What can I do when a current NNN QSR tenant leaves?
Hi,   
I was wondering if anyone has experience with what happens in the following scenario:  
I have a franchise QSR(national brand) in a lease with 4 years left. If they chose to leave, how hard or easy is it to find another QSR replacement. If I chose to rent out the property at a significant discount, would I be able to find another tenant? And who would  I reach out to for leads ( other QSR franchises who I might want to take over a spot.)
[{"id": "gt29q37", "text": "Are you talking about the current tenant leaving early (breaking the lease) or just not renewing in 4 years when the lease expires?", "replies": [{"id": "gt2ai2e", "text": "Not renewing when the lease expires", "replies": [{"id": "gt2bit5", "text": "OK, last question, do you know for certain they won't renew, or are you just exploring options as a \"just in case?\"", "replies": [{"id": "gt2ckac", "text": "There is some evidence that makes it seem like the likelihood of leaving is at least 50%. So you could say just in case I guess but it is a real likelihood too", "replies": [{"id": "gt2hh85", "text": "The good news is, 4 years is plenty of time to get a plan together.\n\nStart by identifying the most active brokers in your area (if you don't already have a great one) and reach out to some of them. There's nothing wrong with talking to multiple brokers. Find out what they're seeing in the market and do they know anyone in that space looking. Make them familiar with the basics of your space.\n\nNext, I'd keep the line of communication with your tenant wide open. There's a lot of things happening in the market due to the pandemic, so it's important to know how they're doing, is there anything you can do (within reason) to improve their operation there, are they thinking of expanding or closing, etc. This concerns your mutual interest so talk to them and work with them as much as you can.\n\nI would prepare an early renewal offer with incentives for extending the current lease by another 2-3 years. You don't have to deploy this yet, but have something like that ready in case you want to keep the current tenant.\n\nLastly, reach out to the QSR brands and find out who has plans to expand. They probably have franchisees in the area who are planning for the future, and if they're corporate stores, they'll be thinking 3-5 years ahead too. Get on their radar, build some contacts.\n\nGood luck and keep us posted.", "replies": [{"id": "gt3ce0t", "text": "All really good advice. I would also do some research to verify whatever the tenant rep tells you. I've found that location managers can many times be much more candid. \n\nHad a similar situation with a Fortune 100 tenant in a huge R&amp;D property. I presented the concerns of the HQ real estate folks to the on site facilities/CRE person on my next visit like \"how is x, how is y\"? So, Mike (not really Mike) are you gonna make me find a new tenant in 2 years? He said there were no big issues and that he wouldn't dream of leaving since I had painted the lines to make his parking space wider and trimmed the trees and bushes to give him a great view. He went to bat for us even though they weren't leaving and we renewed with good terms. Ownership would've renewed much lower if they'd not had the intel.\n\nBut that's also why I suggest hiring a top tier broker. The property sold shortly after the renewal and we probably got $4-$6 Million more with the tenant in place.", "replies": [], "depth": 6}], "depth": 5}, {"id": "gt2mkkz", "text": "I'd imagine whatever reason is causing your existing QSR tenant to consider leaving the location would also cause other prospective QSR franchises to question the location. They don't usually give up locations that are performing well.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gt2aj9o", "text": "It depends on your location and age. It can be easy or hard. But if you do rent to a regional or smaller shop, expect your valuation to drop too.", "replies": [{"id": "gt2aoxf", "text": "This.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gt2amne", "text": "Drive thru equipped? \n\nIt would be odd for a national QSR with a drive-thru to leave. It also would likely be harder to replace because they generally have very specific buildouts. \n\nIf it's a strip mall tenant, look for 12-24 months to find a new tenant.", "replies": [{"id": "gt2cmiq", "text": "Yeah its a national QSR with a drive thru.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gt2qqsk", "text": "Do they have any type renewal or extension option, and if so when/how does it need to be exercised? If so it's reasonable to ask the real estate manager for the region what their intent is and the result may help narrow down your decision to market the property.", "replies": [], "depth": 1}, {"id": "gt2qzkp", "text": "I don't know where this QSR is but do you have a drive-thru?  Where I am at in Los Angeles, properties with drive-thrus are very attractive.", "replies": [], "depth": 1}, {"id": "gt3a8go", "text": "Four years is a good amount of time. I'd be curious why you believe they may not renew? Not an optimal location (market, visibility, ingress or egress, etc) or is their brand struggling? This would help to guide advice.\n\nI'd highly recommend that you get in touch with a seasoned/connected broker in the area who specifically handles similar transactions. They will be able to guide you the best and it'll be worth the cost. Tenant reps for nationals/corporate real estate folks with national groups have a great poker face, that's how they got into those positions. They may really be planning to stay and just playing you. Hiring a broker will likely save you four years of stress and end up actually saving you money.", "replies": [], "depth": 1}, {"id": "gt3ad9o", "text": "Do you know what the tenants revenue is? You can determine how good of a location it is by comparing their revenue with the nationwide average of their brand. \n\nIf they\u2019re building another location within three miles 99% chance they\u2019re out. \n\nIs the per SF rent they are paying higher than the market rent? If both of those answers are yes and you purchased this already leased to them you might lose some money. \n\nGet a good broker. You might have to re-tenant to an independent mom and pop. If the building is in good shape that shouldn\u2019t be hard, but they will pay a market rent not a QSR rent. \n\nHopefully they stay. Good Luck.", "replies": [], "depth": 1}, {"id": "gt3lxr3", "text": "Edit - Just read some comments and see you have a drive through. You've got nothing to worry about. I'm sending you a DM", "replies": [], "depth": 1}, {"id": "gt3szs5", "text": "Hello.  \n\nIf you have 4 years left, I wouldn't worry too much about it at this point.  Unless your lease allows them to leave early without any penalty.   Depend on where you located, all commercial NNN leases should have an extension on the lease.  The tenant should give you notice of their intention if they choose to renew or lease the premises.  I work with Franchisee and   QSR with drive-thru can lease up within 6 months.  It depends on the location.   Hope this help", "replies": [], "depth": 1}, {"id": "gt59tqj", "text": "Now is the time to meet with the tenant in confidential, find out their plans.  See if they will sign a new lease with you now. Discounted of course.", "replies": [], "depth": 1}]