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Top real estate CEO shares advice for franchises


N3 CEO Brenna Wadleigh advises franchisees on much more than just real estate.

It takes a village to guide new franchisees toward smart decisions, as they often are capital constrained and lack the kind of personal experience that only comes from years or decades in the industry. Nowhere is that truer, and more consequential, than on the real estate side of a young franchised business, where picking the wrong location or agreeing to lopsided lease terms can sink a new enterprise before it ever takes flight.

Being a generalist but with a strong specialty in real estate is Brenna Wadleigh’s job as CEO of Texas-based N3 Real Estate. Headquartered just north of Dallas and Fort Worth, N3 focuses on developing restaurants and retail spaces, including a lot of shopping centers and first-time franchisee spaces. At present, the company owns and manages a portfolio worth more than $300 million.

Speaking during the Restaurant Finance & Development Conference in November, which Wadleigh noted was her sixth time attending the conference, she said returning home with three or four outstanding prospects is enough to mark the event down as a success for the business.

“First of all, we’re property owners,” Wadleigh said of her team. “So we really try to focus on what the franchisee wants. We offer such a wide breadth of services that we can do all of their real estate for them from start to finish.”

While that sounds like a rather clean process, that “wide breadth” often translates to solving a phalanx of issues that crop up, from municipal approvals to co-tenancy evaluations and lease negotiation. Wadleigh refers to that general advisement side of her team’s approach as helping them “solve the riddle” that is franchising.

Consider the nuances

Sometimes evaluating a given vacant space isn’t just about what’s inside its four walls, but what complementary or competing businesses are located within a multi-tenant building or just down the street in a neighboring trade area. There’s also the basic decision of whether to buy or lease, which all falls under the CEO’s umbrella.

“They both have their pros and cons,” she said of owning versus leasing. “If you have a poor performer it’s very hard to exit it, because you own it and nobody wants to buy it. And then, secondly, trade areas do move on a regular basis.”

In general, Wadleigh said leasing tends to be a better fit for earlier-stage franchisees, because of those capital constraints and a lack of experience, which makes full ownership a riskier enterprise.

With big data invading the real estate world, plus countless tools helping business owners and real estate professionals evaluate specific spaces and neighborhoods in general, N3 still uses the old-fashioned “two eyes” method of getting out on the streets and sidewalks in person to help inform significant client decisions.

For restaurants in particular, part of that analysis is what Wadleigh referred to as “share of the stomach,” which includes looking at similar cuisine types or restaurant formats—like QSR, fast casual or casual—which itself isn’t entirely cut and dry. On one hand, there’s the well-known idea that clusters of restaurants create memorable dining nodes, but you also don’t want to advise a new franchisee to go into a trade area that has similar competitors with an established customer basis.

Spaces shifting with retail

More broadly, N3 also advises national restaurants that are looking at the entire U.S. to determine where the brand should expand to next. In those instances, Wadleigh said it’s especially rewarding when they present clients with new areas to consider that weren’t previously on their radar.

As many big-box brands like J.C. Penney, Pier 1, Gap, Office Depot and others close stores and leave behind massive vacant spaces, subdividing those spaces creates new challenges for brokers and real estate experts like Wadleigh. She said some such spaces can be divvied up easily, but others result in sub-prime, very-hard-to-fill spaces that require creative thinking. She pointed to delivery-only ghost kitchens as one promising possible use, especially for unused spaces at the furthest depths of the building.

It’s just those kinds of tough-to-crack challenges that have kept Wadleigh engaged in the real estate industry for more than 20 years. For anyone getting into the business of commercial real estate or franchising for the first time, her advice was twofold: avoid making rash decisions, and spend the money to get professional advice.

“Sleep on it,” she said. “It doesn’t matter to me either way, but you hired me to tell you how you can grow the fastest and these are the obstacles I see—and here’s how you can overcome them.”

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