Why do beauty franchise tenants in small spaces still face significant CAM exposure?

Small footprint does not mean low CAM exposure in percentage terms. A 1,200-square-foot Great Clips in a 15,000-square-foot strip center holds an 8% pro-rata share. If the CAM pool is $120,000, that is $9,600 per year. The rate per square foot may look manageable, but the absolute number matters on a thin-margin P&L, and errors in the pool apply to your share the same way they apply to larger tenants.

What is a controllable expense CAM cap and how does it protect me?

A controllable expense CAM cap limits how much controllable expenses (maintenance, management fees) can increase year over year, usually 3% to 5% annually. Taxes and insurance are typically excluded from the cap. If your lease has a cap and your controllable CAM line increased more than the cap allows between reconciliation years, the overage is a disputable charge.

How is parking lot sweeping and lighting allocated in a strip center?

Parking lot sweeping and exterior lighting electricity are pooled into the CAM pool and allocated by pro-rata share. All tenants in the center contribute to these costs proportionally. If you see direct billing for parking maintenance rather than a pro-rata share, verify whether your lease authorizes direct billing for that specific item.

What is a management fee cap applied to gross revenue instead of controllable expenses?

Some leases cap the management fee as a percentage of gross revenues at the property, not controllable CAM expenses. This produces a much larger allowable fee because gross revenues are a larger base. If your lease defines the cap relative to controllable expenses but the landlord applies it to revenues, the resulting fee overcharges you. The lease language defines the correct base.

Does a beauty franchise in a mixed-use building face different CAM issues than one in a strip center?

Mixed-use buildings with retail and residential or office components often have separate CAM pools for different use categories. Retail tenants should only be in the retail CAM pool. If a beauty franchise in a mixed-use building is being allocated costs from a common pool that includes office or residential shared areas, the allocation methodology may not match the lease.

Beauty Franchise Lease Costs: CAM Charges in Mixed-Use and Strip Centers

Beauty franchise locations occupy some of the most common retail positions in US strip centers and mixed-use retail. Great Clips, Sport Clips, Massage Envy, and European Wax Center locations sit in inline positions between restaurants, service providers, and specialty retailers, often in spaces ranging from 1,000 to 2,400 square feet.

The small footprint creates a perception that CAM exposure is modest. That perception can be wrong on a per-dollar basis for an operator focused on store-level P&L. An inline beauty tenant at 1,400 square feet in a well-maintained suburban strip center may carry $8,000 to $12,000 in annual NNN pass-throughs. Errors in the CAM pool apply at your pro-rata share the same way they apply to larger neighbors.

Small Footprint, Full Pro-Rata Exposure

The math of NNN leasing does not change based on what you do in your space. A 1,200-square-foot salon in a 20,000-square-foot strip center holds a 6% pro-rata share. Whatever the common area maintenance pool costs, you pay 6% of it.

The issue for beauty franchise operators is that the pro-rata formula assumes everyone contributes proportionally. When the formula is wrong — because the denominator is too small, because anchor tenants have been removed from the pool without the corresponding denominator adjustment, or because excluded areas are included — your share shifts upward.

Example: a center with a 6,000-square-foot anchor who maintains their own area and is excluded from the CAM pool. If the landlord removes the anchor from the pool but does not also remove them from the denominator (total building square footage), the remaining tenants' pro-rata percentages are understated. Your 6% should become closer to 8.6% (1,200 divided by 14,000 instead of 20,000). But wait — the landlord is not adjusting your percentage upward here. The error runs the other way: the anchor is excluded from contributing to the pool, but their square footage remains in the denominator, which means everyone's percentage is artificially low. You are paying 6% of a pool that 6,000 square feet of building is not contributing to, which inflates the effective cost for those who are contributing.

This is the pro-rata denominator error. It runs in both directions depending on which side of the transaction benefits. Check whether your denominator matches the lease definition.

Parking Lot Sweeping and Lighting

Parking lot sweeping and exterior lighting are among the most routine CAM items in strip centers. For beauty franchise tenants, these costs appear in every reconciliation and generally increase modestly year over year.

