Taco Bell & KFC
Yum! Brands is ranked number 472 on the Fortune 500 list, with revenues of $6 billion in 2018. Yum! Brands started as a spin-off from PepsiCo in 1997. Today, they operate and franchise KFC, Pizza Hut, and Taco Bell restaurants! Yum! Brands is given an investment-grade credit rating of BBB from Standard and Poor’s and Moody’s long term rating of Ba1.
Taco Bell is a Mexican-inspired quick-service restaurant. As the leading Mexican-inspired QSR, Taco Bell plans to have 8,000 restaurants by the year 2023 which they anticipate will add an estimated 100,000 jobs nationwide. Taco Bell serves made-to-order and customizable tacos and burritos, among other choices.
KFC was found by Colonel H. Sanders in Corbin, KY. KFC is best known for its fried chicken. Today, there are over 21,000 locations operating across 131 countries.
Like most QSR tenants, KFC and Taco Bell tend to sign triple net NNN leases, leaving investors with no landlord responsibilities. The leases have a variety of rent escalations, commonly 5-10% every 5 years or 1-2% annually, giving NNN or 1031 Exchange investors a hedge against inflation(NNN lease term).
It is important to note that Taco Bell and KFC franchise the majority of its locations. There are a number of various triple net NNN lease agreements and guarantors operating under the KFC and Taco Bell banners. The most common NNN lease term is 20 years with four (4) five-year options.
Taco Bell and KFC NNN investment properties tend to be in strong locations, with buildings that are easy to backfill and sign landlord-friendly leases. Good visibility from roads with high traffic counts helps drive sales in the restaurant and helps the underlying real estate retain its value
McDonald’s
McDonald’s is currently headquartered in Oak Brook, Illinois. McDonalds Corporation (NYSE: MCD) is the world’s leading global foodservice retailer in the world with over 36,000 locations serving approximately 69 million customers in 120 countries, daily.
McDonalds Corporation has an investment grade Moody’s long term rating of Baa1 and a Standard and Poor’s bond rating of BBB+.
More than 80% of McDonald’s restaurants are owned and operated by franchisees while the remaining 20% are corporate-owned. McDonald’s has the second-highest average sales per location amongst the major QSR burger chains.
McDonald’s investment-grade credit guaranteeing the lease reduces the risk for NNN property or 1031 Exchange investors. McDonald’s restaurants tend to be in great locations. McDonald’s corporate real estate team will analyze sties and locations to ensure long-term sales and profit potential. These factors make these pieces of NNN real estate attractive to any retail tenant.
McDonald’s tends to sign NNN ground leases, where they agree to lease the land and develop their own buildings. These types of NNN leases leave investors with no landlord responsibility, and the periodic rental increases outlined in the lease agreement offer a hedge against inflation.
McDonald’s is a highly desirable triple net lease tenant due to investor-friendly NNN leases, a strong corporate guarantee, and solid real estate fundamentals.
Call the Triple Net Investment Group today to get assistance with navigating your NNN property or 1031 exchange investment with a Taco Bell, KFC or McDonald’s tenant, at a cap rate that will satisfy your modest risk appetite.
