I have helped hundreds of clients buy net lease buildings throughout my career. Of course, that total acquisition number is heavily weighted with fast food drive thru’s, because you know me. Helping someone figure out which building to buy is similar to solving a puzzle. I wanted to share some thoughts to consider as you mentally walk through which building works best for you. Doesn’t matter if this is acquisition #1 or #53.
PORTFOLIO:
Most CRE net lease owners do not think of their holdings as a portfolio, but that is exactly what you have the moment you have more than one building. If you have a financial portfolio it is likely your financial advisor has helped you allocate specific %’s of the portfolio to bonds, large cap, mid cap, small cap, US stock holdings vs foreign investments, dividend stocks, etc. The thought process of why you would want to build out a portfolio of holdings vs a concentration into one thing is the diversification you experience by owning a variety of assets. Building your net lease portfolio is similar. For example, if you own a Jiffy Lube, 2 Taco Bells, Wendy’s, & WaWa, you might consider buying an auto parts building or a coffee store for your next purchase. There is also something to be said here for looking at the credit profile of each of your tenants. For example if one of your Taco Bell’s is a corporate lease signature and one is a franchisee that is almost the same as two entirely different tenant entities. Either corporate or the franchisee could experience different things that may impact their ability to pay rent and operate at any given time.
TENANT HEALTH:
When we are drafting a new lease or lease amendment we constantly strive to insert these clauses into the lease:
“On or before February 15th of each lease year the Tenant shall disclose to Landlord in writing a statement of its gross sales for the immediately preceding year by month. Failure to provide such statement shall constitute a default of the Lease.”
The 2nd clause I constantly push for is:
“Landlord shall have the right to request fully audited financial statements (balance sheet, cash flow statement & profit & loss statement) from Tenant up to two (2) times per calendar year of the Lease throughout the entire term and any options of the Lease. The financials shall be for the most recently completed period to date in the current calendar year and up to two (2) prior calendar years. The landlord shall keep these records confidential and shall not disclose to any party other than its lender, employees, agents, or potential buyer that is in escrow to purchase the property. Failure to provide such statements as requested within fourteen (14) days of the request shall constitute a default of the Lease.”
If you are a family office that acquires existing assets it is highly unlikely you have any language like this in your lease. Also, many of the national tenants push back on this language and do not like it at all. The good news is that in today’s world, it is much easier to understand how your tenants are performing. There are so many resources available to you to understand what is happening at the store from a cell phone traffic perspective, national sales database, etc.
Let’s take the example of an Arby’s that I own located at 129 West 9000 South, Sandy, UT 84070. At this unit, Arby’s provides me with annual sales data per the lease so I regularly receive that. I of course cannot disclose that information per the terms of the lease. All info I report here is info that is available to me through various subscriptions we have to national data sources.

Per their website:
For over 30 years, we have been the ONLY continuous store-level research effort, tracking all major QSR (Quick Service) and FSR (Full Service) restaurant chains. Our products give you the competitive intelligence you need in over 187,000 stores in over 550 chains in every market in the United States.
This is typically the first data source I will check on any restaurant. A quick pull of the Sandy, UT Arby’s shows us:
Sales Estimate: $1,636,000 or a B market-grade store
The last sales survey was completed in 2023
The prior 2018 sales survey indicated a $1,455,000 gross sales factor
Per their website:
Optimize Retail Performance with Foot Traffic Analytics. Analyze visit trends across chains, benchmark performance, uncover audience characteristics and behavior, and inform site selection decisions.
Placer is pulling information from cell phones to understand how busy this location is in comparison to other Arby’s locations. Cell phone data science is getting better each month. It still has a ways to go, but this metric does help you determine which unit is better than the next pretty easily. It’s my solid go-to second data source that I pull.
Below is a screenshot from Placer on the Sandy, UT Arby's. They provide a lot of good estimated data that can be used to determine the health of a particular location. You do need to keep in mind that Placer's data isn't perfect and is based on estimates. That being said it can still give a good idea of how the location is performing when compared to others.
OCCUPANCY COST
You may be asking yourself why do we care what the sales are? In simple terms the higher the sales the more rent the tenant can afford.
occupancy cost = total annual rent / gross sales
A healthy fast food occupancy is going to be in the 8-10% range. The range is largely dependent upon the profit margin of the retailer. A coffee store is going to have a much different profit margin than someone serving hamburgers. A chicken operator may have a lower or higher margin than a hamburger retailer depending on what the cost of chicken and beef are.
