Cap rate = stabilized annual net operating income (NOI) ÷ property value. Rearranged, value = stabilized NOI ÷ cap rate. Verify both the income definition and the risk behind the selected rate before using the result.
Start with the math—but label the assumptions
Illustrative example, not a market quote: $150,000 of stabilized annual NOI divided by a hypothetical 6% cap rate implies $2,500,000 of value. If the same NOI is capitalized at a hypothetical 7%, the indicated value falls to about $2,142,857. The rent did not change; the assumed pricing of risk did.
A flyer may substitute contractual base rent for NOI. Check reimbursements, residual landlord expenses, reserves, vacancy assumptions and whether the quoted rent includes near-term increases or temporary abatements. The OCC describes direct capitalization as most appropriate when NOI is stabilized and future income is expected to remain stable.
Illustration: $150,000 ÷ 0.06 = $2,500,000; $150,000 ÷ 0.07 = $2,142,857 (rounded). These are hypothetical inputs, not current QSR market cap rates.
What can move a QSR's pricing?
The lessee and guarantor matter more than the sign. Compare the legal obligor's finances, lease term remaining, annual rent increases, options, rent-to-sales support when available, building ownership and whether the rent is above replacement-market rent.
The parcel also matters. A functional drive-thru, legal access, visibility, trade-area demand and realistic alternative users can support residual value. A specialized building or restrictive site can make a low-looking cap rate expensive in hindsight.
- Credit: parent guarantee versus franchisee-only obligation.
- Contract: remaining term, rent steps, renewal and exit rights.
- Real estate: access, drive-thru function, location and replacement uses.
Run three cases before accepting the ask
Base case: model in-place rent and the actual expense allocations through the current term. Downside: model nonrenewal or default, downtime, tenant improvements and a lower achievable market rent. Residual: estimate the land and improvements' alternative-use value after conversion or redevelopment costs.
If those scenarios create materially changing income, a single direct-capitalization result can obscure risk. The OCC describes discounted cash-flow analysis as useful where income is expected to fluctuate materially. An independent valuation should reconcile sale comparables, the income approach and site-specific facts.
Avoid the market-average shortcut
There is no universal 'QSR cap rate.' Asking rates, closed-sale rates, ground-lease interests and fee-simple building interests are not interchangeable. Time, geography, tenant structure and remaining lease term must be matched before comparing transactions.
This page intentionally does not publish an undated cap-rate table. For a live acquisition, date each comparable, check whether its stated rate uses in-place or stabilized NOI, and retain the underlying sale evidence.
Sources & methodology
Published as educational analysis on October 1, 2026. Regulatory and institutional sources support general definitions and risk framing; site-specific conclusions require the signed deal documents, current comparable evidence, a physical inspection and qualified professional review. Hypothetical figures are labeled where used. This page is not a live market-data feed.
- OCC Commercial Real Estate Lending handbook Definitions of cap rates, NOI, direct capitalization and discounted cash flow.
This is research and analysis only, not personalized financial advice. Nothing here is legal, tax, appraisal or investment advice for a particular transaction.