Why Fast Food Properties are a Top Menu Item for Investors

Our specialist team of Victorian commercial property experts have observed an increasing ‘appetite’ among investors for tenanted fast food commercial properties in recent months.

This surge in interest can be attributed to several factors that we will explore here, that ultimately create astute and lucrative investment opportunities in the Victorian marketplace.

What is Fuelling Investment Hunger?

The most significant hallmark drawing investors to fast food is that it is a small, tightly-held and often high-profile sector, which drives steady extended income streams and a relatively low-risk profile compared with other general retail offerings.

A core performance trigger for tenanted fast food properties are the strategic locations of these assets across both metropolitan and suburban areas, as well as busy pedestrian areas and high-traffic motorways.

Their ease-of-access in close proximity to bustling urban centres or along busy thoroughfares enhances the visibility and profitability of these investments, while the accessibility and convenience factor contribute significantly to tenant retention.

Attractive Tenants & Leasing Agreements

Generally speaking, fast food commercial properties often come with long-term leasing agreements – usually commencing with a 10-year lease with options to extend by another 10 or even 30 years.

Some of the world’s biggest food brands also occupy these properties, like McDonald’s, KFC, Burger King and Hungry Jack’s. And over several decades, these global franchises have developed incredible brand equity locally, becoming a household name and frequented easy meal option among Australian consumers.

Furthermore, the extended duration of these commercial property leases minimises the hassles associated with frequent tenant turnovers that are more common in the residential sector and other commercial real estate verticals.

Light-touch Upkeep

Investors also appreciate the light-touch upkeep associated with tenanted fast food properties, as fast food operators typically manage the fit-out process and equipment maintenance, especially in brand new offerings, reducing unforeseen financial burdens on property owners.

This hands-off approach allows investors to focus on the financial aspects of their portfolio, making it an attractive option for those seeking a more passive investment strategy.

Current Macro-economic Performance Drivers

A macro-economic factor currently influencing the performance of fast food properties is the cost of living crisis in Australia, which is putting upward pressure on households at the supermarket check-out.

Yet, generally speaking, fast food restaurants often provide a lower-cost and more convenient food option for individuals and families, that in many cases has improved the financial performance of fast food businesses in both metro and suburban areas since the recent peak of interest rates and inflation.

Pricing & Emerging Investment Opportunities

Pricing for tenanted fast food properties can vary significantly, driven largely by the tenant’s attractiveness to consumers and the positioning of the real estate asset.

Not everyone can afford to be a property-owner of one of the 1,000 McDonald’s restaurants or 450 Hungry Jack’s eateries around the country, which can command eye-watering price tags into the tens-of-millions.

There is, however, one growing market segment underpinned by emerging international franchises, such as El Jannah, Carl’s Jr, Guzman y Gomez and Burgertory, that are creating more ‘entry level’ investment opportunities.

This relatively new wave of operator caters to both metro and suburban markets, but generally utilise less square metreage to run their business, which in-turn can often bring investment costs down within a window of $2.5 – $5 million.

Through our corporate network and established property owner clientele, we are aware of several fast food opportunities of this nature, that we would be glad to discuss with you. Should you wish to learn more about this market tier, or would like to have a confidential conversation about a separate property matter, please connect with us at info@jonesre.com.au.