The fast-food industry can mess with your finances; however, it could become a roaring success with the right menu and location.
If you believe you can effectively run the business, then disregard any worry about legal and leasing problems.
It’s true that barriers to affordable asking prices are constantly fueling disinterest in restaurant acquisitions. However, there’s a vast difference between acquiring just any restaurant and buying one with the essential elements for sustained growth and profitability.
The following are some of the things you might need to consider before buying a fast food property like an NNN McDonalds for sale.Â
Location
Your fast-food restaurant’s success will largely depend on location.
You can either buy an existing business and ask them to transfer the fast-food leases for sale to you for the rest of the lease term or get a new premise to begin your fast food business.
If you wish to lease a new premise, you’ll be prepared for more work, including securing local authority approval to acquire a permit for running the fast-food business.Â
Where you’re considering the option of buying an existing fast food business, you’ll need to transfer the lease. Don’t assume that the fast-food owner has an ongoing valid lease.
Your lawyer might discover that the fast-food’s lease is close to the end of term and doesn’t have an option for renewal.
In this case, it’s worthwhile to ask the landlord to have the existing tenant exit the business by relinquishing their lease and give you a direct new lease.
Restaurant’s Cash Flow
When it comes to fast food leases for sale, the amount of income the seller tells you might vary from the actual amount in the financial statements.
Most fast-foods usually sell for multiple cash flows, often double the cash flow; it’s crucial to confirm that the asking price is verified and not from the owner’s estimation.
Rent
The rent reflects the market’s demand and supply trend and the location. Nonetheless, you can agree with the landlord on the rent by negotiating to add outgoings or for a rent incentive with the landlord paying a portion of your fit-out costs.
You’ll need to check neighboring areas to determine the current rent and get an idea of how much it’ll cost to lease similar properties.
The contract could sometimes express the rent on an annual basis and a square meter basis, so ensure to agree with the landlord on the rent calculation.
If the landlord calculates the rent depending on the premises’ area, you might need to carry out a survey plan as evidence of the final lettable site.
Term of the Lease
The fast-food lease for sale duration has financial consequences on the business when you buy, so consider your lease term thoroughly.
There’s often no early termination right if you wish to opt-out after the first year.
If you signed a six-year lease, you can only legally exit your lease by assigning it to another person who will step in to pay rent and meet the lease obligation for the rest of the term.
You can request a surrender of the lease if you’re unable to find who to transfer the lease to. However, the landlord isn’t obliged to accept.
Worst case scenario, you’d be asked to pay rent for the remaining period of the lease term whether your fast-food business is moving or not.
You must know that negotiating a short-term lease will limit the scope of your financial obligations as regards the fast-food lease.
However, you’d be liable for two years’ worth of rent, which might not allow the time you need to build up your fast food business’ goodwill.
More so, it could leave you uncertain about your tenure’s future if you’re business is booming and you’ve decided to stay but don’t have a long lease in place.
Naturally, you’d want to negotiate a lease with its initial term and an option for further terms, which is every tenant’s right when they decide they want to trade from a specific location.
Liquor License
Even if you’re a new investor in a fast-food restaurant like a McDonalds franchise, you might have noticed over time from visiting restaurants that alcohol is a big moneymaker in this industry.
Ask if there’s an existing liquor license and if it’s transferable. If yes, that’s a big bonus.
Obtaining a new liquor license is sometimes challenging, seeing as most states only allow just a few licenses.Â
If there’s no existing license or it can’t be transferred, start the application process immediately. You must note that getting a new liquor license is usually a costly and lengthy process.
Note that certain restrictions can limit you from getting a liquor license. For instance, your town or municipal zoning equivalent may ask you to submit a business site plan or floor plan.
Also, you might have to pass scheduled inspections from the health department and fire department and undergo a thorough background check.
Maintenance
It’s normal to find features like stoves, grease traps, and air conditioning in an existing McDonalds for sale or any other fast-food premises, which you’d be responsible for as a tenant.
You’re responsible for these features and the actual premise, which might sometimes require maintenance works depending on the building’s age.
Before entering into any fast-food lease, ensure that all the machinery is in top working order before agreeing to take up the maintenance obligation as mandated under the lease.
Refurbishment
A standard lease contains the obligation to refurbish the property at specific intervals, for maybe every three to five years.
A refurbished obligation can range from an extensive refurbishment like updating the fittings and decor, replacing the floor coverings, repainting the walls, to painting the internal walls.
An entire refurbishment obligation is sometimes costly, so you need to ensure that the obligation’s scope is limited.
Major Takeaways
Before entering into any fast food triple net lease for a fast-food restaurant like McDonalds, ensure that you negotiate the critical terms.
A lease is long-term, and you’ve got to do your homework by understanding the leasing rights and researching the market.
A fast-food acquisition sounds like a straightforward business transaction, but it’s actually a nuanced process.
You might want to get a business broker to protect your interests. Our experts at Buy NNN Properties know when and how to ask fast food sellers the right questions.
