Rating Manual section 6 part 3: valuation of all property classes

Section 365: drive-in and drive-thru restaurants

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This practice note applies to all drive-to and drive-thru restaurants.

‘Roadside restaurants’, such as those that are or were occupied by Little Chef are Scat coded 238. They are covered separately by (Rating Manual section 6 part 3 - section 880) and have their own Practice Note. Many roadside restaurants are now occupied by brands such as McDonalds and Starbucks being recognised ‘Drive-To and Thru’ brands. Liaison and co-ordination between the Units is essential in all such cases especially at the interface between Generalist and Specialist responsibility.

1.1 Definitions

1.1.1 Definition of drive-to restaurants

Drive -To Restaurants are defined as stand alone restaurants with on-site parking located mainly on retail parks, or leisure parks and adjacent to major road networks. Buildings are often modern purpose built and of modular construction which are built off site and assembled on site. They will have parking adjacent to the restaurant. They may also occupy units in terraces on retail and leisure sites with parking adjacent. This definition does not apply to High Street shop units occupied by the major operators which will be valued on a zoned basis with comparable evidence from those locations. Rating manual - Section 6: Part 3: Section 920 : Shops and Shopping Centres.

1.1.2 Definition of drive thru restaurants

Drive-Thru Restaurants are defined as stand alone mainly fast food restaurants which have a sign posted drive-thru facility. These often consist of a drive-thru lane around the main building with order and collection windows. The aim is to allow customers to order and collect food while staying in their cars. These premises will often have a car park and a seated restaurant. Main operators are McDonalds, KFC and Burger King with newer smaller operators such as Costa, Starbucks and Subway.

These operators occupy modern purpose built modular restaurants as well as converted former pubs. The main criteria is land where they can site the main building and incorporate the drive-thru lane around the building allowing for extra car parking for customers who wish to eat inside the restaurant.

2. List Description And Special Category Code

List description: RESTAURANT AND PREMISES Scat code: Drive-to 091, Drive-thru 092 Scat suffix: S

3. Responsible Teams

3.1 These classes are being dealt with as deemed appropriate by each Unit with coordination essential to maintain consistency.

3.2 Responsibility for inspection, survey and valuation rests with caseworkers who have received specialist training and who have knowledge of this class. The Class Coordination Team provides support.

3.3 It is anticipated that each Unit will have a named individual responsible for the class. More than one named individual is recommended for succession planning.

3.4 It is also recommended that each Unit should allocate a named co-ordinator, or Lead Valuer, to act as a point of contact within the Unit. This Lead Valuer will be responsible for assisting in the delivery of the Unit’s valuation scheme and also for liaising on value and technical issues with other Lead Valuers across adjoining Units. The Lead Valuer will be responsible for ensuring compliance with this section.

4. Co-Ordination

4.1 Co-ordination responsibilities are set out in Rating manual - Section 6: Part 1 : Co-ordination

4.2 The Drive-To/ Drive-Thru Class Co-ordination Team (CCT) has overall responsibility for the co-ordination of this class. You can find contact details here P:\VPs & CCTs\Commercial Valuation Panel\Class Co-ordination Teams\30 - Drive To & Thru (Standalone Restaurants)\2017\Drive To, Drive Thru and Roadside Rest. CCT members.xls The team are responsible for the approach to and the accuracy and consistency of Drive-To/ Drive-Thru valuations. This instruction describes the valuation basis and NSU will provide advice as necessary during the life of the rating lists.

4.3Caseworkers have a responsibility to:

  • follow the advice given at all times – Practice Notes are mandatory.

  • seek advice from the co-ordination team before valuing a new hereditament.

  • not to depart from the guidance given on appeals or maintenance work, without approval from the Class Co-ordination Team.

4.4 Drive-To (Scat Code 091) and Drive-Thru (Scat Code 092) restaurants are now being dealt with by both specialists and generalist caseworkers depending on local arrangements and as a consequence responsibility for ensuring effective co-ordination lies with CCT members for this class. The appropriate SCAT suffix is S.

4.5 Initial co-ordination for R2017 will be led by the CCT members, including co-ordination at the interface between Generalist and Specialist.

5.1There is no specific legal framework in relation to this class of property.

6. Survey Requirements

6.1Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice.

6.2 Drive-To and Drive-Thru Restaurants are measured to Gross Internal Area (GIA) in accordance with the RICS Code of Measuring Practice 6th Edition or its replacement. Gross Internal Area (GIA) - Measurement definitions - isurv

6.3An inspection checklist is appended to this section at Appendix 1. It should be completed for all new properties and updated for maintenance work and stored in the property folder of the Electronic Document Records Management (EDRM) system.

6.4The Survey Template can be found in EDRM. This will need to be completed as part of the inspection process. The checklist at Appendix 1 identifies the information that will need to be gathered in order to properly complete the survey of a drive to/thru restaurant.

