The traditional preference for mall locations among South African optometrists is a habit rooted in a bygone era. It is a strategic convention that is now actively eroding the long-term profitability and equity of an optometric practice. The time has come for the industry to look beyond immediate foot traffic and embrace the powerful, wealth-building convention adopted by counterparts in the US and in local disciplines such as veterinary and chiropractic practices: premise ownership.
The Staggering Cost of the Mall Lease
The financial argument for owning versus renting is not merely compelling—it is staggering.
Consider the following calculation, based on a practice of 150 square meters at a starting rental of R48,000 per month (R350/sqm) with a minimum industry-standard escalation clause of 8% per annum over a 30-year career:
Yes, that is over Sixty-Five Million Rand in rent
alone.
For perspective, the average cost to build or purchase a comparable commercial premises in a South African business node currently ranges from R12,000 to R18,000 per square meter. A 150-square-meter premises could, therefore, have a conservative purchase price of approximately R2.25 million.
The difference is clear: you are spending R65 million to fund a landlord’s equity, when you could be directing that capital toward an appreciating asset that will be worth millions at the end of your career.
The Financial Hostage and the Erosion of Profit
The mall environment is structurally designed to erode your net profit over time. The ideal benchmark for a healthy optometry practice is to maintain a rent-to-turnover ratio of no more than 10% and achieve a 20% net profit.
However, the reality of a mall lease is dramatically different:
- Disproportionate Escalation: While initial practice turnover may show year-on-year growth, it will inevitably flatten out and become non-existent at some point. Crucially, salaries and rent will continue to escalate at predetermined rates, dramatically and disproportionately eroding your net profit margin.
- The Hostage Situation: When you sign a five-year lease, you effectively become a hostage to the landlord. Should your business struggle, your commitment to the long-term, high-escalation lease remains absolute. At lease renewal, the landlord can hike the base rent significantly under the guise of "market-related rental," knowing that finding new premises at short notice and the cost of relocating make you highly vulnerable.
The Mall Trap: A Myth of Customer Acquisition
The primary, and often sole, motivation for a mall location is the expectation of generating customers rapidly through foot traffic. However, this motive has become obsolete, if not an outright myth.
- No New Customers: A new mall does not create new consumers; it merely displaces an existing economy.
- Abolished Exclusivity: The common practice of abolishing exclusivity to sign up three or four optometric competitors in a single mall dilutes the benefit of foot traffic, negating the very reason you pay a premium rent.
- The Landlord's Gamble: Landlords demand high rents from day one, assuming immediate consumer traffic. The reality is that it takes a new mall three to five years to generate the patronage that justifies the initial high rental cost.
- Malls are vulnerable: Malls will continue to lose business to online shopping retail giants such as Temu, Amazon, and Takealot.
Furthermore, the demanding, long trading hours—including whole weekends and late nights in December—necessitated by mall management translate directly into higher salary costs that further push your expenses above industry benchmarks.
The True Path to Independence: Digital Marketing
The argument for owning stand-alone premises, free from the confines of mall management and high rentals, is stronger than ever due to the revolution in customer acquisition.
In bygone years, above-the-line advertising, such as TV, newspapers, and billboards, was indeed far too expensive for small businesses. Today, digital marketing and social media have levelled the playing field and provided a superior, more cost-effective method to drive feet through the door:
- Cost-Effective Reach: Digital marketing is significantly more affordable than traditional marketing and enables precise, targeted campaigns via social media and search engines, ensuring every marketing Rand is spent wisely.
- Beyond Foot Traffic: Through effective Search Engine Optimisation (SEO), targeted advertising, and engaging social media content, a stand-alone practice can reach potential customers precisely when and where they are looking for eye care services.
- A Lifeline for SMEs: The rise of digital platforms in South Africa, accelerated by global events, has made a strong online presence a lifeline for small and medium-sized enterprises, helping build customer loyalty and expand reach beyond the local market.
The Opportunity
Optometrists have an opportunity to follow the successful model of other specialist practitioners. Owning your premises transforms the most significant operational expense (rent) into a personal or business investment (a mortgage).
In doing so, you:
- Build Generational Wealth: You replace a R65 million liability with an asset that will appreciate and can form part of your retirement or the sale of your business.
- Gain Operational Freedom: You set your own hours, eliminating the punishing trading hours that inflate salary costs.
- Future-Proof Your Business: You insulate your core operational cost from disproportionate annual escalations, protecting your profit margin for the long term.
The mall lease is an expensive liability that makes you a financial hostage. The time to plan your own escape and leverage the power of digital marketing for independent success is now.