Hi, my name is Alex Casablanca, Managing Broker at Casablanca Triple Net Lease Advisors. We are a boutique brokerage firm based in Orlando, Florida specializing in Selling NNN Investment Properties Nationwide USA. We represent Buyers, Sellers and 1031 Exchange investors in finding and negotiating the best NNN property according to their investment goals and risk tolerance.
Today I’m going to talk to you about How to Buy a Fast Food Restaurant NNN Property. Fast Foods and Quick Service Restaurants Restaurants in general are the investors’ preferred NNN investment and 1031 Exchange replacement property. Within the context of Food as a primary necessity, fast-food restaurants provide that necessity quickly and with maximum convenience and efficiency. During the Covid 19 pandemic, most fast-food restaurants stayed open and continued operating through the drive-thru, and continued making the rent monthly payments without disruptions.
Nowadays you can also order a fast food meal from your phone through Door Dash or Uber Eats, which gives fast food restaurants an additional layer of income stream that they didn’t have before. The top fast food restaurant brands in the US are McDonald’s, Chick-Fil-A, Chipotle, Taco Bell, Wendy’s, Burger King, Popeyes, KFC, Starbucks, Dunkin Donuts, among others. These are strong companies with strong business models and brand recognition.
But now the question is, How to Buy a Fast Food Restaurant NNN Property? Well, here are 10 simple steps.
1. Hire a team of two key competent professionals to assist you during the process.
First, hire a knowledgeable and experienced NNN Buyer’s Broker with comprehensive knowledge of the NNN fast food market and with extensive access to NNN fast food listings nationwide USA. It is very important that you team up early in the process with a competent and experienced NNN Buyer’s Broker who can represent your interests exclusively and can assist you in searching and evaluating properties, and at the same time help you navigate the complexities of the market. We represent our Buyers for Free, so you will get our expert advice and representation at no additional cost to you. Secondly, hire a competent and experienced Real Estate Attorney with previous experience with NNN transactions. Once your offer is accepted, your attorney should be ready to review the Purchase Agreement and due diligence documents.
2. Define your acquisition criteria
Your acquisition criteria will be a determinant in the success of your transaction. Your investment criteria is comprised of several important key elements, such as: your Price Range, Cap Rate Expectations, Risk Tolerance, Target Locations, Tenants of Interest, Years Remaining on the Lease, Lease Guarantor, among others. As an example, a summary of your investment criteria should look like this: “I am interested in Wendy’s, Taco Bell or Mcdonalds’ in Tax Free states, within a price range of $2.5M – 3.5M, at a minimum cap rate of 5% and with 10 years or more remaining on the lease”. It is very important that you have a clearly defined investment criteria. As your buyer’s broker, we will concentrate our efforts on looking for properties that fit the most your investment criteria.
3. Define your price range
The first step before starting to look for properties is defining your minimum and maximum price target, so as your Broker we can concentrate our efforts on looking for properties within those price ranges. The better the area, the higher the price will be. In the current high-interest rate environment, most Fast Food NNN property acquisitions are funded all cash since financing in most cases is unsustainable.
4. Identify the fast food tenants that you are most interested in
As your Buyer’s Broker we will concentrate our efforts on looking for properties with those specific tenants. It is very important to keep a mind that a great majority of fast food restaurants are operated by franchisees, not the main company itself, so the lease guarantee will come from the franchisee, not the main corporation. There are large and strong franchisees with hundreds of restaurants in their portfolio, and there are other franchisees that are smaller. It is very important to have a clearly defined criteria in terms of your preference between large and small franchisees, or if you might only prefer properties that are corporate-guaranteed by the main corporation. As your Buyer’s Broker, we can provide you with valuable inside information on which Tenants are stronger than others.
