Notice from the author

Please read the page Project Two (selected from the tabs above) before returning to this page to read the rest of the project. I apologize for the inconvenience - I need to take a class on blogging it seems. Thank you.

Site Analysis – Part Two

The following site information comes from the Dairy Queen website in the information provided for potential franchisees.

General Criteria for a DQ Grill & Chill Restaurant Site:

DQ Grill & Chill Core 46 Model Building

Minimum Lot Size:	20,952 Square Feet with 105' Frontage
Building Size:	1,886 Square Feet
Parking:	Minimum of 30 Parking Spaces
Traffic Count Minimum:	20,000 Daily Average
Employees:	5,000 (3 minute drive-time)
Median Household Income:	Minimum of $35,000
DQ Grill & Chill® Image:	Logos, building design and materials allowed
Drive-Thru:	Site can acquire drive-thru zoning approval

The selected site has a 2,898 square foot building sitting on the Southeast corner of the 26,136 square foot lot. The project site substantially fits the standard site criteria listed above. The site also meets the following “other factors considered” for site selection listed on the DQ website.

• Traffic for all critical day parts (lunch, afternoon treat, dinner, evening treat)

• Corner locations or locations with great visibility and easy ingress/egress

• Close proximity to traffic generators and retail 

Financial Analysis – Part Two

After contacting American Dairy Queen’s Development Teams the developer (me) has decided not to be an owner/operator of the location, however, the Development Team shared the site analysis conducted for project one with existing and prospective franchisees interested in opening a store in the Bedford area. Working with Development Team proved fruitful and has secured a green ground lease with an existing franchisee – a lease overview is below. The lease provides for a twenty-year initial term and two five-year renewal options; a duration that coincides with the terms of a DQ Grill & Chill franchise. Since the improvements will revert to the landlord at the end of the lease the developer has included “green” provisions in the rental agreement to act as a hedge against future demands including increasing energy costs and the market’s mounting preference towards sustainable properties. The tenant has agreed these terms because they positively affect his bottom-line with better private financing options and projected reductions in annual operating expenses. These terms also appeal to his social conscience. 

Revised financing estimates for the developer are displayed below. The newly calculated required minimum net operating income is $40,250. The lease overview above shows that the property will be profitable for the developer with return of equity occurring early into the second year. 

Cost-Benefit Analysis

This analysis should serve as supplemental marketing material used to attract tenants by highlighting the tenant-specific benefits.

Sustainable Features:

The green ground lease in place has landlord requirements for design approval and mandates the following sustainable features be included in proposal:

1. Recycle materials from demolition of the existing structure and new construction. 

          Source: http://constructionwaste.sustainablesources.com/
2.  Cool roof design 

          Source: http://www.pge.com/includes/docs/pdfs/shared/saveenergymoney/rebates/remodeling/coolroof/coolroofdesignbrief.pdf

3. Ground source (also known as geothermal) heat pump Heating, Ventilation and Air-Conditioning (HVAC) system.

          Source: http://www.energysavers.gov/your_home/space_heating_cooling/index.cfm/mytopic=12640 

          Source: http://www.energystar.gov/index.cfm?fuseaction=find_a_product.showProductGroup&pgw_code=HP 

          Source: http://www1.eere.energy.gov/geothermal/heatpumps.html

Cost-Benefit Analysis by Feature:

The lease provision states that best efforts must be made to recycle materials from both the demolition of the existing structure and any waste produced during construction of the new building. Recycling construction materials:

Definition: “Construction waste recycling is the separation and recycling of recoverable waste materials generated during construction and remodeling. Packaging, new material scraps and old materials and debris all constitute potentially recoverable materials. In renovation, appliances, masonry materials, doors and windows are recyclable.”

According to research, “The most important step for recycling of construction waste is on-site separation. Initially, this will take some extra effort and training of construction personnel. Once separation habits are established, on-site separation can be done at little or no additional cost.” Therefore the landlord requires contracting with a service provider with established procedures and ample experience in recycling construction waste and on-site separation of materials in order to preserve the maximum amount of reusable resources. Joining with a tested professional will reduce the risks of increased development costs and help ensure quality workmanship.

Potential benefits realized by the tenant include:

• ·        Tax deductions if donations are made to non-profit organizations specializing in recycling construction materials.
• ·        Cost savings through the planning process – promoting efficient design, minimizing waste during new construction and a reducing new supply purchases.
• ·        Good-neighbor credits with the business’s future customers as recycling efforts are widely perceived as environmentally responsible.

Cool roof design:

The cool roof design lease provision is aimed at reducing the energy load from the Heating, Ventilation and Air-Conditioning (HVAC) system.

