Hands holding fork and knife and eating delicious juicy steak on a wooden plate

Assessment Evaluation of Restaurants

Many tomball restaurants owners were surprised to learn that they could not sell or rent their restaurant property with the same amount as the value of the tax assessment. The newly built restaurant market value is usually less than its construction costs. When an owner tries to set a selling price or rental rate, he cannot change costs. The excess property tax is produced from the use of an inappropriate cost approach to market value.

The cost approach is a very good assessment methodology for several types of new properties. It works better for properties that can be used by a large number of users without changes that are contrary to the special usage property. The apartment complex is an example of a property where many users can use the same property as some, if any, change. The restaurant is a category where broad renovations are usually needed to change restaurants from use by one operator to use by other operators. 

Part of the business value developed by the restaurant depends on a typical architecture that can be recognized to restaurant customers, who believe that they can expect the quality of food and reliable services for the price set in this place. It is important for restaurant operators that all operating units have this recognized architecture. This is the main reason large restaurant operators like McDonald’s, Pizza Hut, and Whataburger have a typical restaurant design with typical signage.

Signage is a good example of one of the high conversion items. McDonald’s gold arches are different and serve the purpose of announcing customers the presence of McDonald’s restaurants. However, they are not easily converted to use by other restaurants, maybe not even with extensive conversion costs. The same applies to changing the height (exterior appearance), interior layout and interior stretching.

The unique architecture of restaurant chain facilities makes it difficult to change facilities built for one chain for use by other chains. It is cheaper to change it from use by the main chain to local non chain operators. Examples of national chains with typical architecture include: McDonald’s, Pizza Hut, Burger King, Taco Bell, Long John Silvers, Pizza Inn, Jack in the Box and Whataburger.

Definition determines the methodology

The first step in determining the right assessment methodology includes, reviewing a series of definitions, determining how they register for restaurants in the Woodlands, and reviewing the laws that apply in your jurisdiction. However, sustainable improvements are very important for the growth of the assessment profession. The economic definition of market value is currently stated as follows:

The following definition has been agreed upon by institutions that regulate federal financial institutions in the United States, including the Trust Corporation (RTC) resolution:

The price is most likely to have a property that must bring a competitive and open market under all requirements for fair sales, buyers and sellers each acting wisely and knowledgeable, and assuming prices are not affected by the undue stimulus. Implied in this definition is the refinement of the specified date sales and through the title of the seller to the buyer in a condition where:

  • Buyers and sellers are usually motivated
  • Both parties get information or well suggested, and act in what they consider their best interests
  • A reasonable time is permitted for exposure to the open market
  • Payments are made in terms of cash in the United States or in terms of financial arrangements that are comparable to it
  • Prices represent normal considerations for properties sold are not affected by special financing or creative or sales concessions provided by anyone related to sales. (USPAP, 1992 edition) 1

Use value. Certain property values ​​have certain uses.2

  • Investment value. The specific value of investment to investors or classes of certain investors is based on individual investment requirements; distinguished from market value, impersonal and separate. See also market value.
  • Liquidation value. The most likely price where it is certain interest in real property is likely to bring under all the following conditions:
  • Improvement of sales will occur in a very limited future marketing period determined by the client.
  • The actual market condition is what is obtained today for property interest assessed.
  • Buyers act carefully and knowledgeable.
  • The seller is under extreme coercion for sale.
  • Buyers are usually motivated.
  • The buyer acts in what he considers his best interest.
  • Limited marketing efforts and time will be permitted for sales settlement.

Payments will be made in cash in US dollars or in terms of financial arrangements that are comparable to it.

Prices represent normal consideration for property sold, not affected by special financing or creative or sales concessions provided by anyone related to sales.

Conclusion:

This definition can be modified to provide assessment with the provisions of the specified financing. See also the value of disposition; Sales of distress; forced price; and market value.