Definition and examples of turnover rent
Find out how the flexible rental model with a base rent and variable portion works, what advantages it offers and what legal aspects need to be considered.
The rent for commercial premises in Switzerland is traditionally often agreed upon as a fixed monthly amount. However, especially in dynamic sectors such as retail or hospitality, a flexible rental model is often desired: the turnover rent. Instead of a rigid rent, a combination of a base rent (minimum rent) and a variable component is defined here, which depends on the turnover generated as a percentage. This model offers opportunities for both contracting parties, but also carries certain risks and requires careful contract drafting. Below you will find a comprehensive overview of how turnover rent works, what legal frameworks apply, and how this model affects practice.
What is a turnover rent?
Turnover rent is a rental model where the final rent is based, at least partially, on the tenant's turnover. Typically, this rent consists of two components:
Base rent (minimum rent): A fixed amount that the tenant always pays, regardless of business performance. This basic rent covers the landlord's main costs and prevents the risk of generating no income at all if the tenant's turnover is weak.
Turnover-dependent component: A contractually agreed percentage of the relevant turnover, which only comes into effect if it exceeds the base rent.
The tenant thus always pays at least the agreed base rent. However, if revenues increase significantly, the rent also increases, because the percentage share then becomes relevant. Legally, this model is supported by freedom of contract (Art. 19 CO). The Swiss Code of Obligations (CO) has special rules for indexed and stepped rents, but not for turnover rent. However, since the rent must be determinable, this mixed form (base rent plus variable component) is permissible in principle. The statutory tenant protection (Art. 269 et seq. CO) usually applies mainly to the base rent, while the turnover component in an ongoing contract is largely subject to the negotiated risk sharing.
Examples of turnover rents
The following example illustrates the principle of flexible rent. Let's take a small retail store in Zurich that agrees on a monthly base rent of CHF 5,000. Additionally, a percentage of 5 percent of the monthly turnover becomes due if the turnover is so high that 5 percent of it exceeds CHF 5,000. In weaker months, only the base rent applies, but with higher turnovers, the rent can increase. The landlord benefits from the success of their tenant but at the same time secures themselves via the base rent. The specific limit from which the percentage rent applies (here CHF 100,000 monthly turnover) acts like a break-even point. Only above this turnover threshold does the landlord earn more than the minimum rent.
How high is the percentage of the turnover?
The question of how high this percentage typically is cannot be answered generally. Often, the percentages are oriented towards the respective industry, the location, and the margin structures of the business. In Swiss retail, you find values between 3 - 7%; in highly frequented shopping centers, it can easily be more. In the hospitality industry, rates are often in the range of 6 - 9%; for fast-food concepts with high customer frequency, up to 14% is possible. These higher values usually reflect the exceptional location quality and the typical profit margins in this segment. As a rule: the lower the base rent, the higher the percentage share often is – and vice versa.
It is important that the distribution of risks and opportunities remains fair and that the business idea is viable for both sides under realistic assumptions. A comprehensive turnover and cost calculation is therefore indispensable. The renting parties should also bear in mind that a high turnover does not automatically lead to higher profits, since, for example, personnel costs or the cost of goods sold also increase.
Turnover rent in retail
Turnover rent in retail is widespread in Switzerland, especially in shopping centers. These are usually actively managed to achieve an attractive tenant mix and high customer frequency. The landlord often sees themselves as a partner to the tenant here, because both have an interest in increasing turnover. In addition to the fixed basic amount, the generated turnover can lead to a significantly higher rent in high-revenue periods, which rewards the landlord's investments in location marketing.
It becomes more complex when brick-and-mortar and online sales merge. With Click & Collect services or online orders picked up in the store, the question arises as to whether and how these revenues are to be included. Therefore, a clear definition in the lease agreement is indispensable. This is the only way to avoid disputes over which revenues are genuinely attributable to the retail store.
Turnover rent in hospitality
The turnover rent model is also widespread in the hospitality sector and occurs in various forms. Often, the percentages are in the mid to upper single-digit range. Due to seasonal fluctuations, weather, and changing trends, turnover can vary greatly. Accordingly, a flexible rental model that provides relief in weak months is attractive for restaurateurs. However, they also have to pay more during peak periods. Especially with fast-food concepts, double-digit percentages are not uncommon, as high revenues per square meter are generated in prime locations.
