A radius restriction clause prohibits the tenant from operating a competing business within a defined geographic radius of the leased premises during the lease term. It is primarily used in retail and restaurant leases where a tenant's nearby competing location could cannibalize sales at the leased location, reducing percentage rent income to the landlord.
By Angel Campa, Founder · Updated March 2026
Radius restrictions protect the landlord's percentage rent income by preventing the tenant from diverting customers to a nearby competing location. For retail chains with dense urban store networks, radius restrictions can significantly constrain expansion strategy. For franchise systems, radius restrictions at one franchisee location can conflict with another franchisee's territorial rights, creating complex multi-party disputes. The radius must be carefully defined because an overly broad restriction can prevent the tenant from operating in natural trade areas that do not compete with the leased location.
Negotiate the smallest feasible radius — typically 1–3 miles in urban areas and 5–10 miles in suburban markets — reflecting the actual trade area of the leased location. Exclude internet and e-commerce sales from the restriction, as online sales do not cannibalize foot traffic in any geographical sense. Negotiate carve-outs for existing locations and locations under contract at the time of lease execution. Ensure the restriction is limited to the same trade name and concept, not extended to affiliated brands or sister concepts that do not meaningfully compete.
Geographic radius restrictions (most common), broader "trade area" restrictions based on demographic overlap rather than fixed radius, and restrictions limited to the term during which percentage rent is calculated.
Lextract extracts these fields directly from your lease PDF when this clause is present:
Exclusive Use Clause
An exclusive use clause grants the tenant the sole right to operate a specific type of business or sell particular products within the shopping center or building.
Continuous Operation Clause
A continuous operation clause requires the tenant to keep the leased premises open and actively conducting business during all required business hours throughout the lease term.
Recapture Clause
A recapture clause gives the landlord the right to take back — recapture — the leased premises when the tenant requests consent to assign the lease or sublet the space.
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