Spotlight on Zaxby's

Service. Success. Perfected. Spotlight on Zaxby’s | Net Leased October 2016

Zaxby’s is a privately held chain of chicken-focused quick service including chicken and biscuit chain Bojangles Inc., pizza chain Papa restaurants offering a broad menu of chicken wings, chicken fingers, Murphy’s Holdings Inc, and wings restaurant Wingstop Inc. sandwiches, salads, and appetizers. The first Zaxby’s was established in 1990 in Statesboro, Georgia, near the Georgia Southern University campus, by childhood friends Zach McLeroy and Tony Townley. It was modeled after a small chicken finger chain in Athens, Georgia that Zach McLeroy frequented while attending the University of Georgia. The company operates primarily in the Southeastern United States, but has made plans to move into the Midwest and Mid-Atlantic soon, and grow to more than 800 locations. Zaxby’s popularity has exploded in the last 10 years, adding nearly 350 stores and reaching a total of 725 locations by 2015. Zaxby’s primarily operates a franchise model with 123 corporate-operated locations.

Zaxby’s was recently ranked 25th on QSR magazine’s annual list of the top 50 chains in the quick-service and fast-casual industries; a strong accomplishment given that it maintains a presence in only 16 states. It ranks fourth in the QSR chicken category behind the much larger names of Chick-fil-A, KFC, and Popeye’s. Average Zaxby’s locations are in freestanding buildings with drive-thru annual store sales are strong at close to $2.2 million and in 2013 it windows. The average restaurant is 3,300 to 3,800 square feet on became a billion dollar chain. To continue its growth objectives, approximately one acre. Preferred sites can be suburban or rural but Zaxby’s is reportedly working on an initial public offering (IPO) of need strong residential and daytime populations driven by office, around $200 million that could come as early as the fourth quarter of retail, and university environments. The typical Zaxby’s lease is 2016. Though the IPO market has been slow in recent months, the absolute triple net for a 20-year primary term with either annual or past two years have seen a spate of “fast-casual” restaurant IPOs, periodic rent increases.

Note: Zaxbys.com; Reuters; Business Insider; QSR Magazine

The report below features a sampling of properties recently sold or on market in Alabama, Florida, Louisiana, Oklahoma, and Tennessee in the last 12 months. Please note the different locations and adjust comparisons accordingly. Also note that sales comparables provide a snapshot of recent transactions and are not a perfect predictor of future market movement and behavior.

CLOSED CLOSED Pensacola, FL West Palm Beach, FL

Sale Date July 2016 Sale Date June 2016 Sale Price $2,725,000 Sale Price $2,400,000 CAP Rate 6.75% CAP Rate 6.66% RBA 3,847 RBA 3,804 Price/SF $708.34 Price/SF $630.91 Lease Type NNN Lease Type NNN Term Remaining 20 Years Term Remaining 18 years Year Built 2015 Year Built 2014

CLOSED CLOSED Hixson, TN Daphne, AL

Sale Date May 2016 Sale Date February 2016 Sale Price $2,425,000 Sale Price $2,635,000 CAP Rate 6.50% CAP Rate 8.00% RBA 3,500 RBA 3,400 Price/SF $692.86 Price/SF $775.00 Lease Type NNN Lease Type NNN Term Remaining 20 Years Term Remaining 13 Years Year Built 2005 Year Built 2009

ON MARKET ON MARKET Lafayette, LA Norman, OK

Sale Date On Market Sale Date On Market Sale Price $2,785,000 Sale Price $1,028,571 CAP Rate 6.75% CAP Rate 5.25% RBA 3,350 RBA 3,520 Price/SF $831.34 Price/SF $292.21 Lease Type NNN Lease Type Ground Lease Term Remaining 15 Years Term Remaining 30 years Year Built 2015 Year Built 2015

Note: Some of the Zaxby’s photos in this market report are representative.

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SALES: FINANCE:

Henry Schuldinger Brittany Wismer Senior Investment Associate Senior Finance Associate [email protected] [email protected] P. 202.280.2731 P. 202.280.2826

INVESTMENT SALES DEBT & STRUCTURED FINANCE TRANSACTION SERVICES

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