Occupancy Cost (Restaurants & Retail)
Short answer
Occupancy cost is total rent, common-area maintenance (CAM), real-estate taxes, and insurance — expressed as a percentage of sales. It is the largest fixed cost most physical businesses carry, and the ratio that's considered healthy varies sharply by format (grocery vs. mall-based specialty retail vs. urban full-service restaurant are not the same game).
Formula
Occupancy Cost (%) = (Rent + CAM + RE Taxes + Insurance) / Revenue × 100
Add every cost of being in the building: base rent, common-area maintenance, property taxes (your share), and property insurance. Divide by revenue for the same period. Multiply by 100.
Why it matters
Occupancy is a fixed cost — it doesn't fall when sales fall, which is why a 2–3% sales decline can swing a healthy single-location business into a loss. The widely-cited operator rule of thumb is that rent + CAM + utilities combined should stay under roughly one day's worth of weekly sales (i.e. about 14% combined). Pure occupancy (excluding utilities) varies by format: quick-service restaurants and grocery stores typically run lower as a % of sales because they have higher revenue density per square foot; mall-based specialty retail and prime urban full-service restaurants run higher because rent and CAM are structurally more expensive.
Benchmarks
People also ask
Common questions about Occupancy Cost (Restaurants & Retail)
What is Occupancy Cost (Restaurants & Retail)?+
Occupancy cost is total rent, common-area maintenance (CAM), real-estate taxes, and insurance — expressed as a percentage of sales. It is the largest fixed cost most physical businesses carry, and the ratio that's con…
How is Occupancy Cost (Restaurants & Retail) calculated?+
Add every cost of being in the building: base rent, common-area maintenance, property taxes (your share), and property insurance. Divide by revenue for the same period. Multiply by 100.
What is a good Occupancy Cost (Restaurants & Retail)?+
A healthy occupancy cost (restaurants & retail) is typically around 1–4% of sales — grocery / big-box retail. Specific targets vary by industry and stage; check our benchmarks above for your sector.
Why does Occupancy Cost (Restaurants & Retail) matter?+
Occupancy is a fixed cost — it doesn't fall when sales fall, which is why a 2–3% sales decline can swing a healthy single-location business into a loss. The widely-cited operator rule of thumb is that rent + CAM + utilities combined should stay under roughly one day's worth of weekly sales (i.e.
See your business's occupancy cost (restaurants & retail).
Paste your numbers and CFO Grade computes this — plus 23 other ratios — in seconds, with your industry's benchmark already loaded.
Related concepts
Where this matters most
See Occupancy Cost (Restaurants & Retail) in the context of restaurants & food service.
Industry-specific benchmarks, common pitfalls, and what lenders look for in this sector.