and then would could work out more details after that. Maybe I am just cheap by even $50.00 a week seems steep for only being open three days and not on Sunday. There are points to both a percentage base pay and flat rate pay I like. (percentage being if it's slow, the amount I pay goes down as well. Flat rate - If I make a killing the flat rate stays the same and I keep my hard earned profits.)

Just wondering what others are doing in similar situations?

mrjosco
Posts: 30
Joined: Sat Jun 07, 2014 12:48 am

Re: Permanent location fee

Postby mrjosco » Mon Jul 09, 2018 2:27 pm

It is hard to say what is fair, as everything is so different. My fixed location stores are at the entrance to a major grocery store in town. They have no visibility from the road, but every customer who walks in the door has to walk right past my little hut. We pay a fixed monthly fee that is high in the warm months (7 months a year down here) and very low in the winter. We pay for the full year because we have to. If we decide we won't pay then someone else will! Of course, this location brings in 50,000 shoppers per week of foot traffic, so they can charge a premium.

In all honesty, $50 per week doesn't sound too outrageous. Especially as a trial run. The new business will be marketing to drive traffic and you get to enjoy the benefit (maybe). I like the idea of a fixed fee with the goal of having the fixed fee equal around 10% of your net sales (or less).



Things to consider:
Does the location you would be parked at have high visibility? How many cars pass by the road per hour? per day?

What is the speed limit of the road? A high traffic road with 30MPH speed limit is more valuable than the same amount of traffic on a 65MPH road.


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