Complete Guide For Restaurant Real Estate Investments

Complete Guide For Restaurant Real Estate Investments

Restaurant on property business .- A favorite for many investors because:.

Sign 1.Tenants often very long term, eg20 complete three years net (NNN) lease. Meaning the next rent, tenants also pay for property taxes, insurance and maintenance. Total cost. Only thing you have to pay the mortgage, so your monthly cash flow is more able to predict. There are no responsibilities. Land owners, so you have time to do anything important to you, (eg to leave). All you do is pick up rent checks to the bank. This is one of the key benefits you are investing in restaurants or .- A single-tenant. properties.
2. Whether rich or poor, people want to eat. กำลังกิน Americans are more frequently out as they are the same busy to cook and cleanup after pot & pan that is often the worst! Is the National Restaurant Association, the nation is currently in the restaurant industry to 937,000. Restaurant and the hope to hit $ 537. Billion in sales in 2007, compared to $ 322 required. Billion in 1997 and $ 200 billion in 1987. (In current dollars). In 2006. For all the American dollars on food, 48 cents is used in restaurants. As long as there is civilization in the world, there is the restaurant! You feel comfortable that that feature is always on high demand.
3. You know tenants. Your take very good care of your property because it is in their best interest to do so works. Customer little if any need to go to a restaurant that .- A .- A Ngmosom room, or bath. nullification of the parks are more.

However, restaurants are not created equal, from the investment viewpoint.

Franchised versus freedom.
One often hear that 9 out of 10 new restaurants will fail in the first year; However, this is a must in a story that is not studies. To conclude that. There were only .- A study by associate professor of Hospitality, doctor. HGParsa of Ohio State University who track new restaurant located in the Columbus City Search, Ohio during the period from 1996 to 1999 (records. : You will not draw the final result is that every place in the same or else we or between periods. any other time) doctor. Parsa. Treat it as a seafood. Restaurant is safest. Money or property to invest in business and that the Mexican. Restaurant experience the highest rate of success is not in Columbus, O.. His study also found 26% of new restaurants close in the first year in Columbus, officer between 1996. To 1999. Sides failed Es ° associated activities, reasons for closing restaurants, including divorce, poor health, and unwillingness. To promise immense. Direct calculation of time to business. Based on this study, it may be that it is safe to predict that the restaurant is in the business longer, more like it is doing is following a year so that land owners will continue to. for rent.

For franchised restaurants, franchisee has to pay .- A one-franchisee. Fees at about $ 30 to $ 50 billion and on - are the royalty between 4% to 12.5% of sales revenue. In turn, franchisee for the train is on how to set up, and do .- A proven and. business is complete without being concerned about the market. A .- a result, A .- franchised. Has a customer in the restaurant is opening soon sign is put up. King's franchised. Restaurant is fast - food chain, McDonald is on 30,823. Location (about 14,000 of us) is 2006 with an average of $ 2M in revenue to our location. McDonald is currently at 46% capture market share of $ 58.88. Billion, we soon - food market. Fall behind the Burger King with 14.3% market share. Fast - food chain party to detect new trends faster. For example, they are open early as 5AM. American is the increasingly. Breakfast is purchased his works earlier. They are still being sold more cafe latte to compete with Starbucks.

A handful of independent restaurants will .- As for customers to come in and try to feed.'s Business they are particularly difficult in 12. The first month of being open, especially to owners of those who have no .- A proven track record. So in general, mothers and pop restaurants are .- A risky investment than for you because revenue. is initially weak. If you choose not to invest in A .- - restaurant brand name, make sure return is proportional. To the risk that that you are picking.

Some times it is not easy for you to tell if the restaurant is .- A .- A name brand or not - the name brand. Some chain restaurants, only do, or are known in certain areas .- A. For example, Johnny Carino is a restaurant. .- A chain is very well known Italian restaurants in Texas and Georgia, but there is only one in the Canon list of Forbes Jr. is 2007. chain brand name for the party .- A list of sites that are located all other positive suggestions. . So if you can find restaurants .- A site from Google. Or Yahoo, you can quickly discern. If unfamiliar. .- A name is a name brand or not. Site "entrepreneur com" points to a useful guidance for investors about various franchises restaurants. You can also consult the consumer based on almost any restaurant in our chain on ". Wikipedia org "point.

Leasing & rental Guaranty.
tenants often sign long-term net .- A full third (NNN) lease. meaning the next base rent they pay for doing all costs: taxes property, insurance and maintenance. Costs. For investors, the risk of cost maintenance uncertainty is removed and the cash flows they are able to predict. Tenants. Certification may also rent on his own works or corporate. assets. Therefore, the choice they have to close down the business, they are continuing to pay rent for lease of life. A .- Below are a few things that you need to know about lease guaranty:.

