Get Percentage Rent on Vending Machine Revenues

Many retail tenants nowadays install vending machines in their spaces to generate extra revenue. These vending machines (whether coin-, computer-, or credit card-operated) may offer candy, snacks, beverages, cigarettes, or sundry items to customers. But if your retail tenants install vending machines, chances are you're not collecting all the percentage rent you're entitled to.

The problem: Your tenants may be excluding vending machine revenue from their percentage rent calculation. Why? Because the definition of “gross sales” in the lease's percentage rent clause doesn't specifically mention vending machine revenue. Although each sale through a vending machine may generate only a small amount of revenue, the revenue from many sales can really add up—as can the percentage rent you're losing.

You could challenge the tenant for excluding the vending machine revenue—and if the dispute wound up in court, you would probably win. But you would invest a lot of time and money in the process. The typical gross sales definition should be broad enough to include vending machine revenue, even though it doesn't specifically mention that revenue, says national financial management consultant Kenneth S. Lamy.

A better idea is to add language to the lease that helps you avoid the dispute in the first place while getting all of the percentage rent that you're entitled to.

Add Specific Language on Vending Machine Revenue

To make it clear to the tenant that gross sales includes all vending machine revenue collected, add language to the lease specifying that, advises Lamy. Include the following language in the section of the lease's percentage rent clause where it lists which items are included in gross sales:

Model Lease Language

(x) All revenue from vending mach-ines, whether coin-operated, computer-operated, credit-card operated, or otherwise, located within the Premises.

CLLI Source

Kenneth S. Lamy: President, The Lamy Group, Ltd., 650 Poydras St., Ste. 2245, New Orleans, LA 70130; (504) 525-9914; kslamy@thelamygroup.com.