The Boulder Group’s Research Department has released a new research report providing comprehensive numbers and analysis of the activity in the National Net Lease Quick Service Restaurant (QSR) Market.

1. www.bouldergroup.com
THE NET LEASE QSR MARKET REPORT
AUGUST 2014
Tenant Q2 2014 (Current)
All Corporate QSR 5.75%
McDonald’s (Ground Lease) 4.00%
Panera Bread 5.25%
Starbucks 5.50%
MARKET OVERVIEW
Cap rates in the net lease quick service restaurant (QSR) sector reached
6.00% in the second quarter of 2014. The QSR sector differs from the
majority of other net lease retail sectors as 56% of the properties are
leased to franchisees rather than corporate entities. Cap rates for
QSR properties with corporately guaranteed leases have cap rates of
5.75% while franchisee leases are 50 basis points higher. McDonald’s
ground leases continually represent the lowest cap rates for corporately
guaranteed leases (4.00%) due to their superior credit rating (S&P: A),
long term leases, low price points, reoccurring rental escalations and
long operating histories at sites. Cap rates for QSR properties leased to
franchisees can be affected by the guarantor who can range from a one
unit operator to a franchisee with hundreds of locations.
Investor demand for single tenant QSR properties can best be
illustrated by the median spread between asking and closed cap
rates. In the second quarter of 2014, the spread between asking and
closed cap rates was only 15 basis points, while the same spread is
34 basis points for the entire net lease sector. Additionally, cap rates
for QSR properties were a 50 basis point premium over the entire
net lease retail sector (6.50%). A surplus of 1031 exchange investors
with low equity requirements are attracted to the QSR sector as these
properties have a median asking price of $1,700,000. Additionally,
QSR properties feature recognizable tenants with long lease terms, no
landlord responsibilities, rental escalations and are typically located as
outparcels to shopping centers in high profile locations.
Sale leaseback transactions by QSR operators have been able to boost
supply of single tenant properties for sale. In the current low cap rate
environment, franchisees are able to unlock the value of their owned
real estate and are able to use the capital for expansion or remodeling
of existing locations.
The single tenant net lease QSR sector will remain active as the lower
pricepointsandrentalescalationsaffiliatedwiththisassettypecontinue
to attract private and 1031 exchange investors. Private and 1031
exchange investors typically pay a premium for net lease properties
due to their timing constraints and alternative investment options.
Corporately guaranteed leases will remain in the highest demand
among private investors due to the strength of credit associated with
the assets. REITS and institutional investors will continue to seek larger
portfolios of QSR properties via sale leaseback transactions rather than
one off transactions to obtain economies of scale.
QSR (CORPORATE) PROPERTIES
MEDIAN ASKING CAP RATES
QSR PROPERTIES MEDIAN ASKING
PRICE
Tenant Q2 2014 (Current)
All Franchisee QSR 6.25%
Burger King 6.50%
KFC 6.00%
Pizza Hut 6.25%
Taco Bell 5.75%
Wendy’s 5.75%
QSR (FRANCHISEE) PROPERTIES
MEDIAN ASKING CAP RATES
Tenant Median Price
All QSR $1,704,762
Burger King $1,991,304
KFC $1,755,000
McDonald’s (Ground Lease) $1,875,000
Panera Bread $2,804,400
Pizza Hut $849,589
Starbucks $1,506,750
Taco Bell $2,160,000
Wendy’s $2,270,044

2. www.bouldergroup.com
THE NET LEASE QSR MARKET REPORT
AUGUST 2014
SELECTED COMPANY COMPARISON
Tenant Total Number of Locations Ticker Symbol Market Cap
Arby's 3,400 Private Private
Burger King 13,000+ BKW $9 B
Carl's Jr. 1,369 Private Private
Chick Fil A 1,800 Private Private
Chipotle 1,637 CMG $18 B
Dairy Queen 5,700 Private Private
Dunkin' Donuts 11,000 DNKN $4 B
Hardee's 1,944 Private Private
Jack in the Box 2,200 JACK $2 B
KFC 18,875 YUM $34 B
McDonald's 35,000+ MCD $97 B
Panda Express 1,653 Private Private
Panera Bread 1,800 PNRA $4 B
Pizza Hut 14,967 YUM $34 B
Popeyes 1,800+ PKLI $959 M
Sonic Drive-In 3,510 SONC $1 B
Starbucks 23,187 SBUX $59 B
Taco Bell 6,500 YUM $34 B
Wendy's 5,900 WEN $3 B
Whataburger 700+ Private Private
Leases can be guaranteed by franchisees or corporations.
QSR MEDIAN ASKING CAP RATE BY REGION
WEST
MOUNTAIN
MIDWEST
SOUTH
NORTHEAST
NORTHEAST
SOUTH
MIDWEST
MOUNTAIN
WEST
6.00%
6.00%
6.50%6.38%
4.85%

3. www.bouldergroup.com
THE NET LEASE QSR MARKET REPORT
AUGUST 2014
FOR MORE INFORMATION
AUTHOR
John Feeney | Vice President
john@bouldergroup.com
CONTRIBUTORS
Randy Blankstein | President
randy@bouldergroup.com
Jimmy Goodman | Partner
jimmy@bouldergroup.com
Zach Wright | Research Analyst
zach@bouldergroup.com
© 2014. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information and we
make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any circumstances shall
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Sector
Q2 2013
(Previous)
Q2 2014
(Current)
QSR Sector 6.55% 6.00%
Retail Net Lease Market 7.00% 6.50%
QSR Premium (bps) 45 50
QSR SECTOR VS NET LEASE SECTOR
CAP RATES
Corporate
Cap Rate
Franchisee
Cap Rate
Spread
(bps)
5.75% 6.25% +50
QSR ASKING CAP RATE BY
GUARANTOR
MEDIAN NATIONAL CLOSED
CAP RATE SPREAD
Sector Closed Asking
Spread
(bps)
QSR Sector 6.33% 6.17% 16
Lease Term Remaining Cap Rate
20+ 5.80%
15-19 6.10%
10-14 6.35%
Under 10 6.80%
ASKING CAP RATE BY LEASE TERM
REMAINING