A radius restriction clause is a provision in a retail lease that bars the tenant from opening or operating a similar store within a stated distance of the leased premises, commonly three to ten miles. It exists to stop a tenant from cannibalizing sales at the leased store, which matters most when the landlord is paid percentage rent on those sales. Landlords treat it as protection for a revenue stream they helped create. Tenants treat it as a cap on where they can grow next. Almost every negotiation over one comes down to three things: how big the ring is, what counts as a competing store, and which locations are carved out.
What is a radius clause in a lease?
It is a restriction on the tenant, which makes it the mirror image of the exclusive use clause. An exclusive binds the landlord not to lease to your competitor. A radius restriction binds you not to become your own competitor nearby.
The clause has four working parts, and a dispute almost always traces back to one of them being sloppy:
- The distance. How many miles, and measured from what point to what point.
- The restricted activity. What kind of store triggers it. "A similar business" is a fight waiting to happen; a definition tied to the tenant's permitted use is much cleaner.
- The bound parties. The tenant alone, or also its affiliates, parents, subsidiaries, franchisees, and the individuals behind it.
- The duration. The full term, or only while percentage rent is payable.
Radius restrictions show up overwhelmingly in shopping center and mall leases. They are rare in office and industrial deals, because the landlord there has no share of the tenant's revenue to protect.
Radius clause example
Illustrative language, not a form to sign. Any real clause should be drafted by counsel for the specific deal:
During the Term, neither Tenant nor any Affiliate of Tenant shall directly or indirectly own, operate, manage, or have a financial interest in any business operating under the Trade Name, or primarily engaged in the Permitted Use, at any location within a radius of five (5) miles measured in a straight line from the exterior boundary of the Shopping Center. The foregoing shall not apply to any location open and operating as of the Commencement Date, nor to any location acquired by Tenant as part of a merger or acquisition of ten (10) or more stores.
Read that against the four parts above and the drafting choices become visible. The distance is five miles. The measuring points are stated, which many clauses fail to do. Affiliates are captured, so the tenant cannot sidestep it through a related entity. And two carve-outs are already in: stores that existed on day one, and stores that arrive through a sizable acquisition.
Note what the clause does not say. It says nothing about ecommerce, nothing about a delivery-only kitchen, and nothing about a temporary or seasonal location. Those gaps are usually deliberate on one side of the table.
How big is a typical radius restriction?
Distance tracks the size of the trade area the center draws from. A neighborhood center pulls customers from a few miles; an outlet center pulls from a region, and its radius restrictions are correspondingly wider.
| Property type | Typical radius range | Why it lands there |
|---|---|---|
| Neighborhood or strip center | 1 to 3 miles | Convenience trade area; customers will not drive far for the same offer |
| Community or power center | 3 to 5 miles | Wider draw, more overlap risk between two of the tenant's stores |
| Regional mall | 5 to 10 miles | Regional draw, and percentage rent is common in mall leases |
| Outlet or high-end specialty center | Often well beyond 10 miles | Customers travel a long way; landlords protect a much larger catchment |
Treat those as market observation, not a rule. A distance that is arbitrary rather than tied to the center's actual trade area is the kind that invites a challenge, and courts in several states look at reasonableness when a restraint on where a business may operate is tested.
Why landlords ask for a radius restriction
Follow the percentage rent. In a lease with a percentage rent clause, the landlord takes a share of gross sales above a breakpoint. If the tenant opens a second store two miles away, some portion of those sales moves with it, the breakpoint stops being reached, and the landlord's participation quietly shrinks even though the tenant's overall business is fine.
The landlord also has a co-tenancy and merchandising interest. Centers are leased as a mix. A tenant that opens nearby and lets the in-center store fade weakens the tenant roster that other tenants signed up for, which is exactly the trigger many co-tenancy clauses are written to catch.
Where landlords overreach is in scope rather than distance. A restriction that binds every affiliate, every officer, and every franchisee of a growing brand, with no acquisition carve-out, can block deals that have nothing to do with the leased store.
The carve-outs tenants negotiate
A tenant that accepts the concept can still narrow it substantially. These are the exceptions that get asked for most often, and most of them are gettable:
| Carve-out | What it protects |
|---|---|
| Existing locations | Stores already open on the commencement date, plus their renewals and relocations |
| Acquisitions above a threshold | Stores that arrive through a merger or a purchase of a chain, rather than by opening a new site |
| Different format or banner | A smaller express store, a different trade name, or a materially different offer |
| Non-store channels | Ecommerce, wholesale, delivery-only kitchens, offices, warehouses, and temporary pop-ups |
| Franchisees the tenant cannot control | Independent franchisees whose site selection the tenant does not decide |
| Sunset on percentage rent | The restriction ends when percentage rent stops being payable, since the rationale ends with it |
The last one is the most under-asked and the most logical. If the clause exists to protect percentage rent, a tenant paying flat base rent has a fair argument that the ring should come off.
How is the radius actually measured?
