Restaurants in US selling real estate to boost profits

Restaurants in US selling real estate to boost profits

The trend of selling off unnecessary real estate is growing across the country. Businesses are considering the sell off as a viable option to boost the profit. Olive Garden and LongHorn Steakhouse’s owner recently informed that the restaurant chain will get rid of its majority real estate. The asset light model of ownership is an evolving pattern in the industry. 

Around 1,500 restaurants in the country are owned by Darden Restaurants Inc. now. The company plans to sell around 430 properties to real-estate investment trust which are involved in the public trade. The company will lease the property from trust. The starboard Value LP, an initiative by an activist investor has forced this big restaurant chain to take this decision. 

The removal of real estate assets to relax balance sheets has been also followed by the Orlando, Fla., chain’s action. World’s biggest fast food player McDonald's has also joined the list by selling restaurants to franchisees in order to reduce fiscal risks. This will also guarantee steady supply of profit to corporations.  

Wages, food and health care costs are constantly increasing and this is indirectly affecting the operating costs of the business. Therefore many chains have followed the suit. The debt reduction can be achieved by using the sum collected by transferring an outlet to small firm.  Recently Bob Evans Farms Inc also decided to sell or lease its properties. The chain has around 600 restaurants across the country. The firm now will be focusing on packaged meat business now. 

 

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