FSP measures, and therefore enables the control of, retailer risk. The cost of replacing a retailer that goes bust is high. In major centres, it averages about £300,000 per unit.
Retailer risk is of two kinds – Corporate Risk and Unit Risk.
Corporate Risk can be identified by analysis of company accounts. The Gross Sales Margin of more than one third of UK retailers is less than the direct cost of staff and depreciation. Over 90% of retailers forced to stop trading in recent months have fallen into this Very Worrying category.
Unit Risk can be calculated by relating Sustainable to passing rent. Retailers as any other business need to earn an adequate return on investment. The Sustainable rent is that which, at any given level of turnover, enables the retailer to achieve an adequate return on investment in the store.