NNN properties are typically the ideal type of real estate investment for landlords seeking consistent passive income. Not only does this type of real estate relieve you of the day-to-day operations tied to a rented property, but they also involve long-term lease tenures.
NNN leases can last as long as 20 years, offering a steady cash inflow over an extended period. Due to the long-term tenancies of NNN leases, they’re often the preferred properties for franchises, such as Chick-fil-A, Mcdonald’s, Taco Bell, and Starbucks.
This article discusses Chick-fil-A real estate requirements, including how the restaurant selects its sites and average lease rate. Considering investing in an NNN property and leasing it to a Chick-fil-A franchise? Dive into our guide to determine if this investment portfolio is an ideal fit for you.
An Overview of Chick-fil-A
On May 23, 1946, Truett Cathy and his brother established a small diner in Atlanta called The Dwarf Grill (later famously renamed The Dwarf House). After Ben died in 1949, Truett and his wife Jeanette continued to run the company, with the restaurant growing immensely over the years.
Nearly 20 years later, Truett Cathy opened the first Chick-fil-A restaurant in the Greenbriar Shopping Center in Atlanta in 1967. Prior to this new venture, he had invented the famous Chick-fil-A chicken sandwich in 1964.
From its early beginnings as a business leveraging a “slow growth model,” Truett Cathy successfully managed and grew the Chick-fil-A brand into a family-owned billion-dollar company.
It currently has the highest system-wide sales in the US and operates over 2600 restaurants across America. The amazing part? The company continues to expand into more locations, opening numerous doors for interested investors!
How Chick-fil-A Selects Their Restaurant Sites
Chick-fil-A currently runs over 2700 company-operated and franchised restaurants globally. Like most businesses, the Atlanta-based privately-held company has a strict site selection process. According to its website, Chick-fil-A picks restaurant sites based on corporate goals for expansion in target markets.
That said, two crucial factors considered by the family-owned company while choosing its locations include:
High Traffic Areas
Several quick-service restaurants prefer high-traffic locations, and Chick-fil-A is no different. Of course, this isn’t surprising. You’d typically expect passersby and drivers to stop for a quick bite at a nearby eatery on their way to or from work.
High-traffic areas also offer the restaurant the advantage of visibility. Since these areas are typically busy and congested, the brand is exposed to a significantly larger number of people than it would have been if it was in a remote location.
Accessibility is also a crucial reason traffic-congested locations are a preferred pick for any Chick-fil-A franchise. When it comes to food, most people would rather not struggle to find an excellent restaurant.
If you’re considering investing in a Chick-fil-A franchise, I’d strongly recommend opting for commercial properties in a traffic-congested location.
Sit-on Pads Near Major Shopping Malls
Although it has several thousand free-standing restaurants today, setting up shop in a bustling mall is the Chick-fil-A trademark. The company’s first Chick-fil-A restaurant was opened in the Greenbriar Mall in Atlanta, and it established itself as a strong brand using this model throughout its early years.
This strategy makes a lot of sense when you consider that malls are often filled with hundreds of individuals who fit Chick-fil-A’s target market.
That said, finding purchasable land for the construction of a Chick-fil-A restaurant may be challenging, especially in urban areas where most malls have no vacant real estate. However, you may find opportunities to invest in shopping plazas in smaller neighborhoods.
Dense populations are one criterion high-traffic areas and shopping malls have in common. Larger populations often mean increased visibility. The idea is to establish the restaurant in a location where it’ll generate the needed business traffic.
As a result, aside from shopping malls and high-traffic sites, you should also consider other neighborhoods with a dense population of individuals that fit Chick-fil-A’s target demographic.
Of course, while searching for populated neighborhoods, you want to consider factors such as parking spaces. While the restaurant will likely have its parking lot, it helps to have alternatives, especially on extremely busy days.
Average Chick-fil-A Lease Rates
The Chick-fil-A franchise is one of the most attractive business ventures for real estate investors, mainly due to its popularity and year-on-year billion-dollar sales revenue. As one of America’s most profitable QSRs, it offers any investor the assurance of consistent annual income.
The solid corporate guarantee the investment comes with also means the company will shoulder all financial obligations regarding the business. Among its competitors, Chick-fil-A pays one of the highest rent fees for its restaurants, at an average price of $1,094/square foot.
Property leases typically last for around 20 years, with a 10% rent increase every five years. Chick-fil-A’s leases also have an average cap rate of 3.60% and an average sales price of around $4,000,000.
As expected, when purchasing a Chick-fil-A restaurant, you’re buying the property the structure is built on. In other words, the investment will feature a ground lease. As such, you’ll have no business handling the eatery’s construction and equipping. The company typically shoulders that obligation. Throw in the fact that the family-owned establishment favors an NNN lease, and your only responsibility as a property owner will be to collect cheques at the end of every year.
That said, Chick-fil-A isn’t particularly famous for accepting franchisees. As a matter of fact, only 0.4% of potential applicants are approved annually. That’s unsurprising since the privately-held company only takes up expansion opportunities in target markets if it fits its corporate goals.
Is Chick-fil-A a Good Investment?
Chick-fil-A is one of the most successful QSRs in America, with system-wide sales totaling $16.7 billion in 2021. The fact that this figure continues to increase annually is another pointer to the immense profitability of the privately-held company.
I’d recommend opting for an NNN lease while negotiating a real estate investment with this restaurant, as this contract will relieve you of any repair and maintenance responsibilities and other day-to-day operations involved in running the property.
Since the contract will also likely be a ground lease, Chick-fil-A will handle the construction and equipping of the restaurant – another factor that makes the investment ideal for you as an investor.
The company’s solid corporate guarantee also means it has the financial health to sustain the lease over its 20-year tenure. With a Chick-fil-A real estate investment in the right location, profitable sales returns are more or less a given. As a result, the brand will likely sign a renewal at the end of the contract.
Acquire a Profitable Chick-fil-A NNN Property With NNN Deal Finder
NNN leases for restaurant franchises like Chick-fil-A are among the most lucrative, hands-free real estate business ventures to get involved in. You’re almost guaranteed annual checks with zero financial commitment to the property.
However, despite the mouth-watering ROI of these properties, it’s significantly tricky to kickstart an NNN investment. If you’re interested in investing in NNN real estate, you need expert hands to help you to navigate the market.
By working with NNN Deal Finder, you’ll have access to a real estate team with professional experience in helping you to locate the ideal property to suit the profile of a top-tier company like Chick-fil-A. Our team will work with you on an individualized basis to find the most lucrative NNN investment for you.
Ready to create substantial wealth via a triple net property investment? Contact us to learn more about Chick-fil-A real estate requirements and the doors they can open for you!