I need help choosing which tenant

A national chicken chain (franchisee) or a local nail/hair salon(,He has 4 locations.)
2600 sf. Chicken will go out 20yrs/put in 300K. Nails 10/ 100K.
I have a coffee shop and another chain around the corner, same property.Chicken will exacalate 2.5%, nails 2.75/year. Dont want to hurt other food. Busy corner with bus stops.Brooklyn N.Y.
In Leasing Property - Asked by doug s. - Oct 15, 2010
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Answer(s)

Bob M.
Half Moon Bay, CA

Franchises offer solid business plans and more secure operations and people always need to eat. Nail care is mostly optional. Food tenant's do like to cluster to provide comparable and competitive choices for consumers. You are less likely to upkeep issues (even if NNN) with the franchise. If the nail place struggles, property care might decline. I'd go with proven entity. Bob McComb, Top Dogs, 888 894 5772 X 3

Oct 15, 2010
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Neal L.
Property/Asset Manager
Westport, CT

National chain, if well established, and operator with good credit, will enhance the value and ability to finance. Check with your insurance carrier regarding the additional risk of having another deep fryer on premise to see if your premium will be affected. See if you can cut the chicken guy's term down. 20 years seems like a long time unless you want to finance the lease separate from the property. Just a couple of thoughts. Hope this was helpful.

Oct 16, 2010
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YaYa J.
Broker/Agent
Reno, NV

Doug,
From the info you provided I defiantly will go with the chicken chain. Its looks like a solid tenant and I do believe that having the other food shop will help to both traffic. I wont be 2 concern with the different in regard to the escalation gap between the two on 2600 SF.
YaYa Jackoby, CCIM
Reno, NV

Oct 17, 2010
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Marty H.
Broker/Agent
Lenexa, KS

Doug
The chicken chain sounds like the best bet. However, I'm wondering if the $300K investment includes their equipment or if is just building improvements. If they would be willing to pledge their equipment as security for the lease you would be able to retain it if this unit goes out of business. If this is a possibility, get your attorney to help you draft the appropriate language and prepare a UCC filing. If this all falls into place you have a "ready to go" restaurant location if this franchisee closes up. Otherwise, the equipment will be pulled out by either the franchisee or his banker and the space may not look very pretty when you regain possession. In summary, the residual value of the $300K investment may not be of much benefit to you if the space is torn up and all the equipment removed. Chances are good that they will object to this approach (since the equipment is probably being financed by a bank) but it's worth a try.
In the event you do a nail/hair salon elsewhere in your project, use caution as these operations can generate smells that neighboring tenants may have a problem with. Be certain that shared walls are properly sealed to prevent odor transfer and have the tenant install plenty of exhaust fans that remove the smells to a location that does not allow the odors to be drawn into the neighboring space. There have been some new advances in the chemicals used for nails and perms that generate fewer odors and are more environmentally friendly. Thus, you may want to quiz this type of tenant about their chemical use, etc.

Oct 22, 2010
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