In the Fast Lane; Leases for Drive Thru Fast Food Units

Drive Thru unit lease renewal

At Vickery Holman we are well versed in dealing with a huge range of retail and restaurant properties for landlords and tenants. One recent example of this was a drive thru fast food unit where Amy Durkin has just finished lease renewal negotiations. Amy discusses below a few key points to consider when looking at rents and lease terms for this type of property.

As with most lease renewals, the basis of negotiations depends on comparable evidence. With this type of property, the surveyor may often have to search a wider geographical area to find relevant transactions. Due to specific characteristics of this type of property, comparison locally with traditional restaurant/café uses is not usually the most accurate assessment of market rent. These units are usually located on larger sites with car parking and space for the drive thru lane around or adjacent to the property. Premises which are located on or near to established retail or leisure parks combined with large amounts of parking will command the best rents, but individual sites with a high amount of pedestrian and motor traffic are also beneficial to these operators.

As smaller snack/coffee operators move into the drive thru market, consideration to the size of the property should be given. These operators are able to take smaller properties as their dependence on eat-in customers is smaller than those who typically provide meals. Kitchen and storage space is also greatly reduced for some operators. This can result in a much higher price per square foot being paid for smaller units, which shouldn’t be directly applied to a larger unit. This relates similarly to all commercial properties, where the general consensus is a larger property has a lower rent per square foot.

The Drive Thru market appears to be booming and this market confidence is also shared by the Valuation Office Agency, who applied a nationwide average 14% increase on drive thru unit rental values in the 2023 business rates revaluation. Traditionally, fast food operators took leases of 20 years or more. However, as in other property sectors, some tenants are now wanting shorter leases with tenant break options, often reducing the fixed term of occupation to 10 years, sometimes even less. In order to agree the best terms, careful consideration of the evidence is key. If you would like to speak to us about a lease renewal or rent review of drive thru or restaurant property, please do get in touch.

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