1. In general, guaranty lower strength than the return of your investment. Guaranty company with McDonalds by A .- "A" & P corporate strength in mice is of a public company .- A is better than .- A small company owners. The Amazing .- franchisee. .- A restaurant with a little. So, A Restaurant with Amazing .- .- McDonalds corporate charter typically offer low 6% -7 Cap (return of investment in the 1st. Years of ownership), while the Animated McDonalds properties .- franchisee guaranty may offer 6.5% -7.5 hat.
2. Some time .- A multi-franchise. Location will be parent company .- A form of ownership to all restaurants. Restaurants, each in turn is owned by .- A single-LLC. What have they (Limited Liabilities Company) to shield the parent company liabilities. So rent guaranty. The single-LLC. What they do not have much meaning as they do not have many assets.
3. A .- well, guaranty long do not do .- A .- A good lemon car. The same, A .- guaranty do not do A strong .- lousy. Restaurant .- A good investment. It means only tenant. Will make all efforts to pay your rent. So do not Amazing .- primarily. The decision on features guaranty.
4.guaranty was good until the company announced that it approved bankruptcy. At that time that, reorganizes the company calculated it by closing the set with low-income and store locations are good, (ie one with strong sales. ). Therefore, it is more risky for you to select the features .- A .- A good location. If it happens to a weak A .- guaranty, (eg from .- A small, private companies), you will. You benefit twice: on time rent payments and high return.


Location, Location, Location.
A .- lousy restaurants may do well .- A good location, while those with .- A menu may give the best .- A bad location. .- A good location to source more. For those who do have strong and is primarily. You are important to investors. It will look like this:.

1. High levels of traffic: this will draw more customers to restaurants and Results .- A high income. So Amazing Restaurant .- A .- at the entrance to the pavement under the shade of the region or Disney. A world or .- shopping. Is always key fulfillment center.
2. Good clarity & signage: a high level of traffic is required to clear with the good from the road. This will allow small advertising charge and is a lesson .- A constant for the food to come. in.
3. The convenience of ingress and egress: A .- Search .- A set of top restaurants - the service road running parallel. To A .- freeway. .- A's are very clear and traffic is not that great, but .- A great location. It is difficult for customers to be able to return if they miss the entrance. In addition, it is not. possible to do .- A left turn. On the other hand, restaurants must close the freeway. Issue is more convenient for customers.
4.demographics Best: A .- restaurants will do well with the area .- A large, growing population and loss of earnings is high, it has more people with money to use.'s Business, it is generating more and more to profit and loss. pay for higher rent increase.
5. Most of the parks are gaps: most chain restaurants have their own deeds are more parks to accommodate. Customer hours steeple. If customers are unable to find .- A park spaces within .- A few minutes, there they were .- A good opportunity to cross it and / or winning does not come back often.
6. The sale of high income: gross annual revenues alone do not tell you much from the larger - in term of square footage - Restaurant Banquet to be higher than income. So rent to income ratio is A .-. gauge. Best of success. Please refer to rent to income ratio in time diligence. Section for further mention.
7.barriers high to list: this simply means that it is not easy to replicate. Location is near for various reasons: simple space do not developable. Any more land, or do not plan to win any further settlement construction of business properties, or it is more expensive to build .- A feature similar to the time of high land prices and construction items. For these reasons. , tenant is like to renew. Lease if the business is profitable.


Financing Considerations.
In the general interest .- A bit rate is higher than average for restaurants of that time to the fact that they are usually single-tenant. properties. to lenders, there are evidenced .- A risk because if the restaurant is closed, you can potentially lose 100% of your profit and loss from which the restaurant. Lenders. More brand name restaurants to enjoy. In addition, some lenders will not lend to out - of - state, especially if investors find that restaurants are located in smaller cities. So it may be is .- A concept. Good for you to invest in A .- franchised. Restaurants in metro core areas, egAtlanta, Dallas. In 2009. A .- It is quite a challenge to have financing. For sit - down restaurant acquisitions, especially for mothers and pop restaurants and the region. In early 2009, it is almost impossible to find lenders. Any of us is to finance the purchase of regional restaurants time to tight. Credit market. However, things seem to have improved .- A bit.

Cap rate is higher than the loan interest rate when, eg cap rate is 7.5% while the interest rate is 6.5%, than you are considering borrowing as much as possible. You will have 7.5% return on your down. payments plus 1% return for the money you borrowed. From now on, your total return (cash on cash) is higher than the rate cap. Additionally, since inflation. In the near future is to look above to the chicken-time price of fuel, the money you borrow to finance your purchase is less than in year's time is following to inflation. Therefore, it is even more benefits to. maximum leverage to expand now.

Time Diligence.
You may want to consider these factors before the decision to go ahead with the purchase of:.

1.Tenant financial advice is: restaurant business is labor intensive. Born employees average only about $ 55. Billion in yearly revenue. The price of the good, eg food and supplies to the 30-35% of revenue; Labor and actions cost 45% -50; Rent about 7-12%. Therefore, a review of benefits and loss (P & L) sentences, if available, with players of your account. In P & L sentences, you may see the acronym. EBITDAR. It stands for Earnings. Income Before Taxes, Depreciation (of equipment), Amortization (of capital improvements), and rent. If you do not see a royalty fee of P & L. Motorola's .- franchised. Restaurant or advertising costs, P & L. Of independent restaurants, you may want to understand the reasons why.'s Department, we will need to ensure that the restaurant is profit after the rent is paid. The ideal, you would like to see a net benefit equal to 10-25%. of gross income. In the last few years, banks have taken Es associated ° .- A stroke is a restaurant, so has dipped. so do not panic. If you have to see around 3-4% reduction in gross income. It seems to be affecting most if not all restaurants at every location. In addition, it may take .- A new restaurant for many years. ability to reach revenue goals. So do not look forward to the new location right away, even for-profit chain restaurants.
2. Rent to income ratio: This is the basic rental rate than gross. Annual sales of store. It is .- A fast way to determine if the restaurant is profitable, ie lower rates, better location. A .- A rule of thumb you will want to collect less than this rate.

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