‘Landlords win either way’: Gordon Ramsay exposes how commercial property owners grow their riches no matter what
Celebrity chef Gordon Ramsay is a culinary titan and a household name in the restaurant industry. With a global empire of 88 restaurants, and a total of eight Michelin stars, Ramsay has cemented his legacy as one of the most successful chefs in the world. And his estimated net worth of $220 million also places him among the highest-earning figures in the business.
However, during an appearance on the First We Feast YouTube channel, Ramsay revealed a surprising insight about his industry: one group always holds the upper hand: landlords.
Host Sean Evans, curious about the inner workings of Ramsay’s restaurant empire, asked, “Is there a hidden cost in running a restaurant that most diners are unaware of?”
Without hesitation, Ramsay replied, “Yeah, it’s called rent and labor cost — two big key factors in running a successful business.”
He went on to elaborate on landlords’ unique position in the industry: “Landlords — they win either way. So the more successful you are, the more rent they ask for. The less successful you are, the more demanding they are after the rent.”
Ramsay’s blunt assessment highlights a critical dynamic in the restaurant business: the leverage landlords hold in commercial real estate. While restaurateurs may find themselves grappling with thin profit margins, rising labor costs, and fluctuating food prices, landlords maintain a consistent advantage — the rent is always due.
When restaurants thrive, they’re often eager to stay in their prime locations, giving landlords the upper hand when renegotiating higher rents. In some cases, landlords may include percentage rent agreements, where tenants pay a base rent plus a percentage of gross sales exceeding a certain threshold. Under this arrangement, landlords directly benefit from a tenant’s success, as higher sales lead to higher rent payments.
While rent is a necessary cost of doing business, it can also become a significant burden for restaurant operators. For instance, when popular seafood restaurant chain Red Lobster filed for bankruptcy last year, its then-CEO Jonathan Tibus noted “above market” rent as one of the challenges weighing down the company.
When a restaurant struggles and fails to pay its rent, the landlord’s income stream is also at risk. To mitigate losses, landlords often turn to legal remedies to recover unpaid rent. This may include seizing the tenant’s assets on the premises — a process known as distraint — or initiating court proceedings to claim the owed amounts. In cases of prolonged non-payment or other lease violations, landlords may want to terminate the lease to seek a more financially stable tenant.
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Ultimately, Ramsay’s insights illustrate why real estate remains a highly attractive asset class for investors. Landlords often enjoy a relatively stable position regardless of market conditions. When tenants succeed, landlords may benefit from increased rents or percentage-based agreements. When tenants falter, landlords can leverage legal and financial measures to minimize losses, while continuing to benefit from potential long-term property value appreciation.
The good news for aspiring investors is that you don’t need to be ultra-wealthy to participate in this market. Real estate investment trusts (REITs) provide an accessible way to invest in income-generating properties. These companies own and manage properties, collecting rent from tenants and distributing a portion of the earnings to shareholders as dividends. This structure allows investors to share in the returns of commercial leases without the challenges of directly owning or managing properties.
REITs encompass a wide range of property types, including shopping malls, office buildings, apartment complexes, warehouses — and even restaurants. For those interested in the restaurant real estate, consider exploring names like Four Corners Property Trust (FCPT).
Four Corners specializes in owning and acquiring net-leased restaurant and retail properties. Its diverse portfolio consists of 1,153 properties spread across 47 states, providing exposure to some of the most recognizable names in the industry.
Among Four Corners’ tenants are household favorites like Burger King, McDonald’s, Chick-fil-A, KFC and Olive Garden. The REIT pays quarterly dividends of 35.50 cents per share, translating to an annual yield of 5.3%.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
