Triple net lease investment properties are often a great, brand new addition to an investor’s real estate portfolio. NNN properties have a few key benefits for both the landlord and the tenant that make them a popular option for commercial real estate properties. These benefits, for property owners, include less time invested as property maintenance is passed to the tenant, and fewer expenses as property taxes and insurance premiums are handled by the tenant as well. This provides a consistent income stream without a ton of added stress. Now, when investors look for NNN properties, that can mean a variety of things. Some medical offices, strip malls, dollar stores and restaurants fall under this category. Within the restaurant sector, both dine-in restaurants and fast food restaurants are often triple net leased.
The Value of Commercial Real Estate and a NNN Lease
In recent years, Americans eat out most days of the week. Surveys have shown that the average American dined out, whether at a dine-in or quick service establishment, at least once per week. While that number may have slightly changed with the pandemic, studies are showing that everything, including McDonald’s restaurant dining, increases every month. What that means for restaurant owners and prospective McDonald’s owners is that the customer base is there and ready to eat. With a McDonald’s, landlords can rest easily knowing that they will be signing a McDonald’s ground lease with creditworthy tenants with corporate backed, single tenant leases. If seeking out a fast food restaurant, like a McDonald’s NNN property for sale, is on your list of business opportunities, continue reading to learn about considerations you should know and what questions you can ask as you begin the investment journey.
Benefits of Investing in McDonald’s
Aside from the typical benefits of triple net properties discussed above, there are some additional benefits that investors like when investing in triple net properties like McDonald’s fast food restaurants. Investors can see:
- Long term tenant for at least 10 years (often 15 or more)
- Low-risk investment and high investment grade, with the tenant absorbing tax and insurance costs related to the property
- Consistent income stream without surprise expenses
- Equity builder
- Fewer time investment with less landlord duties
- Creditworthy tenants with a strong corporate backing
- Investment diversification
Considerations for Buying a McDonald’s Property For Sale
McDonald’s are often on an absolute triple net lease investment in many locations because they have the McDonald’s Corporation backing them. For an investor, this is a great opportunity to grow your investment portfolio with a relatively safe NNN property. Each triple net property and net lease term is unique, so you should understand a little about the business and the market so you can make the best decision and investments for your business. The four things you should look into when searching for a McDonald’s NNN for sale are:
- Market trends and knowledge
- Tenant information
- Details about the property
- Net lease term
Market trends and knowledge
When you are entering a new market, or even if you’ve owned corporate fast food properties in the past, it can be a good idea to brush up on current trends and inside knowledge that can help you ensure this property will fit the current and immediate future needs of tenants. This will help you identify and sign a new tenant if needed in the future (or sell the property if that’s the route you decide to go in a few years). By conducting some research on the fast food industry, or partnering with an experienced real estate team that can guide you through the most recent updates, you are better able to see how this property can fit into the industry as a whole. Some key trends that are still impacting the industry as we return to a new normal after the COVID-19 pandemic include technology like mobile orders and delivery or curbside pickup, the need for social distancing, and expanded menu options. The way this may play into specific properties is indoor space to allow for customers to have some space and room to breathe, and a parking lot large enough to give space for curbside pickup and mobile orders. When you work with a real estate broker with past experience in the fast food industry, you can have better insight into these trends and other upcoming trends that may impact your decision. Brokers will assist with property evaluations, the current market cap rate, and potential challenges that the industry is undergoing.
Beyond the industry and property itself, you will need to know about the tenant. Obviously McDonald’s is a very well known corporate fast food company, and because it is publicly traded, a lot of its financial history is readily accessible on their website and through the SEC. This will make your job even easier with fewer landlord responsibilities! If you’re finding many different McDonald’s for sale that interest you, doing some additional research can help you weigh the pros and cons of each investment opportunity to figure out which McDonald’s NNN is right for your portfolio.
Details about the triple net property and location
Because location is often key, considering each property’s location and the area is important. With a corporate fast food restaurant, you need to consider both the interior and exterior of the property itself, and the nearby locations around the property. For the interior of the property, is there space for people to wait for their food? Are there enough tables for a busy rush? Will people be able to spread out, or will they be right on top of each other? In certain areas, you may also want to consider whether a play area is something you are interested in having in a property you own. For the property’s exterior, consider the drive-thru and the parking lot. Will you have enough space for parking and a line at the drive-thru? Are there parking spaces that can be dedicated for mobile pick-up? All of these are important so that the McDonald’s property can serve customers and pay their bills!
Then you need to consider the nearby area. Is it near neighborhoods, transportation, or business centers? These would all have different customer bases, but they can all bring in a large number of people on a regular basis. Are there other fast food properties on other corners at the intersection? Is this location near a shopping center? Doing some research can help you understand the location of the McDonald’s store.
Understanding the lease term
If you are taking over a McDonald’s that is already under a lease term you will be inheriting, make sure you understand the terms of the property. If you are extending a new lease term offer with new terms, make sure you know what is included in the net leased terms and who is responsible for which aspects of the property. A NNN broker can help you understand what goes into absolute triple net leases and properties for sale, as well as the transaction process so you don’t miss a step.
Questions to Ask as You Search for a McDonald’s NNN For Sale
Now that you understand some of the background knowledge you should have as you look for an investment property, you are ready to start looking for the right property to invest in. A broker can help you with the search, but if you are able to provide some information into your goals with the McDonald’s property, it can lead to a smoother process. Here are four categories of questions you should be able to answer; if you don’t have the answer now, these can guide your conversations as you begin to look into investment options.
Size and location of the McDonald’s restaurant
- Do you have a preference for an urban versus a more rural area?
- What size town is the restaurant in?
- Is it on a main road, intersection, or on a public transportation route?
- Does the parking lot allow for curbside pickup or a lunch/dinner rush?
- Are there enough tables inside? Is there an outdoor dining area?
- Is there space for customers to wait for their food or will the area be too crowded?
Traffic, at the store and nearby
- Is the store near an interstate, highway, or busy intersection?
- Can people easily walk to it?
- Is there a lot of shopping, residential or corporate offices in the area?
Potential for growth, improvement, and cap rate
- Does this McDonald’s location already have technological advancements, or is that something you may have to do to attract future tenants?
- Is there space for improvements in layout, merchandising, and technology?
Neighborhood and local area
- Are there competitors nearby?
- If there are competitors, are they direct competitors or just another fast food chain?
- Will there be future growth in new corporate buildings, shopping centers, or neighborhoods going in nearby to bring in even more customers in the future?
Working with a Broker to Find McDonald’s NNN Properties For Sale
The Restaurants For Sale Team at Sands Investment Group has helped investors close on restaurants across the country. With experience in McDonald’s NNN properties, we can move quickly to help you grow your portfolio. By getting to know you and your goals for investing in a McDonald’s property, we can identify which opportunities can fit your needs. We’re ready to help you understand the industry and trends, so you can invest in a fast food restaurant. Call 844.4.SIG.NNN or fill out this form to start finding the right McDonald’s for sale.