The exact definition of the relevant turnover is important: What happens with tips? Are revenues from delivery services added? Are commissions deducted? The treatment of cashless payments or online services (e.g. delivery platforms) should also be clearly defined in the contract so that both sides know which revenues serve as the calculation basis.
Legal particularities in Swiss tenancy law
Although turnover rent is not explicitly regulated in the Swiss Code of Obligations, it is based on the general freedom of contract (Art. 19 CO) and the prerequisite that the rent must be determinable. In the event of a dispute, the base rent can be contestable if it appears excessive. The variable component, on the other hand, is viewed as a risk-sharing agreement, which is difficult to challenge on an ongoing basis for being abusive.
Some key points:
Tenant protection (Art. 269 et seq. CO): Usually only applies to the base rent.
Contesting the initial rent (Art. 270 CO): The tenant can also have the turnover rent component reviewed for abusiveness within 30 days after taking over the property.
Notice periods, retention rights and other provisions apply just as with conventional commercial lease agreements.
Because the law does not provide specific rules for turnover rents, all details – from the definition of turnover to reporting and auditing obligations, up to possible operating obligations – must be stipulated in the contract. Unclearly formulated clauses are a frequent cause of conflict.
Particularities and pitfalls
Good contract drafting is crucial for turnover rent. Since the variable rent is not standardized by law, misunderstandings threaten if it is not exactly defined which types of revenues flow into the calculation. The tenant's obligation to disclose turnover figures can also be sensitive because it requires deeper insights into internal business data. The landlord will usually reserve a right to audit to ensure that no turnover is concealed.
Special stumbling blocks:
Information asymmetry: The tenant knows all revenues in detail, while the landlord has to rely on reported figures.
Restricted privacy: Since the tenant may have to disclose business data, concerns regarding trade secrets can arise.
Share of online business: With multi-channel models, complex questions arise regarding the allocation of turnover.
Base rent as a minimum cost block: It helps the landlord to cover fixed costs but can be a burden for the tenant in poor phases.
As already mentioned, both sides should also consider that turnover growth does not always mean proportionally higher profits, since costs for personnel and raw materials usually rise in parallel.
Why a turnover rent is worthwhile
Despite the mentioned risks and potential for conflict, turnover rent certainly has its advantages. It provides a certain risk sharing: in the case of weak business, tenants are relieved; in the case of good turnovers, the landlord benefits. In industries with strongly fluctuating demand – such as seasonal businesses or in hospitality and retail – this often represents a sensible solution. Furthermore:
Common interest: Both sides have a concrete interest in developing the business in the best possible way. The landlord can actively invest in marketing in a shopping center or a restaurant strip to increase the turnover of all tenants, from which they directly benefit under the turnover rent model.
Location promotion: Due to the variable component, landlords are often eager to make their property attractive (e.g. good accessibility, modernized building, advertising campaigns).
Predictable base rent: The minimum amount secures a calculable baseline income for the landlord, while the tenant knows that they only pay more above a certain turnover level.
In this respect, a well-designed turnover rent can create a win-win situation in which both parties cultivate not just a pure lease agreement, but a kind of partnership relationship.
Conclusion
Turnover rent is particularly popular in Switzerland in industries with fluctuating demand and high margin pressure. It offers flexibility, but also requires thorough contractual drafting, as the Code of Obligations provides no detailed guidelines here. At its core, it combines a base rent with a variable, turnover-dependent component that only takes effect above a defined break-even point. If the business is successful, payments increase, compensating the landlord for the shared risk. At the same time, tenants are not burdened by an overly high fixed rent during poor phases.
It is important to clearly regulate all details contractually – from the exact definition of turnover to auditing rights, reporting deadlines, and possible operating or non-competition clauses. For tenants, the affordability of the base rent is crucial, as it represents an existential financial lower limit. Landlords should bear in mind that they benefit in the long term from a competent, successful tenant if they realistically assess their turnover potential and agree on fair conditions. Thus, a turnover rent can be a genuine win-win solution in the long run that does justice to the interests of both sides and opens up new opportunities in demanding, highly competitive markets.