The controllable expense cap matters here. If your lease caps annual increases in controllable CAM expenses at 4% and the parking lot sweeping line increased from $18,000 to $23,000 in one year — a 27% jump — that increase should trigger review.

Before concluding there is a cap violation, verify: Was there a one-time event like flood cleanup or major repaving that is categorized as maintenance but might actually be a capital improvement? Capital expenditures are typically excluded from both CAM and the cap calculation. A large one-time maintenance item may be legitimate even if it exceeds the cap percentage, depending on how your lease defines the cap.

The question to ask: is the increase in controllable expenses due to higher ongoing service costs (cap violation) or a specific event (may be excluded)? Request the underlying invoices. The answer is in the documentation.

Management Fee Applied to Gross Revenue

The management fee overcharge is the most consistent error across all commercial tenant types, and beauty franchise tenants are not exempt. The specific pattern that appears most often: the lease caps the fee as a percentage of controllable CAM expenses, but the property manager calculates the fee as a percentage of gross building revenues.

Here is why it matters:

Controllable CAM expenses for a 20,000-square-foot center might be $85,000 per year. A 4% management fee cap on that base produces a maximum fee of $3,400.

Gross building revenues for the same center — total rents collected — might be $600,000. A 4% fee on that base produces $24,000.

The difference is $20,600. At a 6% pro-rata share, your piece of that overcharge is $1,236 per year, per lease year, for every year you have been in the center.

The fix is straightforward: identify the management fee cap percentage and the base in your lease, calculate the allowable maximum, and compare to what is billed. CAMAudit flags this automatically when the lease provisions are clear.

Mixed-Use Buildings: CAM Pool Segregation

Beauty franchise locations in mixed-use retail buildings, where retail space coexists with office or residential, can face a different problem: shared CAM pools that include expenses from non-retail components.

A properly structured mixed-use lease segregates the CAM pool. Retail tenants contribute to a retail CAM pool covering shared retail common areas. Office tenants have a separate pool. Residential tenants have theirs. The costs in each pool are specific to the areas those tenants actually share.

Problems arise when:

The property runs a single undifferentiated pool and allocates it across all tenant types including office and residential
Common areas that serve primarily the residential or office component are included in the retail pool
The denominator for the retail pool includes non-retail square footage

If your lease specifies retail-only CAM and your reconciliation uses a denominator that includes office or residential square footage, your pro-rata share is understated — but you may also be paying costs associated with areas you do not use. Request clarification on the pool composition and denominator from the landlord.

Controllable Expense Cap Verification

Most beauty franchise leases negotiated in the past ten years include some form of controllable expense cap. The structure varies, but common versions cap year-over-year increases in controllable CAM expenses at 3%, 4%, or 5%.

To verify: pull three consecutive years of reconciliations and identify the controllable CAM expense totals. Calculate the year-over-year percentage change. If the change exceeds the cap, the overage applied to your pro-rata share is disputable.

What to watch out for: landlords who reclassify historically controllable items (maintenance, management fees) as non-controllable in years when expenses jump. Non-controllable items (taxes, insurance) are exempt from the cap. If the controllable/non-controllable classification changed between years without a corresponding change in the lease, that reclassification may inflate what passes through unrestricted.

Your Next Step Before Paying the True-Up

Beauty franchise locations are thin-margin operations. Every dollar of unverified occupancy cost that should have been disputed is margin that did not make it to store-level P&L.

Before paying the annual true-up, run through:

Pro-rata denominator: does it match the lease definition?
Management fee: what is the cap base, and does the billed fee exceed the allowable maximum?
Controllable expense increases: does the year-over-year change exceed your cap?
Mixed-use pool: if applicable, is the pool retail-only or does it include non-retail components?

Upload your reconciliation and lease to CAMAudit and get the specific findings before you decide whether to dispute.

Beauty Franchise Lease Costs: CAM Charges in Mixed-Use and Strip Centers