KIT: The revenue-sharing model in retail
Strategic tools for the practising manager
Retailers today are opting for revenue-sharing arrangements with reality companies to counter high rentals.
The revenue-sharing model acts as an incentive for mall owners to make their malls successful rather than just pocketing fixed monthly rentals.
Revenue-sharing is usually entered into with large retail chains having books of accounts which they are willing to share so that property owners are assured of revenues. Deciding the level of revenue-sharing depends on the rent earned by similar properties, size of the property, facilities offered by the mall, tenant mix and so on.