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Operator playbook
Occupancy cost is rent plus tax, insurance, and CAM, divided by sales. Here’s the benchmark, how to calculate it, and what I did when a location ran hot.
Your restaurant’s occupancy cost should run about 6–10% of sales — rent plus property tax, building insurance, and CAM, divided by total sales. Full-service concepts target the lower end; quick-service and prime locations run higher. Over 10%, the fix is rarely the lease itself — it’s sales volume and the two costs next to it, food and labor.
Occupancy cost is the full cost of the roof over your restaurant, not just the rent line:
Add those up for the month, divide by that month’s total sales, and multiply by 100.
Occupancy cost % = (rent + property tax + insurance + CAM) ÷ total sales × 100
The widely-cited industry benchmark is 6–10% of sales — confirmed across restaurant-finance sources including NetSuite’s 2025 restaurant benchmarks and multiple restaurant CPA practices. Where you sit inside the range depends on your model:
| Concept | Occupancy cost, % of sales | What the number means |
|---|---|---|
| Full-service / independent restaurant | 6–8% | The target range. Most independents that hold this range are not fighting their rent. |
| Quick-service / high-traffic prime location | 8–10% | Defensible when the location itself drives the volume that carries it. |
| Any concept | over 10% | Rent is eating margin that should be yours. Survivable only while sales stay strong. |
Say you pay $8,000/month base rent, and property tax, insurance, and CAM add another $1,500/month. Your occupancy cost is $9,500/month. If that location does $120,000/month in sales:
$9,500 ÷ $120,000 × 100 = 7.9% — right in the healthy range.
Drop sales to $85,000 in a slow month and the same rent becomes 11.2% — that’s the trap. Your occupancy percentage moves every month even though the rent check doesn’t, which is why you watch it monthly, not once at lease-signing. (Figures here are an illustrative example, not benchmark data.)
I signed leases that looked fine on paper and ran hot the first slow season. What actually moves the number:
Occupancy, food cost, and labor cost move together. The number that ties food and labor together is prime cost; occupancy sits alongside it. Watch all three on one screen and you stop guessing which one is bleeding.
Last updated: . Draws on industry-standard operational data plus 14 years operating Mouton’s Bistro & Bar (Cedar Park, TX) and Mouton’s Southern Bistro (Leander, TX).
The total cost of your space: base rent plus property tax, building insurance, and CAM charges, expressed as a percentage of sales.
Add rent, property tax, insurance, and CAM for the month, divide by that month’s total sales, and multiply by 100.
About 6–10% of sales. Full-service concepts target 6–8%; quick-service and prime locations run 8–10%. Above 10% means rent is eating margin you should keep.
Drive sales first (the fastest lever), renegotiate at renewal with sales-per-square-foot data, and check whether food and labor cost are also high — if so, prime cost is the real problem.