Straight-line distance from a fixed point, in a well-drafted clause. The two points both need naming, and clauses that skip this cause real arguments: five miles from the exterior boundary of the shopping center is a meaningfully different ring than five miles from the front door of the leased premises, and driving distance is different again from straight-line distance.
When a new store sits near the edge and the parties disagree about whether it falls inside the ring, the answer comes from a measurement against the deed and the site plan rather than from a mapping app, and a licensed land surveyor can fix the distance from the agreed measuring point in a form that holds up if the dispute goes further. Getting the measuring convention written into the lease costs nothing at signing and settles the question before it becomes expensive.
What happens if a tenant violates a radius clause?
Rarely eviction. The usual remedies are financial and are written into the clause itself, because a landlord's real complaint is lost percentage rent rather than the existence of the store:
- Sales attribution. The violating store's gross sales are added to the leased store's sales for percentage rent purposes. This is the most common remedy and often the fairest, since it restores the landlord to the position it bargained for.
- Loss of the kick-out right. The tenant forfeits its right to terminate early for underperformance. A tenant that diluted its own sales should not then use those weak sales to walk, which is the argument landlords make and it usually lands. If your lease has one, read it alongside the go dark and kick-out provisions.
- Injunctive relief. Available in principle, harder in practice, and dependent on how reasonable the restriction looks to a court.
- Event of default. Some leases make it a straight default. Tenants should push for a notice and cure period before that bites.
Enforceability is not automatic. A radius restriction is a restraint on where a business may operate, and states differ on how they treat that. Restrictions tied to a genuine trade area, with a defined activity and a stated term, are far easier to enforce than sweeping ones. Broad, arbitrary rings are the ones that get tested.
Radius restriction vs exclusive use clause
These get mixed up constantly, including inside abstracts, so it is worth being precise:
| Radius restriction | Exclusive use clause | |
|---|---|---|
| Who is restricted | The tenant | The landlord |
| What it prevents | The tenant opening a similar store nearby | The landlord leasing to a competitor in the property |
| Geographic scope | A radius extending outside the property | Usually inside the property or a defined parcel |
| Who benefits | The landlord | The tenant |
| Common trigger | Percentage rent in the lease | A tenant with a competitor-sensitive offer |
A single retail lease routinely contains both, pointing in opposite directions, and both belong in the abstract.
Tracking radius restrictions across a portfolio
For a retailer, the radius clause is a site selection constraint, and it only works if the real estate team can see it before they sign an LOI on the next location. That means it has to leave the lease document and land in something searchable, with the distance, the measuring point, the restricted activity, the bound parties, and the carve-outs recorded as separate fields rather than as one line reading "5 mile radius."
That last part is where most abstracts fall down. A summary that captures the number and drops the carve-outs is actively misleading: it will stop a deal that the acquisition exception would have permitted. When we pull lease data into a structured abstract, restriction clauses come out with their exceptions attached and each value linked back to the clause it came from, so the person reading it two years later can check the language rather than trust a paraphrase.
If you are building the register from scratch across a back catalog of retail leases, the practical route is to abstract the whole portfolio once, tag every location with its radius terms, and keep the register updated as amendments arrive. Our retail lease abstraction page covers what that looks like for a multi-site operator, and key clause extraction covers which restriction clauses get pulled by default.
What is a radius clause in a commercial lease?
It is a clause preventing the tenant from operating a similar business within a set distance of the leased premises, typically three to ten miles depending on the center's trade area. It protects the landlord from sales at the leased store being diverted to a nearby store the same tenant owns, which matters most when the landlord receives percentage rent.
Are radius restrictions enforceable?
Generally yes when they are reasonable in distance, duration, and scope, though treatment varies by state because the clause restrains where a business may operate. A restriction tied to the center's genuine trade area, naming a defined activity and a stated term, is far more defensible than a broad, arbitrary ring covering any business the tenant might ever run.
How many miles is a standard radius clause?
There is no standard, but three to five miles is the most common range in community and regional retail leases. Neighborhood centers often sit at one to three miles, while outlet and high-end specialty centers regularly go beyond ten because their customers travel much further to shop.
Can a tenant negotiate a radius restriction out of a lease?
Removing it entirely is uncommon in a percentage rent deal, but narrowing it is very achievable. Tenants routinely win a shorter distance, carve-outs for existing stores and acquisitions, exclusion of different formats and non-store channels, and a sunset when percentage rent stops. Ask for the measuring points to be written in as well.
Does a radius clause apply to online sales?
Only if the lease says so, and most older clauses do not address it. Ecommerce, delivery-only kitchens, and wholesale fall outside a clause drafted around operating a store at a location. Landlords increasingly try to capture sales fulfilled from nearby facilities, so tenants should read the sales definition and the restriction together rather than in isolation.
Who is bound by a radius restriction besides the tenant?
Whoever the clause names, which is why the definition matters more than the distance. Well-drafted landlord versions reach affiliates, parents, subsidiaries, principals, and franchisees, so the tenant cannot open through a related entity. Tenants push back on franchisees they do not control and on individuals whose other ventures are unrelated to the leased business.