Grocery Store Financial Audit

[Ash Patel]

Hey BP!  Does anyone have referrals for a Grocery store auditor?  We have a tenant that has a $10m rent threshold before they kick up a % of sales.  Of course for years they have been hovering just under $10m.  Would also love to hear any stories of landlords auditing tenant financials.  Thank you!

[Joel Owens]

The grocery store could be hovering because another grocery store opened in the area. I have seen Publix doing 600 a foot in sales and when Kroger opened across the street went down to 450 a foot. Then as population kept growing both still did well.

Grocery makes very little margins in 10% and under range typically it's a volume game for them.

You need to look at lease and how language is written for them to disclose sales. Do they give you general info or agree to a regulated and audited process? Also you need to look at language in the lease and see if it has CPI resets.

Example could say sales above 10 million but then each year adjust for inflation so if next year was 3% now new number is 10,300,000 before they stat paying percentage rent. That is why I like the QSR restaurant ones with no language like that because just with inflation and goods costing more they could do same volume of customer but pay percentage rent. The other way the property owner is (chasing the dragon) hoping monster sales outpace the cpi or inflation adjustment number.