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This chart outlines the profitability of renewing a restaurant. The optimal time to let a lease lapse for any restaurant is after month 5 (original purchase + 4 renewals) based on the average profit (Profit LTD/period).
You can see that after month 9, the monthly profit turns into a monthly deficit. After month 14, the restaurant has created a deficit for the amount earned over the entire life of the lease.
Numbers used are for renewing on day 0 of the lease, but assuming no food sales.
30-day period | Terms, lease | Cost, lease | Profit (rev. - lease expense) | Profit LTD |
---|---|---|---|---|
1 | 15000 orig price | 15000 | 1500 | 1500 |
2 | 18750, 15750 back | 3000 | 13500 | 15000 |
3 | 23437,19687 back | 3750 | 12750 | 27750 |
4 | 29296, 24609 back | 4687 | 11813 | 39563 |
5 | 36621, 30761 back | 5860 |
10640 |
50203 |
6 | 45776, 38452 back | 7324 | 9176 | 59379 |
7 | 57220, 48065 back | 9155 | 7345 |
66724 |
8 | 71525, 60081 back | 11444 | 5056 | 71780 |
9 | 89406, 75101 back | 14305 | 2195 | 73975 |
10 | 111758, 93877 back | 17881 | -1381 | 72594 |
11 | 139698, 117346 back | 22352 | -5852 | 66742 |
12 | 174622, 146683 back | 27939 | -11439 | 55303 |
13 | 218278, 183354 back | 34924 | -18424 | 36879 |
14 | 272848, 229192 back | 43656 | -27156 | 9723 |
15 | 341060, 286490 back | 54570 | -38070 | -28347 |