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Don’t get screwed.</text><text x="58" y="258" font-family="Arial,Helvetica,sans-serif" font-size="30" font-weight="600" fill="#6b5b4d">Leases, TI, NNN &amp; buildouts — negotiated in your favor</text><g transform="translate(1010,86)" fill="none" stroke="#C0531F" stroke-width="9" stroke-linejoin="round"><rect x="20" y="40" width="150" height="130"/><line x1="20" y1="40" x2="95" y2="6"/><line x1="170" y1="40" x2="95" y2="6"/><rect x="50" y="80" width="36" height="36"/><rect x="104" y="80" width="36" height="36"/><rect x="74" y="128" width="42" height="42"/></g></svg>

How Do I Negotiate a Kick-Out Clause for Low Sales?

Direct Answer

A kick-out clause (also called a sales-breakpoint termination right) lets you walk away from the lease if your store fails to hit a defined sales threshold — and the move is to set that breakpoint at a number you can defend, measured after 24-36 months, with a low or zero termination fee.

A fair structure: if gross sales are below your breakpoint (commonly $X per square foot, often set at the level where the location stops being worth the rent) by the end of a measuring period, you may terminate with 6 months' notice. The strongest deals carry no penalty; weaker tenants accept a fee equal to unamortized TI and leasing commissions only — never a full rent acceleration.

The move: tie the breakpoint to a sales number, measure it early enough to act, keep notice short, and cap the exit fee to the landlord's unrecovered costs. A kick-out clause turns a 10-year lease into a paid trial run — it is the single most powerful protection a retail or restaurant tenant can win, and it costs the landlord nothing unless your store actually fails.

Why a Kick-Out Clause Matters More Than Almost Any Other Term

A bad retail location can bleed you for years. A kick-out clause caps that downside. Without it, you are trapped paying base rent plus NNN charges on a dying store until the term ends or you scramble to find an assignee — and assignees are scarce for a location that already failed.

With a kick-out, you get a clean, pre-negotiated exit if the location underperforms: no litigation, no buyout fight, no personal-guaranty nightmare dragging on for years. Landlords resist it because it shifts location risk back to them, which is exactly why it's worth fighting for.

The clause forces the landlord to share the bet that the site actually drives the traffic they promised.

The Levers That Make or Break the Clause

• The breakpoint number. This is everything. Set it at the gross-sales level where the store is no longer viable, not at a fantasy figure the landlord prefers. Many deals use a dollars-per-SF figure or a multiple of base rent (for example, sales below 8-10x annual rent). Run your real break-even before you negotiate it.
• The measuring period. Measure at the end of year two or three, not year five. You need to exit before the losses compound. Push for a trailing-12-month measurement so one bad month doesn't decide it — and so a strong holiday quarter doesn't mask a weak year.
• Notice period. Shorter is better for you. Aim for 3-6 months. Landlords want 12 so they can backfill — trade other points to keep it short, because every extra month of notice is another month of losses you eat.
• The termination fee. Best case: zero. Acceptable: a fee covering only the unamortized TI and unamortized leasing commission, prorated down over time. Reject any clause that makes you pay accelerated future rent — that converts an exit into a buyout.
• Co-tenancy linkage. If an anchor tenant (the big box that draws traffic) goes dark, you should get a parallel kick-out or a rent reduction to a percentage-rent-only basis until the anchor is replaced.

What to Ask Before You Sign

• "What sales breakpoint triggers my termination right, and how is gross sales defined?" (Exclude returns, gift cards, and online orders shipped from elsewhere.)
• "When is the measuring period, and is it a trailing-12-month figure?"
• "What notice must I give, and is there any fee?"
• "Is the fee limited to unamortized TI and commissions, and does it decline over time?"
• "Does an anchor going dark trigger a co-tenancy remedy?"
• "Is the right a one-time window or does it repeat if I miss the first measurement?"

Traps That Kill the Clause's Value

• A breakpoint set impossibly low. Landlords set the threshold so low you'd have to be nearly bankrupt to qualify. Anchor it at a realistic viability number tied to your actual break-even, not theirs.
• Measuring too late. A year-5 measurement on a 10-year lease is almost worthless — you've already paid five years of losses. Demand an early measuring window while the wound is still small.
• Fee disguised as rent acceleration. Some "kick-out" fees secretly equal all remaining rent. That's not an exit; it's a buyout. Cap it to unrecovered landlord costs and make those costs amortize down.
• Vague sales definition. If "gross sales" includes things you don't actually collect, you'll never hit the breakpoint. Pin the definition down precisely and exclude pass-through items.
• One-shot windows. Some clauses give you a single 30-day window to exercise, then it vanishes forever. Negotiate a rolling or repeating right so a near-miss doesn't lock you in for the full term.
• Recapture in disguise. Watch for a landlord "recapture" right that lets *them* terminate and seize your built-out space cheaply. Keep the kick-out tenant-controlled.

A Quick Worked Example

Suppose your base rent runs $120,000/year and your break-even needs roughly $1.2M in gross sales. Set the breakpoint at $1.0M trailing-12-month sales measured at month 30, with 4 months' notice and a fee limited to unamortized TI. If sales come in at $850,000, you give notice, pay only the small unrecovered TI balance, and walk — instead of grinding through seven more years of a money-losing store.

That single clause can be the difference between a manageable setback and a business-ending lease.

FAQ

What is a fair sales breakpoint for a kick-out clause? Set it where the store stops being worth the rent — frequently expressed as sales below 8-10x annual base rent or a dollars-per-SF floor. The number should reflect real viability tied to your break-even, not a figure the landlord designed to be unreachable.

When should the sales be measured? At the end of year two or three, on a trailing-12-month basis. Measuring later defeats the purpose — you want to exit before losses pile up across the term, and the trailing window smooths out seasonal swings.

Should I expect to pay a termination fee? The best deals carry no fee. If a fee is unavoidable, limit it to the landlord's unamortized TI and leasing commissions, declining over time. Never agree to a fee that equals accelerated future rent, which turns an exit into a buyout.

What is co-tenancy and how does it relate? Co-tenancy protects you if a major anchor tenant closes and traffic collapses. A strong lease pairs the sales kick-out with a co-tenancy remedy — either a parallel termination right or a drop to percentage-rent-only until the anchor is replaced.

Sources

• CBRE — Retail leasing and co-tenancy / kick-out clause guidance
• JLL — Tenant representation: retail sales breakpoints and exit rights
• Cushman & Wakefield — Retail lease structuring and termination research
• NAIOP — Commercial leasing and risk-allocation standards
• BOMA International — Lease administration and operating-cost practices
• IREM (Institute of Real Estate Management) — retail lease management
• Tenant-rep broker commentary on kick-out and co-tenancy negotiation