Two McDonald’s on the same street can sell at very different prices. Same brand, same sign, same menu. The difference is often one line in the lease: who signs it and who guarantees the rent.
When you buy a NNN property, you are really buying a stream of rent payments. The brand on the building matters, but the company standing behind those payments matters more. Here is how corporate and franchisee leases differ, and how we help buyers judge each one.
Corporate vs. Franchisee: The Basic Difference
A corporate lease is signed or guaranteed by the brand’s parent company, such as McDonald’s, Wawa, 7-Eleven or Dollar General. If one store struggles, the whole company is still on the hook for the rent.
A franchisee lease is signed by the local operator who owns the restaurant or store under a franchise agreement. The brand does not guarantee the rent. Your rent is backed by the operator, which might be a company with 300 locations, a group with 10, or one person with a single store.
The key point: the brand name on the building is not the same as the credit behind the lease. Many of the most recognizable names in net lease, like Wendy’s, Taco Bell, Dunkin’ and Jiffy Lube, are mostly franchisee leases.
Why It Changes the Price
Buyers pay more for rent they are more confident they will collect. A lease backed by a large, rated parent company is usually seen as safer than one backed by a private operator, so corporate leases generally sell at lower cap rates than franchisee leases with the same brand.
That does not mean corporate deals cost more. Many corporate deals are ground leases: the tenant builds and owns the building, so you are buying only the land. Most franchisee deals are build-to-suits that include the land and the building, because the operator would rather fold the construction cost into the rent than pay it up front. So a franchisee deal often has a higher price tag, even at a higher cap rate.
That does not make franchisee leases worse investments. They often offer more income on your investment, and a strong, well-run operator can be a very good tenant. The trade-off is that you have to do more homework on who is actually paying you.
Watch the Fine Print on “Corporate”
Not every lease called corporate is backed by the parent company. Sometimes the tenant is a subsidiary or an operating entity with far less behind it than the brand name suggests. Before you pay a corporate price, confirm:
- The exact legal name of the tenant on the lease, and whether it matches the rated parent company.
- Whether there is a separate guaranty, who signed it, and whether it covers the full lease term or ends early.
- Whether the guaranty can be released if the store is sold or the company is restructured.
How to Judge a Franchisee
With a franchisee lease, you are underwriting a private business. These are the six things we look at first.
Who Usually Backs the Lease, by Tenant
This is a general guide based on the NNN deals we see most often. Every lease is different, so always confirm the tenant and guarantor on the actual lease.
| Tenant | Usually Backed By | What to Know |
|---|---|---|
| McDonald’s | Corporate | Most restaurants are run by franchisees, but nearly all NNN sales are ground leases guaranteed by McDonald’s corporate. |
| Burger King | Corporate or franchisee | Many corporate deals, plus franchisee leases. |
| Taco Bell | Mostly franchisee | Large multi-unit operators are common. |
| Wendy’s | Mostly franchisee | Operator size and store sales matter most. |
| Dunkin’ | Mostly franchisee | Still a good number of corporate deals. |
| Jack in the Box | Mostly franchisee | Confirm the operator and units behind the guaranty. |
| Jiffy Lube | Franchisee | Jiffy Lube corporate does not guarantee franchisee leases. |
| 7-Eleven, Wawa | Corporate | The company signs the lease. Many 7-Eleven stores are franchised, but the lease is still corporate. |
| Dollar General | Corporate | Corporate leases; location and rent level drive pricing. |
| Starbucks, Chipotle | Corporate | Company-operated stores rather than franchised. |
For lease terms, credit ratings and price ranges on 65 tenants, see our NNN Tenant Profiles.
When a Franchisee Lease Can Be the Better Buy
The safest franchisee deals are the ones where the real estate protects you, not just the operator.
- The rent per square foot is well below market. Not at market, but below it. If the operator ever leaves, a new tenant could likely pay the same rent or more, so the property holds its value.
- You are buying below replacement cost, meaning the price is less than it would cost to buy the land and build the building today.
- You want more income for your money and are comfortable doing deeper homework on the operator.
- The operator is large and strong, with many units behind the guaranty and solid financials.
- The store’s sales are strong and rent is a healthy share of those sales.
- The real estate is excellent, so the site would attract another tenant if the operator ever left.
Expect to pay for that upside: deals with very low rent or a price below replacement cost usually sell at more aggressive cap rates, because buyers are paying for the real estate as much as the lease. That is often money well spent, since the real estate is what protects you if the operator struggles.
Red Flags We Look For
- A guaranty from a single-store company or one that ends partway through the lease.
- For a fast-food restaurant, rent at or above about 10% of store sales.
- A franchise agreement that expires before the lease does.
- An operator that is shrinking, selling stores or behind on other obligations.
- A seller who will not share store sales or guarantor financials.
Large franchisees can and do run into trouble. In September 2026, Meritage Hospitality Group, a Wendy’s franchisee with about 314 restaurants, filed for Chapter 11 bankruptcy after closing about 60 underperforming stores. In 2023, three Burger King franchisees, TOMS King, Meridian Restaurants Unlimited and Premier Kings, filed for bankruptcy, affecting about 278 restaurants. That is why we look past the brand to the operator on every franchisee deal.
Common Questions
What is the difference between a corporate and a franchisee NNN lease?
A corporate NNN lease is signed or guaranteed by the brand’s parent company. A franchisee NNN lease is signed by the local operator that runs the business under a franchise agreement, and the brand does not guarantee the rent.
Are corporate NNN leases always safer?
Not always. A corporate lease is usually backed by more credit, but you still need to confirm the exact tenant entity and guaranty. A strong franchisee with many units and healthy store sales can be a very good tenant.
When is a franchisee NNN deal a safe buy?
When the real estate protects you. Look for rent per square foot well below market and, ideally, a price below replacement cost, so a new tenant could step in at the same rent or more if the operator leaves. Expect those deals to sell at more aggressive cap rates, because buyers are paying for that upside.
What is a good rent-to-sales ratio for a fast-food franchisee?
For fast-food (QSR) restaurants, a rule of thumb is that around 10% is break-even, 6% to 8% is healthy, and under 6% is very strong. The lower the ratio, the easier it is for the operator to pay rent. These numbers do not apply to convenience stores, auto service or other retail, which have very different profit margins. Store sales are also usually only shared on franchisee build-to-suit deals; corporate tenants and ground leases rarely report them.
How do I find out who guarantees a NNN lease?
Read the lease and any separate guaranty. Confirm the exact legal name of the tenant and guarantor, how many locations back the guaranty, whether it covers the full term, and ask for the guarantor’s financial statements. As your buyer’s broker, we do this for you at no cost.
If you are weighing a corporate versus a franchisee deal, contact us. We have represented buyers on 225+ NNN transactions, and our buyer representation is always free to you.