Ground Lease KFC

[John McKee]

I'm looking at ground lease drive thru KFC in the south.  About 28k cars a day go by.  Cap rate is a 7%.  Anyone have any feedback with this brand?  8 years left on a 20 year lease.  Let me know your thoughts.

[Tiffany Colvert]

Most KFC locations are owned and operated by franchisees, (I've done 2 KFC deals and both were very different). The strength of this lease will fall on 1. Their sales and 2. Their financials. However, ground leases are tricky and don't offer some of the same tax benefits/ deprecation as if you owned the building. Plus, I agree with @Henry Clark that KFC as a brand is not as strong as some others that have recently emerged. Given both factors (ground lease and old brand) I'd probably pass on this opportunity.