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.