Not all restaurants offer franchises, but there are several others with vast real estate holdings. Some, such as Darden Restaurants (DRI), find themselves in the crosshairs of activist investors, pushing the company toward separation of the company's 1,048 owned locations, (Darden also owns 802 buildings on leased land) into a separate real estate investment trust, as a potential way to unlock value. For its part, Darden has been pursuing a spinoff of its Red Lobster chain, a move opposed by the activists.
Then there's the current crop of struggling restaurant chains, most notably Ruby Tuesday (RT - Get Report), which owns 324 locations, and an additional 265 buildings on leased land. Ruby Tuesday has a current enterprise value (market cap plus debt, minus cash) of about $600 million; much of that reflects the value of the real estate, with little value being placed on the restaurant business itself. Ruby Tuesday has its work cut out for it in order to resurrect its struggling business, and the real estate may ultimately have to be monetized, but it's a potentially nice arrow to have in the quiver.
Other chains that own significant portfolios of real estate include Cracker Barrel (CBRL) (412 locations), Bob Evans (BOBE) (482 plus 78 building only), Sonic (SONC) (219, plus 177 building only), Jack in the Box (JACK) (224, plus 641 building only), Luby's (LUB) (86), Krispy Kreme (KKD) (42, plus 23 building only) and Frisch's Restaurants (FRS) (80 plus 15 building only).
Owning real estate is not a prerequisite for running a successful restaurant operation, but those companies that do may have an opportunity to create value by monetizing those assets.
At the time of publication the author is long KKD.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.