It looks like investor demand for net lease quick service restaurants is on the right. Some of the reasons behind investor interest in these properties has to do with brand names that are easily recognized, escalations on rent, exciting price points, and long-term leases. According to experts in the industry, the market is as hot as it has been in ten years.
Another reason for the boom with quick service restaurants? The interest provided by 1031 exchange investors. In a 1031 exchange, investors defer capital gains taxes and make use of a qualified intermediary. Low interest rates and a shortage on available quality product has pushed down cap rates. This means that franchisees and corporations are in a sense being forced to unlock the values associated with the real estate owned. These proceeds can then be used to expand, pay down current debts, or even remodel existing locations. One group of particularly interested individuals are those who operate multiple franchise operations, because the sale-leasebacks help to fund the renovations and upgrade that are necessary as rules passed down by the parent brand.
The economy is slowly improving, too. Sales in the restaurant industry are poised to hit a high of $709.2 billion in this current year, showing the sixth year in a growth of growth in the market. There are challenges, however, that are keeping these gains below what you might otherwise expect in the industry coming out a recession.
Quick service restaurants bring in a different kind of net-lease investor than a table-service restaurant. According to research, the fast/casual restaurant segment is expected to outpace growth in the table-service segment. Fast casual growth is predicted at 4.3 percent while table restaurant growth is just under 3 percent. Due to building size and a lower price for each meal, it's often cheaper to acquire a quick service restaurant from the investor's perspective. This means that investors can become active in the market at a lower price than if they opted to get involved with another segment or industry.
The median asking price for a quick service restaurant is around $2 million. The structure of these businesses also appeals to investors because it is frequently easier to analyze these properties. The investor can get a better sense of the restaurant's tone and can look at how a particular restaurant is performing against other stores all over the country. This can give a big picture overview for an investor interested in 1031 exchanged handled by a qualified intermediary.
Another reason for the boom with quick service restaurants? The interest provided by 1031 exchange investors. In a 1031 exchange, investors defer capital gains taxes and make use of a qualified intermediary. Low interest rates and a shortage on available quality product has pushed down cap rates. This means that franchisees and corporations are in a sense being forced to unlock the values associated with the real estate owned. These proceeds can then be used to expand, pay down current debts, or even remodel existing locations. One group of particularly interested individuals are those who operate multiple franchise operations, because the sale-leasebacks help to fund the renovations and upgrade that are necessary as rules passed down by the parent brand.
The economy is slowly improving, too. Sales in the restaurant industry are poised to hit a high of $709.2 billion in this current year, showing the sixth year in a growth of growth in the market. There are challenges, however, that are keeping these gains below what you might otherwise expect in the industry coming out a recession.
Quick service restaurants bring in a different kind of net-lease investor than a table-service restaurant. According to research, the fast/casual restaurant segment is expected to outpace growth in the table-service segment. Fast casual growth is predicted at 4.3 percent while table restaurant growth is just under 3 percent. Due to building size and a lower price for each meal, it's often cheaper to acquire a quick service restaurant from the investor's perspective. This means that investors can become active in the market at a lower price than if they opted to get involved with another segment or industry.
The median asking price for a quick service restaurant is around $2 million. The structure of these businesses also appeals to investors because it is frequently easier to analyze these properties. The investor can get a better sense of the restaurant's tone and can look at how a particular restaurant is performing against other stores all over the country. This can give a big picture overview for an investor interested in 1031 exchanged handled by a qualified intermediary.
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