Chick-fil-A: Private Company Trades like Investment Grade

Although Chick-fil-A is a private company, there is great demand for their free-standing stores as net lease investments. The properties are well located near major shopping centers, university and college campuses, and business centers. More than half of Chick-fil-A’s 1,500+ locations are stand-alone restaurants, which meet customer demand for convenience and access in high-traffic areas.

Chick-fil-A is notorious for have strong franchised restaurant operators, proven by the fact that Chick-fil-A maintains a franchisee turnover rate of less than 5% per year. For net lease investors, it is reassuring to know that the Chick-fil-A triple net leases have a corporate guaranteed by Chick-fil-A, Inc. Many investors are becoming more comfortable with this top QSR brand and recognize that they carry a certain implied credit-worthiness. Chick-fil-A net leases properties provide a long-term investment with no property management responsibilities in the form of a 15 to 20-year primary term nnn ground lease. Also, it should be noted that the contracted rent typically increases 10% every 5-years throughout the lease and option periods.

When purchasing a Chick-fil-A ground-leased property, investors are buying the real estate upon which the Chick-fil-A restaurant sits. These ground-leased properties provide additional investment security given the nature of the real estate investment made by Chick-fil-A’s real estate team, which generally pays for the design, construction, and equipment for all new stores. Finally, from a real estate fundamentals perspective, knowing that store locations and developments are chosen based on corporate goals for target markets; it is not surprising that new stores are typically located in high-traffic areas and are often found as out-parcel/pad sites at major shopping centers.

Pros

• Excellent operators and exceptional, growing sales and market presence
• Strong real estate fundamentals
• NNN ground lease structure with rent increases

Cons

• Private company
• Franchised Operators
• Ground lease provides no depreciation on land

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