6.5One line entry should be recorded for the main space to include the restaurant, food preparation and kitchen areas to include all staff accommodation. For two-storey restaurants use Ground floor and First floor.

6.6Where freezer and chiller pods are attached to the building these should also be measured to GIA but recorded as an ‘other addition’. These pods are attached to the main building and the cladding often matches the outside decor, however these pods are prefabricated off site and transported to the site and connected to the main building. See valuation approach in section 8.

6.7Outside storage units whether they are purpose built or containers should be measured to GIA and recorded as a separate line entry.

6.8Many different sub-location codes have historically been used to value these types of property across the country. It is recommended that each unit use the SCAT code of each type of property (091 or 092), preceded by a Unit prefix as shown below. For example Drive-To restaurants in North West Unit would have a sub-location code of NW91.

Unit Drive-To Subloc Drive-Thru Subloc
South West Unit SW91 SW92
Central Unit C091 C092
North East Unit NE91 NE92
North West Unit NW91 NW92
East E091 E092
South East SE91 SE92
London L091 L092

6.9Car parking spaces and external areas should be recorded but their value will be reflected in the overall assessment and not valued as a separate item.

6.10 Air conditioning should be recorded where it exists.

6.11 A record of any Wi-Fi and the provider recorded if this can be identified and requires a separate unit of assessment.

6.12Opening times should be recorded and whether open 24 hours.

7. Survey Capture

7.1Rating surveys should be captured on the Rating Support Application (RSA) and plans and surveys stored in the property folder of the Electronic Document Record Management system (EDRM).

8. Valuation Approach

8.1 Rental Adjustment and Analysis

In the vast majority of cases leases relate to a ‘shell’ only and an adjustment to the rent paid will be needed to reflect the value of the tenant’s rateable fitting out. It is recommended that 10% be added to shell rents, to reflect the standard of fitting out typical of this class of property compared with the unfitted demise; this addition includes air-conditioning which is a normal feature and invariably a tenant’s improvement. Some tenants may have paid rents for buildings that have since been converted and it is important to analyse using the correct demised areas.

8.2The Freezer / Chiller units (also referred to as ‘chiller pods’) which have traditionally been found attached to the rear of most McDonald’s prefabricated modular drive-thru restaurants and on some of the newer KFC units are now being added to some Pizza Huts. These are almost invariably a tenant’s improvement and not included in the rent. The pod may be accessed wholly internally, either via a lobby or direct from the main area, or externally if no lobby exists, but the pod itself is not located within the main shell of the building. The recommended 10% addition for fitting out does not reflect this additional accommodation. As a consequence, the adjusted rent should be analysed against the GIA excluding the freezer/ chiller pod.

8.3 Valuation Issues

The following paragraphs offer guidance in respect of valuation issues. The guidance generally follows the approach adopted for the 2005 and 2010 lists.

8.3.1 Freezer/ Chiller Pods

The value of chiller/ freezer pods at Drive-Thru Restaurants are to be valued at the rate stated in the Practice Note. The rate has been derived from the cost to build and install the pod.

8.3.2 There have been extensions to some restaurants and replacement of the pods with larger chiller/ freezer units. When dealing with appeal and maintenance casework it will be necessary to undertake a full inspection of such restaurants to ensure our survey records are correct before the rating assessment is altered.

8.3.3 This guidance is in respect of pre-fabricated chiller/ freezer pods that can be delivered to the site as a modular unit. Modular chiller/ freezer pods may also be found at KFC, Frankie and Benny’s, Pizza Hut, Burger King etc and the same rate should be applied.

8.3.4 The area of the pod should be captured as an other addition using codes ZO1 for Chiller and ZO2 for Freezer. Use of the two codes will give us future flexibility should we need it. Whichever code is used the description must be overwritten with ‘chiller/ freezer pod’ for example (if the pod combines the two functions). See Practice Note for valuation guidance.

8.3.5 Paragraphs 8.3.1 to 8.3.4 do not apply to Drive-To Restaurants or Drive-Thru Restaurants where the cold room is within the structure of the building. Chiller/ Freezer units situated internally (ie under the main roof space) are to be valued at the restaurant rate.

8.3.6 Paragraphs 8.3.1 to 8.3.4 do not apply to cold rooms found in two-storey pre-fabricated McDonalds Drive-Thru and Drive-To restaurants where they form part of the main building.

8.3.7 Non Ground Floor Accommodation

The majority of upper floor accommodation is found in converted units such as former pubs. In these cases the first floors are often used for staff accommodation and administration use only. Some of this accommodation is often surplus to requirement comprising the living accommodation of the former public house.

8.3.8 Unfitted/ Disused Accommodation

In a small number of cases, mainly McDonalds, converted shops and public houses, areas of basement/ first floor accommodation, are disused, apart from occasional rough storage. This accommodation, which is unfitted/ shell quality should be valued at 25% of the appropriate £/m².