5. Define the target location or locations that you are interested in
Most investors prefer tax-free states such as FL and TX because their rental income will not be subject to state taxes. Location is the most important aspect when buying any type of Real Estate. Most investors prefer major metropolitan cities with strong real estate fundamentals, while other investors might be open to considering more rural areas in exchange of a higher cap rate. Remember, the better the location the lower the cap rate will be. It is important to keep in mind that the best property is not necessarily the one that is in your home state or closer to where you live. The best investment property is the one with the best location and the strongest real estate fundamentals.
6. Start Looking for Properties that are in line with your investment criteria
As your Buyer’s Broker we will do that job for you. We will assist you with market research, property evaluation and selection, offer submissions and negotiations, due diligence, and closing. We work quickly and decisively towards finding for your consideration as many properties as possible within your criteria.
7. Start submitting Offers for the property or properties that most closely match your criteria
Once you decide the price that you want to offer, we put together a Letter of Intent for your signature, then we will submit it to the Seller and we will negotiate the offer on your behalf. Although there is always room for negotiation, your offer should be competitive and reasonable, if you submit an offer way under the asking price the offer will not be taken as seriously and could not even be considered. As a general rule, your offer should not be less than 10% of the asking price. Every property and every transaction is different, how much room for negotiation there might be will depend on the particularities of the transaction, like how many days the property has been on the market, and how motivated the seller is to sell, among others. As your Buyer’s broker, we will do that job on your behalf. We have the relationships and connections with sellers and brokers’ colleagues to get inside information about the property and how much room for negotiation there is.
8. Have your #1 property selection under contract
Once your offer is accepted, the Seller will provide a draft of the Purchase Agreement, your attorney will review it and negotiate the final language with the Seller’s attorney, then you will be ready to sign the agreement and secure the property under contract. It is very important to keep in mind that the only way to secure a property is by having it under contract. Having an offer accepted does not constitute an obligation to buy or to sell.
9. Review the Due Diligence Documents
The due diligence period in a NNN transaction is usually 21 or 30 days. Once the Purchase Agreement is signed you will have a due diligence period, or inspection period, to review all relevant information concerning the property. If after evaluating such documents you are not satisfied with the property you can cancel the contract during that period and your escrow deposit will be fully refunded. Once the Purchase Agreement is signed the Seller will provide a package of due diligence documents in his possession that will include: the Lease Agreement and any amendments, the existing title, the survey, environmental and technical studies that are in the Seller’s possession, and any other the document that is relevant to the transaction. Your attorney will have the responsibility to review all the due diligence documents on your behalf and identify any possible areas of concern.
10. Close on your Fast Food NNN Property
Once the due diligence period is complete and you have determined that the property is acceptable to you, you are now ready to close on your transaction. The title agent will circulate copies of the closing statement before closing, you will review it with your attorney and then you will be ready to close.
Although Buying a NNN Property could be seen as stressful and overwhelming, the key is to start early and hire the key competent professionals to assist you. If you do that, the process can really become really straightforward and stress-free.
At Casablanca, we have extensive knowledge and experience in the Fast Food NNN market and we can guide you as well through a successful NNN property acquisition. We will assist you from the early stages of market research, identifying potential properties, submitting offers and negotiating them, due diligence, up to the closing table. We have helped many NNN Buyers and 1031 Exchange Investors in finding and negotiating the best property according to their investment goals and risk tolerance.
Moreover, we represent our Buyer’s for Free since we get paid from the Seller, so you get our expert advice and representation at no additional cost to you. In addition, and we pay for our Buyer’s Closing costs up to a maximum of $10k. This incentive will offset or cover completely the major Buyer’s closing costs expenses such as Title Fees, Attorney Fees, Recording Fees, among others. We are the Brokers that give you more in exchange for your trust.
If you have any questions about How to Buy a Fast Food Restaurant NNN Property or any other NNN Property feel free to contact me directly at 407-205-7570 or you can also email me at [email protected]. Feel free to call me anytime at your convenience, I’m always available for my clients. Thank you very much for watching this video and I’m looking forward to being your Broker in your next Fast Food NNN property acquisition.