If you enjoy fast food, you may have noticed that your favorite burger joint is redesigning its restaurants. At many fast food franchises, gone are the plastic booths that were easy to clean but unstylish, and the garrish wall decor that featured the restaurants’ sandwiches or mascots is being retired, too. Replacing these overworn designs are cushy booths, new color schemes that aren’t as jarring, and big screen TVs that pipe in popular programs — and that’s just the interior.
The exterior of fast food franchises is getting a redo as well. Wendy’s is using more glass and fewer colors to create a modern looking building; Burger king is adding more windows and promoting its classic logo to a high, prominent position above the entryway, and McDonalds is trading in its sloped roof for a flat one, creating a frontage of natural stone, and using modern architectural flourishes to make the new exterior and traditional logo aesthetically coherent.
HOW THE CHANGES AFFECT INVESTMENT PROPERTY
The redesign of leading fast food franchises is good news for their customers, but it’s also important news for real estate investors who are considering buying fast food investment property. According to John Gordon, a long-time restaurant analyst:
In the restaurant space, customers judge the perceived price value of the restaurant not just [based on] the food, but also the appearance of the store, the location of the store [and] how the employees act.
That Wendy’s, Burger King, and McDonalds are rolling out new menu items — some of them higher priced than older items — in the midst franchise redesigns is no coincidence. Each of the restaurants is trying to increase sluggish slow sales growth. In the second quarter of 2013, sales growth for Wendy’s and McDonalds’ U.S. stores came in at a modest 0.4% and 1%, respectively, while sales growth at Burger King’s U.S. and Canada stores fell 0.5%.
The combination of new menu items and redesigned franchises will help make Wendy’s, Burger King, and McDonalds solid real estate for investors who are planning to make a fast food property investment in 2014. In addition to boding well for sales growth, the restaurant redesigns also mean that utility expenses and maintenance costs are likely to decrease at many franchisees, which will make them more stable by creating a higher net operating income.
LOOKING TO INVEST IN FAST FOOD PROPERTY?
If so, now is a good time to do it. The changing aesthetics and menu items at fast food franchises are positioned to have a synergistic effect that increases sales and makes fast food franchisees increasingly reliable triple net lease tenants. However, before you invest in a particular franchise, let the experienced investment real estate brokers at Westwood Net Lease Advisors ensure that the franchise is indeed positioned to meet your investment goals.
