Sale Leasebacks Can Help Restaurants Generate Capital Through Existing Real Estate
Give your restaurant the cash it needs by arranging a sale leaseback with ZEL Capital Partners. We purchase restaurant and franchise real estate and lease it back to the business owners, eliminating possible economic risks and reducing other financial concerns. Under a sale leaseback, restaurant and franchise owners are able to get a return on a property’s lease and keep its existing management.
How Restaurants and Franchises Win with Sale Leasebacks
It’s a win-win for everyone. Restaurant owners get to cash out early with no recourse and a fair buyout. The best part? The new lessee is able to keep existing managers and get a return on the leasehold. Creating a sale leaseback agreement with ZEL’s restaurant investors is a smart strategy for established restaurants, franchises, and larger restaurant chains.
How Sale Leasebacks Work
A sale-leaseback is simply a buying operation that allows the seller to cash out. From a real estate standpoint, the deal is straightforward. Once ZEL Capital Partners purchases the restaurant or franchise’s property, the title is transferred and the restaurant or franchise owner becomes the tenant. All deals are made under a master lease that can be extended and expanded into a sublease.
For the new lessee, a non-recourse management agreement will be created. Non-recourse agreements protect the restaurant owner and their assets; the only repayment required is the value of the purchased real estate. Management agreement and lease terms can be extended throughout the deal. A cash security deposit and letter of credit may be required depending on two factors:
- NOI (or Net Operating Income) to ensure sufficient, consistent payments
- Level of risk restaurant or franchise owner is willing to take
Where did the Sale Leaseback Model Originate?
Sale leasebacks were established in Europe but are becoming more popular in the U.S. Many oversea investors are looking for assets in the states, helping American sellers gain capital. ZEL Capital Partners is based in Scottsdale, Arizona but works with clients nationwide.
Questions? Contact Us. We’ll Call You Directly.
Explore your restaurant’s sale leaseback opportunities with the advisors at ZEL Capital Partners. All consultations for are complimentary. Learn about all the benefits of partnering with our financial experts.
What if a Third Party is Involved?
It’s common for franchises to have third-party management companies involved. Depending on the situation, the purchaser might want to keep the existing management in place, terminate the third party completely, or terminate the third party and bring in their own management company. Each situation is unique and will be evaluated while creating the management agreement. More often than not, with ZEL Capital Partners, the original franchise structure stays the same (the third party company will not be affected). We want to keep the deal simple and daily operations running smoothly.
Disadvantages of Restaurant Sale Leasebacks
There are no disadvantages or major risks involved with arranging a sale leaseback for your restaurant (it’s a win-win for the seller and purchaser). The seller receives cash for their real estate and the buyer gains a restaurant investment. The only foreseeable risk is if the restaurant underperforms after the sale. If the lessor can’t keep up with payments, they might lose some or all of their security deposit and will have to find an alternative way to pay rent. Both the seller and the buyer have the option to terminate the lease and walk away from the deal. Although this is an economic risk to consider, it’s important that you know ZEL Capital Partners is here for the long run. All sale-leaseback and management agreements are structured to protect your business.
Why Team with ZEL for a Restaurant or Franchise Sale Leaseback Agreement?
Our team of investors is qualified and experienced, serving a variety of franchises and privately-owned restaurants. We are solely interested in purchasing your real estate assets and seek quality business that has the capability to manage all business operations. Our sale-leaseback agreements are altered to fit your restaurant’s needs and are structured to protect your business.
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