Opening a Venue at Qiddiya: Fixed Rent or Turnover Rent, Worked Through

An illustrative comparison for a food and beverage tenant in a new destination, showing how rent structure shifts ramp-up risk between tenant and landlord.

Qiddiya is a PIF-backed entertainment, sports and culture destination near Riyadh. Tenants who open restaurants, shops or leisure concepts there face a new destination's classic problem: visitor numbers build over time, while rent is due from the first day. Whether you agree fixed rent or turnover rent can decide whether the first years are survivable, as the illustrative example below shows.

The situation

A foreign restaurant brand is offered a 200 square metre unit in a new destination and can choose between a fixed annual rent and a rent set as a share of sales. It wants to compare both across the first three years.

Assumptions (illustrative)

• Assumed fixed rent: SAR 1,500 per square metre per year, so SAR 300,000 per year.
• Assumed turnover rent: 12% of sales, with no minimum.
• Assumed sales: SAR 2,000,000 in year 1, SAR 2,800,000 in year 2, SAR 3,500,000 in year 3.
• Assumed low case for year 1: sales of SAR 1,200,000.
• Assumed gross margin: 65% of sales.
• Assumed operating costs before rent: SAR 900,000 in year 1, rising to SAR 1,100,000 in year 3.

Step 1: Year 1 profit before rent, base case

SAR 2,000,000 multiplied by 0.65 equals SAR 1,300,000; minus SAR 900,000 equals SAR 400,000.

This is what the restaurant earns before paying for the space.

Step 2: Year 1 result under each rent

Fixed: SAR 400,000 minus SAR 300,000 equals SAR 100,000. Turnover: 12% of SAR 2,000,000 is SAR 240,000; SAR 400,000 minus SAR 240,000 equals SAR 160,000.

In the base case turnover rent is cheaper in year 1, because sales have not reached the level where 12% exceeds the fixed rent.

Step 3: Year 1 low case

SAR 1,200,000 multiplied by 0.65 equals SAR 780,000; minus SAR 900,000 equals a loss of SAR 120,000. Fixed rent makes it a loss of SAR 420,000; turnover rent of SAR 144,000 makes it a loss of SAR 264,000.

If the destination ramps up slowly, turnover rent cuts the first-year loss by SAR 156,000.

Step 4: Break-even sales between the two structures

SAR 300,000 divided by 0.12 equals SAR 2,500,000.

Below SAR 2,500,000 of annual sales turnover rent is cheaper; above it, fixed rent is cheaper.

Step 5: Year 3 result, base case

SAR 3,500,000 multiplied by 0.65 equals SAR 2,275,000; minus SAR 1,100,000 equals SAR 1,175,000. Fixed rent leaves SAR 875,000; turnover rent of SAR 420,000 leaves SAR 755,000.

Once the destination matures, turnover rent costs SAR 120,000 more that year.

Step 6: Three-year rent total, base case

Fixed: SAR 300,000 multiplied by 3 equals SAR 900,000. Turnover: SAR 240,000 plus SAR 336,000 plus SAR 420,000 equals SAR 996,000.

Over three years turnover rent costs SAR 96,000 more in the base case. That is the price of protection against a slow start.

What changes the answer

• A lower turnover percentage, such as 10%, moves the break-even sales level to SAR 3,000,000 and makes turnover rent cheaper for longer.
• A hybrid of a low base rent plus a smaller turnover share splits the risk more evenly.
• Fit-out contributions from the landlord can matter more than the rent structure in year 1.
• If visitor numbers ramp up faster than expected, fixed rent becomes the better deal earlier.

What the numbers tell you

• In a new destination, turnover rent works as insurance against a slow ramp-up.
• The break-even sales figure turns a negotiation about percentages into a question about realistic sales.
• Tenants should model a low case, not only the landlord's projected visitor numbers.
• Rent reviews and the switch point between structures deserve as much negotiation as the headline rent.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

If a Vision 2030 programme or market trend is shaping your investment case, Domira can test it against real land, construction costs and local demand in the city you are considering before you commit capital.