Northmarq Restaurant Group: A Conversation with Matt Lipson and Mike Philbin

There are so many brokers in the restaurant space. What makes you different?

We’ve spent years creating a one-stop shop for operators, developers and all other investors focused on restaurants. Our database includes franchisees from every major brand in every area of the country, and we have relationships with developers that have extensive track records of building restaurants nationwide. Our team spends hundreds of hours each quarter on data extraction and analysis to create our brand-focused cap rate guides, and these reports serve as a risk management guide to anyone investing or operating in the restaurant space. We offer access to a strong, integrated debt team, as well as referrals to restaurant-focused attorneys in all 50 states, restaurant-focused investment bankers across the country, and lenders ranging from life companies to credit unions who are strongly focused on restaurants. Because of the depth of our restaurant track record, the strength of our relationships, and our access to vast resources in the sector, we are able to serve our clients in ways that others cannot.

What can you share about your analysis of restaurant real estate cap rate data?

The data we mine has not only confirmed some of our hypotheses, but it has also opened our eyes to the effect on profit that uninformed decisions can have. For example, an average 15-year QSR lease versus a 20-year lease equates to about a 30-basis point delta in a transaction. If you’re a developer negotiating with a tenant, is it really worth punting on those five extra years and losing $100,000 or more on your real estate sale? Or for those franchisees that structure single-state entities for tax purposes: is it worth 48 basis points to fall into the one- to 20-unit bucket versus giving the full-entity guaranty and offering 100+ units? This decision too could cost someone hundreds of thousands of dollars per property.

It’s been fun quantifying these seemingly benign decisions, and it’s interesting to see how these decisions are interpreted from brand to brand. We have more than 50 brand-specific cap rate guides that we update regularly, and by really studying these trends, we’re better equipped to advise our clients.

Can you talk about the services you offer clients?

We’ve put a lot of time and effort into developing a database that serves as a matchmaker for our clients. In our database today, we have 897 restaurant-focused developers, 3,404 restaurant franchisees and franchisors, and 518 institutional buyers, along with Northmarq’s 100,000+ retail buyers and sellers. Beyond that, we have our integrated debt and equity platform, referrals to restaurant-focused attorneys, investment bankers and third-party engineers.

We know the franchisees for every brand in any given area. When a developer has a pad site available, we bring multiple parties to the table, and then provide our cap rate guides so they can make the right decision about who to choose as their tenant. For franchisees and franchisors, we work with developers to expand their brand, investors to buy their sale-leasebacks and cap rate guides to make educated decisions on where to place their money and how to structure their leases. To our buyers and institutional clients, we can structure portfolio sale-leasebacks and make connections with tenants to complete their buy and sell initiatives. We’re 100% focused on restaurants and have created a one-stop shop for data and expansion trends.

Are you willing to share your data?

Absolutely. We have been sharing our materials upon request. We’re always open to jump on a call or have an email conversation. Clients can access our cap rate guides by going to our team’s website as well.

What advice would you give restaurant companies and investors?

When you find a broker with a specific focus, challenge them with your questions. Data is increasingly valuable in today’s world, and we’ve found a way to leverage that data into real answers to questions our clients haven’t been able to find an answer to. Every topic in our cap rate guides has come from questions over the years from our clients. Therefore, they are tailored to fit all restaurant investor’s needs.

You also want a broker who is not afraid to push boundaries and ask the hard questions. Whoever you list with will need to act as a gatekeeper and influence the direction of your transaction, so you want a broker who will act with confidence and accuracy.

Track record matters as well. Because of our extensive track record in restaurants, we have buyers and brokers calling and emailing us every day with buyer needs or asking if we have anything in our inventory that fits. There is a surplus of good inventory in this market, and you want to hire a broker who is going to be able to distinguish a deal as much as possible.

Finally, marketing matters. We have spent countless hours perfecting our marketing packages, making sure that every highlight is pointed out perfectly in our pitch, our aerials and our property overviews. You want a broker who is going to make your property stand out in the sea of its comparable listings.

Any parting words?

The platform we created is like a cheat code to restaurant investors. Our cap rate guides show developers who the best match is for their land or vacant building. They show franchisees exactly how to structure their sale-leasebacks and provide a guide for future negotiations over lease terms with their landlords. The cap rate guides also show institutional and high-net-worth clients if they are paying too much or too little and when the right time is to exit their property. The data is invaluable, and our Restaurant Group acts as a comprehensive resource for negotiations, brainstorming and execution.