Why Fast-Food Restaurants Make Great NNN Investments

Oct 3, 2019

QSRs Continue to Thrive

Fast-food, or quick-service restaurants (QSRs), continue to thrive, which makes the industry a great place to invest. Fifty million Americans eat at a fast-food restaurant daily, which accounts for the 2018 U.S. revenue of $256 billion[1], and 2019 growth is projected around 4%. QSRs like McDonald’s, KFC, Wendy’s, and Starbucks are stable, long-term net-lease investments with reliable, creditworthy tenants, effortless monthly income, periodic rent increases for 10-15 years, and few or no maintenance responsibilities.

Quick-Service Restaurants by the Numbers

There are over 200,000 U.S. QSRs and, according to Brand Z rankings, 2018 revenue for the top eight fast-food brands was $229 billion. Entrepreneur and QSR Magazine report McDonald’s, Starbucks, and Subway were the 2018 front runners:

  1. McDonald’s − $37,480,670,000 in sales/$2,670,320 sales per unit
  2. Starbucks −$13,167,610,000 in sales/$945,270 sales per unit
  3. Subway − $10,800,000,000 in sales/$416,860 sales per unit

QSR Sales −Top Five Segments by Market Share[2]

  • Hamburger-focused 30%+
  • Pizza 15%
  • Sandwich/sub 12%
  • Chicken 8%
  • Mexican 7% (on the rise)

Zion Market Research determined drive-thru restaurants will push even more market growth and stated, “Rising hectic lifestyle with dual-income is anticipated to elicit the demand for fast food in the forecast period. Moreover, growing fondness towards inexpensive food with no wait time may further prompt fast-food industry growth over the coming years.” Many QSR corporations rely on triple-net (NNN) lease investors to move forward with new locations, which creates a lucrative situation for both property owners and the fast-food corporations.

Fast-Food vs. Casual Restaurants

Most fast-food experiences are cafeteria-style with easy-to-eat meals in minutes that run between $4 to $7 each. Casual restaurants, like Applebee’s and Buffalo Wild Wings, average $15 per meal and appeal to customers who want to order at their tables and be served. Then there’s fast-casual, the latest trend that blends fast food and casual dining. Fast-casual examples include Panera Bread and Jimmy Johns Gourmet Sandwich Shop (now owned by Yum! Brands), with the average meal between $7-9. Most offer a more upscale and varied menu than fast food with a casual dining atmosphere and the convenience of a drive-thru, online ordering, and delivery. Many casual dining and fast-casual restaurants make solid net-lease investments, with a range of owner responsibilities and cap rates commensurate with those responsibilities, though QSRs reign supreme for absolute NNN lease investments with steady cape rates and no owner responsibility.

The continued growth of the fast-food industry reflects QSRs’ response to evolving consumer demands and opens the door to abundant NNN lease investor opportunities.

Selling Your Triple Net Lease Property

What to Look for in QSR Property Ownership

There are many NNN investment benefits that allow buyers to continue to work, build a portfolio, or enjoy life in retirement with few worries and peace of mind that their money is safe. To maximize those benefits, look for high-credit corporations that want total control over their properties and brand image with no involvement from the landlord. You also want to ensure the investment provides:

  • Low-risk reliability/creditworthy tenant financials and reporting
  • Expense-free ownership with stable monthly income
  • Corporate-backed lease guarantee for 10-15 years with extension options
  • Rental increases throughout the lease term to offset inflation
  • Preservation of wealth and investment diversification
  • Opportunity to build equity over the lease term

To Wrap it Up – QSRs Make Lucrative NNN Investments

The fast-food industry isn’t slowing down, it is growing and benefitting investors with a wide range of property choices, lease options, and stable, lucrative income. If you are interested in starting your NNN investment search, the best way to secure the right property for your goals is to use a reputable Westwood Net Lease Advisors buyer’s agent who knows the national market and is well-known in the marketplace.

Our advisors provide evaluation and risk tolerance assessments, explore properties that fit your investment criteria, evaluate tenant financials and credit ratings, work with you on the many detailed financial and tax considerations, like §1031 exchanges and cost segregation, and more. We offer objective advice, education, knowledge, and advocacy – all at no cost to you. Contact us today for a no-obligation consultation, 314-997-5227.

[1] Statista/Zion Market Research

[2] Franchise Help

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