What Salad and Go’s Bankruptcy Says About Net Lease Risk

Salad and Go’s bankruptcy is putting a familiar net lease assumption to the test: how much security does a long-term lease actually provide when the tenant can no longer perform?

 

The drive-thru restaurant chain filed for Chapter 11 bankruptcy protection in August after a period of rapid expansion, store closures, and mounting financial pressure. At its peak, Salad and Go operated 146 locations across Arizona, Nevada, Texas, and Oklahoma before ultimately closing its remaining restaurants.

The Real Estate Still Matters

Interest from Dutch Bros and 7 Brew in former Salad and Go sites suggests there is demand for at least part of the portfolio. Many of the properties are small-format drive-thru locations with existing infrastructure in markets where new drive-thru development can be difficult and expensive. GlobeSt reported that rents across 65 reviewed locations averaged approximately $120,000 annually, with many leases carrying another 13 to 14 years of initial term.

 

That interest is encouraging for some landlords, but the value of each property still depends on the underlying real estate. A long lease can provide predictable income while the tenant is operating, but vacancy shifts the focus to traffic, access, visibility, parcel size, vehicle stacking, surrounding demographics, and the strength of the retail corridor. Lease restrictions, permitted uses, parking, and the physical configuration of the site can also affect how easily another operator can take over the space.

 

Those differences can create very different outcomes across the same portfolio. A well-located drive-thru pad in a strong trade area may attract several operators, while a smaller or more constrained property may have fewer replacement options. The existing rent also matters, particularly if it is above what another tenant would be willing to pay for the location.

Underwriting Beyond the Lease

The interest surrounding former Salad and Go locations shows why replacement demand should be part of the underwriting process from the beginning. If multiple operators see value in the site, a landlord may have more flexibility after a tenant departure. If demand is limited, the property may require rent adjustments, additional capital, or a longer lease-up period before it can generate comparable income again.

 

For net lease investors, that means underwriting more than tenant credit and remaining lease term. The quality of the location, the rent relative to market, the flexibility of the building, and the number of realistic replacement users can all affect how a property performs if the current tenant leaves.

 

A useful question for investors is whether they would still want to own the property without the existing tenant. That answer often provides a clearer view of the long-term strength of the investment than lease term alone.