MarshallMorgan recognizes that developing a financially sound real estate strategy is as important as a franchisee’s restaurant operations and sales. Trying to decide whether to continue to hold real estate or to sell it and leaseback your operations is always a tough decision. Timing is also crucial in making these decisions. For instance, when the markets are tight and there is too much money with too few places to invest, real estate values begin to soar. During these times, large REITs and investment partnerships fiercely compete to place cash thereby driving up the sales prices while reducing their expectations of large returns. That is why low cap rates to the buyer equals higher value to the seller. Other considerations such as geographical location and the current business cycle of a brand are also factors to be taken into consideration. The primary reason franchisees choose a sales-leaseback option is to create additional liquidity to acquire new markets or to redevelop their stores. This has, many times, proven to be a viable alternative to taking out additional debt.
However, when these favorable business cycles decline, it is usually best for a franchisee to hold on to their real estate and determine if there is more value in utilizing it as collateral in acquiring more favorable loan terms or to simply hold it and wait until maximum value can be achieved. In the end, owning real estate is still about “buying low and selling high”. Even if a franchisee is all about planning for “retirement”, the main goal is to make your real estate constantly work for you and to give you the highest return possible given the current market conditions.
MarshallMorgan helps franchisees determine what their best strategy is by:
- Determining the highest value through the 3 methodologies of “income (including potential sales-leaseback)”, “market comparables (highest & best use)” and “replacement costs”.
- Developing a full Demographic Analysis of the location of the site including maps, traffic counts, 1-3 mile radius analysis of the surrounding population (including income, age, ethnic make-up, projected growth of the market, etc.) area and competitive businesses surrounding each site.
- Review and analysis of all existing leases to determine future strategies or to renegotiate better terms or renewals.
- Marketing the real estate to MarshallMorgan’s vast database of franchise restaurant REITs, banks and investment groups to create competition on pricing.
- Negotiating favorable lease terms on any sales-leaseback including financial impact analysis to determine which rent rates vs. pricing works best for our client.
- Detailed report on current business cycles and cap rates tailored for our client’s location and brand.
- Complete due diligence analysis and negotiations services for any new real estate acquisitions or developments including lease negotiations for any ground leases.
- Lease vs. Own analysis to give you the tools to make an informed decision.