Is Ground-up Development a Viable Option for Retail and Restaurant Franchisees?

Posted on June 19, 2018

While some franchisees consider it practical to build restaurants and retail stores from the ground up, they must recognize the significant investment of time and dollars that new construction requires. Under most circumstances, franchisees can yield better results when they spend these resources either up-front on marketing their new businesses to generate traffic and sales or allocating those dollars to update their units’ décor and improve technology in the future. In fact, multiple studies have shown that upgrades made to existing stores or restaurants typically results in a sales increase of at least 17 percent.

Today, a growing number of franchisees are refocusing their funds and attention away from new construction. Instead, they are selling their undeveloped land to real estate development companies that can finance the construction of individual operating units and lease the land or finished units back to the franchisees. These sale-leaseback arrangements limit franchisee’s exposure to risk while providing them with an immediate influx of capital that they may use to reinvest in their stores, update décor and technology, such as online ordering, and meet the evolving needs of often-fickle consumers.

Engaging in sale-leasebacks and ground-up construction projects requires investors, franchisees and development agents to work with experienced real estate professionals who understand the local market and can guide them through the process of getting the right deal done at the right time.

The team at Orion works with investors, franchisees and development agents, real estate developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.