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[L371]List Of Chain Restaurants

by Patricia Farnham, Pat

I have to tell you that I love eating out. I seem to always be on the go for one reason or another. Cooking just feels like a waste of time in most instances as well! I definitely love to eat at chain food restaurants though as I like to know what I will be getting from the experience. I didn't have a good time when I recently ate at an unknown diner while on a shopping trip.

I love to eat chili burgers, and there is one chain restaurant in my area that does them better than anyone else. They make homemade green chili with all the spices to smother them with. I ordered a chili burger off the menu at this particular diner though and it wasn't at all what I was hoping for. The chili was from a can and while it tasted decent it was nothing to get excited about.

I left that diner feeling like I had been cheated, I guess I am just spoiled knowing what a great chili burger should be like. I really like going to chain restaurants though as I can get consistent good food, good service, and know what it will all look and taste like. You also know how much food you will be getting. The portions are very different at various locations.

Traveling is a common theme for many people. They go to visit family members, to take care of business for their jobs, and to take a well deserved vacation as a break from their daily routine. Regardless of the reason for why they are traveling though they will all need to eat. A chain restaurant takes the guess work out of what your meal will consist of and what it will taste like.

As consumers, most of us like to stick to what is familiar. We want to be able to order and feel confident that we will be happy with our meal. You will notice even children can easily identify trademarks of chain restaurants. They know exactly what can be found when they see those golden arches for McDonalds.

With all of the instant customers that a chain restaurant can have as the result of this, people are very interested in owning them. They know they will have a successful business right from the start. They will also get the training they need to operate it and all of the necessary equipment. There is often a high price associated with chain food restaurants to buy them though.

There aren't always good times associated with chain restaurants though. Negative publicity can follow locations all over the place. There are very few people that didn't see the video online of the rats in a Taco Bell in New York. The media was all over the story about a finger being found in the chili at Wendy's. As a result people had a hard time going to these types of chain restaurants for a while.

People love to get their money's worth though, and they often feel confident they will get it when they visit a chain restaurant. They may be afraid to take a risk on a new place as it may not be up to their standards. Still, you are encouraged to try a new place from time to time. This way you can expand your experiences and you may find a place you are very impressed with.

In the Dallas/Fort Worth area, fast food chain locations sell for a fraction of their original construction cost because they no longer operate as chain restaurants or because they are sold to second generation non-restaurant-chain operators. Texas appraisal districts, however, tend to take the opposite approach. That approach is a dollar spent equates to a dollar of taxable market value, so how do you prove that the districts are wrong? Can one prove that the cost approach is not the best approach to use when valuing chain locations? Doesn't the cost approach really determine the fee simple taxable market value of a chain restaurant? Is it true that the income and the sales comparison approaches may not be appropriate in valuing a new chain property? How do appraisal districts measure the going concern value of a chain restaurant? These are some of the questions that are discussed in this article.

VALUING CHAIN~THE COST APPROACH

Is it safe to assume that the cost approach is the best approach to use when valuing a chain restaurant? The answer in this author's estimation is, no. The cost approach should be challenged as the exclusive method of determining the taxable realty value of chain locations. Further, the other two approaches to value, income and sales comparisons, should be modified to truly appraise the taxable restaurant market. In the third quarter, 1990 issue of the Enterprise Valuation Reporter, John D. Emory, value points out that:

Business valuation has to do with the value of the rights inherent in ownership of a commercial, industrial or service organization pursuing an economic activity. Real estate appraisal involves the valuation of land, improvements and associated rights. Real estate appraisal does not deal adequately with the whole area of intangible business assets such as patents, trademarks, copyrights, goodwill, customer lists, employment contracts, covenants not to compete, exploration rights, intangible drilling costs, franchises and licenses. The more a company depends on its intangible assets to generate earnings, the more important such assets are in any business enterprise value. Robert Reilly notes in the January 1993 issue of Valuation, published by the American Society of Appraisers, that:

Traditionally, real estate appraisals of location-dependent commercial encompass a portion of (if not all of) the intangible business enterprise value of the property.. .. The naive application of real estate appraisal procedures to location-dependent businesses will ignore the fact that the real property's highest and best use (and total concluded value) are dependent upon the existence and assemblage of such location-specific intangible assets as business licenses, certificates, permits, and franchises and such non-location-specific intangible assets as a trained and assembled workforce, goodwill, and going concern value. Therefore, by including an economic contribution from these intangible assets, the real estate appraisal may overstate the true market value associated exclusively with the subject “bricks and sticks” for these location-dependent businesses.

It has been this author's experience that Texas appraisal districts believe the primary approach to valuing chains is the cost approach; that is, the acquisition cost of the land plus the cost of personal property, plus the hard and soft costs of the improvements, less accrued depreciation, represent the taxable market value of a chain restaurant. The theory apparently relies heavily on the principle of “substitution,” which The Appraisal of Real Estate, published by the American Institute of Real Estate Appraisers, defines as:

The principal of substitution is basic to the cost approach. This principal affirms that no prudent investor would pay more for a property than the cost to acquire the site and construction improvements of equal desirability and utility without undue delay.. .. Because cost and market value are closely related when properties are new, the cost approach is important in estimating the market value of new or relatively new construction. The approach is especially persuasive when land value is well supported and the improvements are new or suffer only minor accrued depreciation and, therefore, represent a use that approximates the highest and best use of the land as though vacant.

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Both Patricia Farnham & Paul Pennington are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Patricia Farnham has sinced written about articles on various topics from Advertising Guide, Perfumes and Home Management. Patricia Farnham is a restaurant business veteran. Before you decide to ">. Patricia Farnham's top article generates over 201000 views. to your Favourites.

Paul Pennington has sinced written about articles on various topics from Property Tax. Paul Edward Pennington is President and Principal of , Inc. Mr. Pennington has authored numerous articles on property tax management and property tax app. Paul Pennington's top article generates over 590 views. to your Favourites.