Recruiting "National Chains"
How does one go about recruiting a national chain to lease a building that they own or wish to build? For example, what if I live in a town that needs a McDonalds, and I have an approved location that they could occupy. Let's say it's a vacant lot. Could I get an agreement with McDonalds and build to their specs, and lease them the building when done. How does this work? How do developers attract the fast food chains and grocery stores? Thanks in advance!
Well in the case of Mcdonalds the area has probably already been sold to a franchisee even if they've not built a store. Try to find out who the local franchisee is.
Other than that there are brokers who specialize in these things. And an annual trade show -- I think its in Vegas.
Quote:
On 2004-05-19 21:07, commercialking wrote:
Well in the case of Mcdonalds the area has probably already been sold to a franchisee even if they've not built a store. Try to find out who the local franchisee is.
Other than that there are brokers who specialize in these things. And an annual trade show -- I think its in Vegas.
---how would one go about finding out who the local franchisee is. I was actually thinking about a Long John Silver's. Are you familiar with this restaurant chain?
Ok so 3o seconds with Google comes up with www.this.ICSC.org. ICSC is the international Council of Shopping Centers. A trade org. with a weekly and monthly mag. Get past copies, see who's advertising for brokerage services, interview brokers, sign a listing agreement. Let them do the work
commercialking--
does one usually hire a broker to sell the lot/land, or to recruit a tenant? I often see vacant lots with "will build to suit" signs on them. Is this how the broker would present a property to a commercial establishment?
Thanks,
Brad
If you really want national chains, yes, you are probably going to have to hire a broker. The odds of the locations acquisition guy for Long John Silver driving past your sign and thinking, "good location, I think I'll call this guy" is just about zero.
But don't just go to your closest real estate guy. Really, get the mag, get a guy who specializes in this sort of thing.
Commercialking,
Thanks for all your responses. Greatly appreciated. I'm confused as to how far I need to go as a investor/developer to have a product that a broker can market. In other words, is it simply a lot in a high traffic area, or is it that you build to suit the buyer? How does this normally work? I have often heard of developers recruiting particular "big name" tenants or buyers. My thought was that they marketed a location, brought in the "big name", and built to the "big name's" specs. However, is the "big name" becoming a tenant or are they buying the property?This is where I'm confused. Thanks in advance.
--Brad
Yeah, well thats because its confusing.
For the most part the bigger stores (Walmart, Target, etc.) rent their stores. The smaller stores (McDonalds, LJS) are owned byt the franchisee.
But that is only a very rough rule of thumb. There are probably exceptions both ways.
As to the question of how much needs to be done prior to leasing that also varies. For example the big regional mall developers usually market to the "anchors" first before there is any building. These guys get special lease rates and other concessions for signing on early in the deal. The smaller in-fill tenants rent only after the building is up. They pay much higher rates and get fewer concessions.
If you're talking McDonalds or LJS here they sometimes do it either way. For example, the McD's in the food court of a mall is leasehold with no concessions. The free-standing one next to the highway is probably owned fee-simple by the franchisee.
All the people doing these kinds of projects are making a living at it. So they understand all their options and are prepared to negotiate for any portion of the deal. Maybe you want to keep the land? I'm sure that there is a McD's built someplace on a 99 year land lease. Want to build the building and lease both? I'm sure its been done. The key is having a location that will drive sales. After that anything is possible.
Commercialking,
--Do you think it would be a good idea to contact the franchisee in a nearby city to see if they have interest in operating another location? Then maybe sell the location to them? Maybe I should become the franchisee, build the restaurant, and then sell it? I know nothing about running a fast-food place, though! Could you maybe relay an experience you or someone you know has had in recruiting a "big name"?
Thanks,
Brad
I'd stay out of the resturant business if I were you. Too much work.
Contacting a local franchisee is not a bad idea if only to get an idea of how the process works for that franchise. Don't approach him asking if he wants to buy a store in your area (too easy to get a simple no) ask him how the franchise he's attached to goes about choosing locations.
There is many ways to approach this as I am in negotiations to purchase a franchise which is a small one but I like the food.
1) Contact the President directly if possible if not then askfor the Marketing department for the company. Mention you are seeking the locating service they use. They will usually disclose this informatuion to you.
2) Look up the franchisees in your area as some are a hands on type and will be available to discuss what you are proposing.
3) Go to your county and search thepapers for the locations of the present stores which are located within your county and find out the owner of them. That will tell you if it is the same person who owns the franchisee rights or the master franchisee rights. If these dont match then contact them and see if how they rented or leased the building and offer a piece of the pie to them for assisting with the transaction.
4) Do a market anaylsis of the traffic and foot traffic near it in comparison to other areas of the same franchise. Then do it with several franchises not limiting to anyone and send to all at same time for an option of them to take advantage of. Try a smaller franchise as they are usually more aggressive. If you are set on the food look at the smaller as if you would build to suit they may offer you the rights if you build to code and have the rights for the area and a business. I found one aggressive franchise with 100 stores I know its small but they also pay the renovations,signage and the only cost out of pocket is 10K with a 3 yr lease of equipment and a 4% royalty.
5) Contact a franchise attorney as this is a specialized field to do negotiating.
Do Your homework and things happen as many are very aggressive.