Investors who feared that diminished in-person dining during the pandemic would greatly impact store sales in single-tenant casual dining are finding that to not be the case, according to The Boulder Group's 2022 Net Lease Casual Dining Report issued last week.
"The recovery experienced by the restaurant sector has brought net lease investors back to this category," Jimmy Goodman, Partner, The Boulder Group, said in prepared remarks.
And rising cap rates are no longer on the net lease casual dining menu, as they decreased 6.03% in Q1, according to The Boulder Group.
Recommended For You
This represented a 70-basis point decrease when compared to the prior year.
Casual dining properties with corporately guaranteed leases generated cap rates of 5.75% while franchisee leased properties had cap rates of 6.40%. Cap rates for corporate guaranteed leases experienced 40 basis points of compression while franchisee lease properties decreased by 72 basis points.
Randy Blankstein, President, The Boulder Group, said better overall market conditions for the restaurant sector post-pandemic led to cap rate compression.
"Investor interest and transaction velocity increased due to recovery for casual dining restaurants following the pandemic," Blankstein said in prepared remarks.
Leading Brands Expanding Footprints
Sales in casual dining spiked more than 30% in 2021 compared to 2020 according to Technomic's Top 500. Only 30% of the casual dining restaurant brands exceeded their 2019 store sales. Strong corporate brands including Olive Garden and Texas Roadhouse have followed up the pandemic with significant expansion plans.
The bid-ask spread compressed to 15 basis points in Q1, a sign of increasing competition amongst investors. Furthermore, corporate backed leases are priced at a 65-basis point premium over their franchisee backed counterparts, according to the report.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