Definition: “Cool roofing is defined by the radiative properties known as solar reflectance and thermal emittance.”

The cost of the cool roof design will be dependent on the selected roofing materials. These materials also impact the effectiveness of the roof so it’s important, again, to work with experts to ensure top quality construction and therefore receive the maximum benefits from incorporating it in the structure (and lease). In California, where  high energy performance standards are regulated, property owners are finding “cool roofing is often the least expensive option” to achieve those goals. “The cost of cool single-ply roofing is between $1.50 and $3.00 per square foot. The cost of cool coatings is between $0.75 and $1.50 per square foot. These costs include materials, installation, and basic preparation. The incremental cost of adding a cool roof coating to a traditional roof is less than $0.20 per square foot.”

According to research, “Unlike conventional roofs, cool roofs stay at or near ambient temperatures even on the hottest summer day.” Cool roofing reducing the amount of heat flowing through a building’s roof and into the space below, which in-turn reduces the HVAC load and energy costs. “Studies show cool roofs can typically reduce summer air-conditioning energy use by 10% - 20%.” If the cool roof meets or exceeds expectations, the reduced load also can permit downsized equipment needs (initial capital expenditures).

Potential benefits realized by the tenant include:

• ·        Energy and demand savings – as stated above, the expected reduction in energy usage is between 10% and 20%. The research sites a field test with a reduction of 38% and notes that electrical savings are the greatest in hot and sunny locations, like Texas.
• ·        Maintenance expense savings through reduced thermal cycling (roof temperature fluctuations) which extends the life of the roof past that of typical roofing. The maintenance to the HVAC system is also expected to less due to the smaller energy load and downsizing of equipment.
• ·        More good-neighbor credits through positive environmental impacts. Cool roofs transfer less heat to the ambient environment, “the resulting lower outdoor air temperatures can slow urban smog formation. Simulations predict a reduction in ozone of 10%-20% resulting from a three to four degree Fahrenheit cooling in ambient temperature.” Additionally, the drop in energy demand translates into reduced carbon-dioxide and other undesirable emissions.

Ground source heat pump HVAC system:

As with the cool roof design, the geothermal heat pump lease stipulation aims at reducing the energy load on the HVAC system and thereby realize monetary gains from the costs savings. The lease states that the installed heat pump must be an ENERGY STAR qualified model to ensure annual energy savings.

Definition: “Geothermal heat pumps (GHP) use the constant temperature of the earth as the exchange medium instead of the outside air temperature….depending on latitude, ground temperatures range from 45 to 75 degrees Fahrenheit. Like a cave, this ground temperature is warmer than the air above it during the winder and cooler than the air in the summer. The GHP takes advantage of this by exchanging heat with the earth through a ground heat exchanger.”

The Geothermal heat pumps do costs quite a bit more than their traditional counterparts, however the savings do provide a return on investment. According to research, “even though the installation price of a geothermal system can be several times that of an air-source system of the same heating and cooling capacity, the additional costs are returned to you in energy saving is five to ten years.”

Potential benefits realized by the tenant include:

• ·        ENERGY STAR qualified models are over 45% more energy efficient than federal minimum standards for energy efficiency.
• ·        Possible tax credits
• ·        “The benefit of ground source heat pumps is they concentrate naturally existing heat, rather than by producing heat through the combustion of fossil fuels.”
• ·        ”Lower operating and maintenance costs, durability, and energy conservation make Ground Source Heat Pumps the smart choice for commercial applications”
• ·        “Simultaneously heat & cool different parts of the same building
• ·        Very quiet--users do not know when the system is operating
• ·        Can be set up in multiple zones, with each zone having an individual room control
• ·        Greater freedoms in building design due to 50-80% less mechanical room space
• ·        No outside equipment to hide, eliminating vandalism and roof top units
• ·        Pipes have 50-year life expectancy
• ·        All electric, which eliminates multiple utility services
• ·        Expel boiler and chiller maintenance
• ·        Ground heat exchanger is maintenance free and will last 40+ years”

Plus these other “great savings:

• ·        Very competitive on initial costs and lower lifecycle costs than most HVAC systems.
• ·        Savings of 25-50% on energy consumption
• ·        Lower peak demand, lowering your operating costs
• ·        Water heated with waste heat from air conditioning at no cost in the summer and at substantial savings in the winter
• ·        Some utilities offer rebates or incentives to their customers who purchase GSHPs
• ·        Conserve natural resources by providing efficient climate control and thus lowering emissions
• ·        Minimize ozone layer destruction by using sealed refrigeration systems, which seldom or never have to be recharged
• ·        Use underground loops to transfer heat, with no external venting and no air pollution
• ·        Very energy efficient, with the earth providing over 70% of the energy required to heat and cool“