Both a commercial real estate broker and a longtime restaurant operator, Josh McBride is better equipped than most with insights into the quick-service site selection process. And, as the industry evolves at a rapid pace, there’s been no better time to revisit some of the fundamental calculations that should be on every operator’s mind when looking for real estate.
Below is an edited version of a conversation between McBride and QSR magazine.
What is your background in the restaurant and real estate industries?
“I began my restaurant career with Chick-fil-A in 2004, where I served for over 9 years, including as an owner-operator. I also spent time as vice president of development for what was, at the time, the largest Pieology Pizzeria franchisee group. More recently, I co-founded Hogwood BBQ in Franklin, Tennessee—one of the highest-rated BBQ restaurants in the Nashville area.
Since launching McBride Real Estate a few years ago, I’ve brokered over $50 million in retail and restaurant leases across the Southeastern U.S., and have evaluated over 1,000 raw land development opportunities, resulting in a net lease asset sale value of over $75 million.”
What are key things franchisees and operators should look for when targeting sites?
“When analyzing an opportunity, there is nothing more critical to understand than how the restaurants in the immediate vicinity are performing. There are some very sophisticated software programs today that can provide operators with real-time customer traffic data that wasn’t accessible 5 years ago. Operators should use these tools to understand how their competitors are performing at a specific location and then target the sites with the highest probability for success.
Employee population in a trade area typically correlates to how the restaurant should perform in the breakfast and lunch dayparts. Residential population in the trade area typically correlates to how the restaurant should perform for the dinner or weekend business. Operators should ideally look for sites with high counts for both categories.”
What are key things franchisees and operators should inquire into when negotiating commercial real estate?
“Aside from rent, a big concern for most restaurant operators is their initial cash investment in the space. Borrowing is getting more expensive while, at the same time, construction costs continue to rise. A second-generation restaurant space can be a very good option, if you can find one.
For new developments, the operator can submit a work letter to the landlord. This work letter could include stipulations like having a grease trap, patio with railing, upgraded electrical panel, and high tonnage HVAC installed. Most franchisors should be able to provide a detailed landlord work letter for their brand.
Rent and investment are the two most critical items in the landlord proforma as well, so compromise is key. Operators should expect to pay a premium in rent if the landlord is prepared to invest additional capital in their restaurant buildout.”
Connect with McBride on LinkedIn or follow his LinkedIn page: McBride RE.
