At the Caterer Middle East Food & Business Conference, a number of F&B operators rallied against the current turnover rent model that sees them paying a percentage of their revenue share to their landlord even when they are not making a profit.
Samer Hamadeh, the founder of Aegis Hospitality which operates Akiba Dori and Stereo Arcade in Dubai, suggested that the government is set to outlaw it with new regulations.
Quoting sources at the Dubai Land Department, Hamadeh says the practice is “going to disappear this year” as it benefits landlords who “want to be part of the success but not part of the failure”.
With landlords taking both rent and a share of the operator’s revenue, Hamadeh said it “doesn’t make sense” and that landlords should “have to pick one”.
When contacted for comment, the Dubai Land Department said that there is no new regulation “at the moment”.
As part of the Rent vs Revenue panel at this year’s conference, a number of panellists spoke out about the turnover rent model.
Nataliya Plotkina, financial analyst at JRG Dubai also said that “12% turnover fees are not sustainable” and called on operators to “start banging the doors” of their landlords to get it changed.
Also agreeing that “the turnover rent model is totally broken” and is “always in the favour of the landlord” was Andre Gerschel, regional director of operations at Baker & Spice.
Gerschel and Hamadeh also questioned the payment of marketing fees to landlords, with Gerschel saying “there’s not a lot of transparency when you pay that to a large mall” and Hamadeh claiming that it is therefore the “malls responsibility to bring in footfall. If you’re failing to bring people in you are failing me as an operator”.
With his Akiba Dori concept at D3, Hamadeh was quick to praise the location for “killing the marketing fee” and bringing everybody’s rent down, but he wants to see more landlords working in partnership with their tenants.