Real estate investors, developers, and REITs are very familiar with the tax-deferred advantages of a 1031 Exchange. However, you may not have considered how the strategy could be beneficial in other ways including, diversifying, moving markets, and increasing income.

If you are contemplating a 1031 Exchange, or have recently transacted a deal, making the next investment step could seem daunting. After all, the real estate market is in a state of perpetual, cyclical motion, with unique opportunities arising every day. The reality is that these opportunities are created by others with similar objectives – sell to acquire.

Quick service could mean a long-lasting investment.

As with most investments, the objective is to have a sustained, consistent return over time, preferably, a long time. With nearly 200,000 quick service restaurant (QSR) franchise locations in the U.S.1 and increasing each year, the segment is particularly appealing. No business is completely recession proof, but quick service restaurants have a lower average check, greater convenience, and increased food choices that resonate well with financially stressed consumers.

Growing franchisees who own real estate will often find themselves in the predicament of wanting to expand locations, but not having the capital to do so. Among the possibilities to gain liquidity, they will pursue a sale/lease back. In this circumstance, the franchisee (the seller) upon sale of the property, becomes a tenant of the buyer. Clearly, the benefit to the franchisee is the immediate profit from the sale. The buyer (investor), however, acquired a 20-year cash flow stream that typically has extension options and escalations available.

Landowners are only as successful as their tenants, so how can you determine which is the best investment for you?

It goes without saying, location comes first. Ensure the real estate is well positioned in an area that promotes customer traffic and is in an area poised for development. Look for a franchise that is part of a mature brand. Choose a sizable franchise. Larger franchises are typically more appealing. Confirm that the franchisees location has positive year-over-year results.

The value of choosing the right franchise tenant could result in as much as 20 years of perpetual lease income. With cap rates presently stable in the mid 5s to low 6s, the initial investment poses nominal risk.

Whether you are a novice or an expert dealing in franchise real estate, you can benefit from M&T Bank’s more than 30 years of franchise experience. The M&T Franchise Team specializes in providing research on potential franchise tenant brands, as well as operating company and property company financing to franchisees.

Want to learn more?

Reach out to Blair Ridder, M&T Bank New York City regional president at or 212-350-2480 and Karen Schonfeld, M&T Bank managing director of franchise banking at or 410-244-4252, with a NYC headquarters at 350 Park Ave or visit us at

This article was previously published in the New York Real Estate Journal


1 Statista, number of quick service restaurants in the U.S.,

This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.


Share this page

If you are interested in sending this page to a friend or relative, please enter the following:

* Indicates required fields
+ Add another

No personal information (including e-mail addresses) about you or your friend will be collected from this e-mail notification feature offered by M&T Bank.

Please Note:

By clicking "ok" below, you will leave and enter a Third-Party Website.

Tenga en cuenta que:

Al hacer clic en “Aceptar”, abandonará e ingresará en el sitio web de un tercero.

Please note that:

  • The Third-Party Website is governed by a different set of terms and conditions and privacy policy than and you should review those terms, conditions and privacy policy prior to reviewing the content of the Third-Party Website
  • M&T is providing a link to the Third-Party Website as a convenience and does not necessarily control the content of, or endorse, the Third-Party Website, it's owner/operator or any information, products or services that are made available on or through it
  • M&T makes no representations or warranties regarding the information, products or services provided through the Third-Party Website

Such Third-Party Website's owner/operator may be regulated by governmental entities and laws that are different than those that regulate M&T.

Tenga en cuenta que:

  • El sitio web de un tercero está regido por un conjunto de términos y condiciones y una política de privacidad diferentes que, por lo tanto, deberá revisar esos términos y condiciones y la política de privacidad antes de evaluar el contenido del sitio web de un tercero
  • M&T le proporciona un enlace al sitio web de un tercero para su comodidad y no necesariamente tiene control sobre el contenido, o se adhiere, al sitio web del tercero, su propietario/operador o ni a ninguna parte de la información, producto o servicio que se ofrezca a través de él
  • M&T no ofrece declaraciones ni garantías respecto de la información, productos o servicios prestados a través del sitio web de un tercero

El propietario/operador de ese sitio web de un tercero podría estar regulado por entidades gubernamentales o leyes que son diferentes a aquellos por los que está regulado M&T.