So if we assume the restaurant trends data is correct for my Arby’s at $1,636,000 then in theory Arby’s should be able to afford $130,880 - 163,600 in rent.
$1,636,000 [gross sales] * 8.0% [occ cost] = $130,880 [rent]
$1,636,000 * 9.0% = $147,240
$1,636,000 * 10.0% = $163,600
My rent in this location is lower than the 8.0% rent-to-sales ratio if Arby’s sales per restaurant trends are accurate. I should be feeling comfortable as the Landlord that my Tenant is making a profit and the rent is in a sustainable range for my store location. Most landlords do not think of the success of their tenants, but it is a huge factor. You need that tenant making money. They need to be healthy so you can get your consistent monthly cash flow checks every month like clockwork.
NATIONAL AVERAGE COMPARISON
I always pull my national average sales data from qsr.com. The 2023 sales report was released in August 2024 and is available via free download on their website.
This report indicates the average U.S. sales per unit for Arby’s at $1,400,000. So if the Restaurant Trends gross sales figure of $1,636,000 is accurate that would mean my Sandy, UT unit is 16.86% higher than the national average.
($1,636,000 (RT sales) - $1,400,000 (nat’l average) )/ $1,400,000 (nat’l average) = 16.86%
Why would you want a top-performing unit for a restaurant?
The answer here may seem kind of obvious, but chains focus on the highest volume stores, not the lowest. That means, the higher the volume for a unit the better the managers, employees, salespeople, etc. The better the store does in the long run the more likely you are to experience regular rental payments with no interruptions.
In the event that the parent company, franchisee, or chain experiences financial trouble and needs to go through a reorganization or bankruptcy it is extremely atypical for the court and the leadership team to reject the leases for the top-performing units. Those typically carry the concept through the reorganization process and allow profit to flow through to the parent company.
If it’s a top unit for one brand and for some reason they close or the lease expires other national brands will recognize that and be willing to pay more rent to be in the same location.

REPLACEABLE RENT
There are a couple of things you can do to gut-check the rent on the unit you have identified to consider purchasing. The top method will be to find your leasing broker in the market and ask them what they think of market rent in the building. Why ask a leasing agent? This is the person you are going to call if your net lease asset hits any trouble. They are going to be responsible for helping you find a new tenant. A good leasing agent will always typically be conservative with their estimate of market rent because they know the market moves up and down and you may not call them today to help on the leased building you are buying. It might be in 5 years or 10! Whoever it is they want to make sure they are going to over deliver on whatever they have discussed with you. The leasing brokers are the key to the entire knowledge base of what is happening in an area, with a brand, with a building, with a city, on a corner, in a specific area. They know everything concerning how that tenant might perform over time. Asking for an opinion of value is a no-brainer. They also typically have nothing to gain by giving you a number which I think helps with you getting a more accurate number to depend on. It is unlikely they are selling you the property. Once they get you an opinion of value drop a $100-250 gift card to them so they can take their significant other out on date night. Leasing brokers work far harder than any other brokers out there. In general, they are undercompensated. Little things like this go a long way.
How do you know if your leasing broker is the right broker to ask? Do they or does their firm represent Starbucks, Panda Express, Chipotle, Dutch Bros, or any other big-name tenant? Do they or does their firm represent 10 other similar vacant fast food drives thru's in the last 12 months? If the answer is yes to either then you are in the right place.
The market continues to rocket ship ride upward in cost post covid. It seems like we are on a never-ending increase here. That is causing many of the new deliveries of drive-thru buildings to have the highest rents the market has ever seen. These rents may make sense on an occupancy cost basis. I would caution you to solve the math and look at market rent and take it just as seriously as occupancy cost. For example, I recently heard of a Southern California 2-acre site being leased to a chicken concept on a ground lease for $700,000. This chicken concept does enough volume that from an occupancy cost standpoint, the numbers likely make sense for them. However, none of the brokers I have spoken with in So Cal can point me to a ground lease in the $600’s. There are a few in the $500’s. So the question becomes is this asset rented at “market rent?”
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