8.3.9 Drive-thru adjustment for quantum

In certain instances it may be appropriate to make an adjustment to the ‘standard’ price per m² when valuing larger format Drive-Thru Restaurants.

8.3.10 Adjustment for quantum does NOT apply to Drive-To restaurants, which are generally larger, often significantly, than Drive-Thrus and serve an increasingly identifiably different market.

8.3.11 A standard size Drive-Thru is taken to be 250-350 m². However, operators new to the Drive Thru market such as Costa are constructing smaller units for their own occupation.

8.3.12 Care should be taken with quantum where local rental evidence is derived from smaller units. Where there is little evidence some reference to previous agreements can be considered and whether the final rateable value seems fair and reasonable.

8.3.13 External Stores

Stores within the enclosed yard area may either be block or pre fabricated construction and may be attached to the corral walls. These stores will generally be valued at 25% of the restaurant rate.

8.3.14 Play areas

In the absence of direct rental evidence to the contrary, dedicated play areas are to be valued in accordance with the following table:

Building Type Full A3 unrestricted permission Restricted non A3 use
As Main building 100% 70%
Full height Glass & Steel 80% 50%
Conservatory 80% 50%
Dome 50% 40%

Areas must be separately recorded in RSA and reductions carried out within prescribed adjustments using QAL and a suitable description.

8.3.15 Parking

The basis of valuation reflects parking so an “inclusive” Car Parking table should be used. Where there is insufficient or shared parking only this will be reflected in the matrix price that has been derived from the evidence.

8.4 Diverse rental evidence

Where it is found that varying levels of rent have been agreed on units in the same location (usually Retail or Leisure Park) consideration should be given to whether such factors as the relative positions and size of the units provide explanation. If there is no clear reason for the difference, it is reasonable to assume that negotiating strengths and the requirements of the Park ‘mix’ have played a part. In such instances it is recommended that all the adjusted rents are included in the ‘basket’ and, having considered the weighting that should be attributed to each, a ‘fair and reasonable’ rental level should be determined.

8.5 Key Rents

All properties where a key rent has been identified must be inspected R2017 Key Rent Inspections.

9. Valuation Support

The following sources are available to Referencers and Valuers dealing with the maintenance and defence of Roadside Restaurants.

  • Rating Support Application (RSA)

  • Survaid

  • Class Coordination team for Drive To, Drive Thru and Roadside Restaurants P:\VPs & CCTs\Commercial Valuation Panel\Class Co-ordination Teams\30 - Drive To & Thru (Standalone Restaurants)\2017\Drive To, Drive Thru and Roadside Rest. CCT members.xls

  • National Specialist Unit

Appendix 1

This inspection checklist should be used for Drive-To; Drive-Thru and Roadside Restaurants and completed on site. Whilst carrying out the survey special attention should be given to the following features:

Drive-To, Drive-Thru and Roadside Restaurants: INSPECTION  CHECKLIST (GIA) Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice.  
Occupier/ Name of establishment/ Name of Franchisee.  
Address including postcode:  
Drive to/ thru type:  Purpose built or converted      eg: Public House, Retail Warehouse.  Planning: Record Use class on RSA survey.  
Location: Main road, Retail Park, Leisure Park etc (Name of Retail Park/Leisure Park) If on retail / leisure park please note position especially in relation to other Drive-to , Drive-thru's. Whether in a residential area and the degree of affluence   Nearby amenities and leisure uses for example cinemas and tourist attractions.   Any restrictions on access; Any year round or seasonal trade restrictions If remotely located note whether a 'destination' establishment.  Why do customers visit? Photographs should be taken to show the immediate surroundings.     
Car Parking: as part of hereditament - Car parking for use of customers, noting number of spaces and location, access and restrictions.  Parking facilities nearby: Car parks and availability of on-street parking.  
Opening Hours:  24hr opening? Tenure: If rented the amount payable, when effective and basis agreed, lease term and if any incentives and other factors affecting the rent.     
  Areas for private functions:  separate from the main dining area. Play/Party areas etc.      
Building - External Construction.  Approximate age; whether the property is a Listed Building; any particular architectural features.   Purpose built; Main structural alterations - for example if converted from previous use.  Number of floors; position and prominence of property and any particular aspect. Access and limitations to entrance.   Photographs should be taken of the main elevations of the front and rear of the property  
Outside: External ancillary areas such as gardens, terraces and smoking facilities.   Outside seating areas - noting amount and whether part of the hereditament or not.   Note the characteristics of the Drive Thru lane(s)    
Building - Internal    
Refurbishment Date restaurant refurbished    
Fitting out Any tenant's improvements and fitting out works.  Whether excluded from the rent paid.  Obtain costs where possible.    
Accommodation GIA: main space to include the restaurant, food preparation and kitchen areas to include all staff accommodation. Structure and quality of finish   Whether the premises are predominately non-ground floor   Levels of floors (eg GF; FF)   Natural lighting – Good Natural light or lacking   Layout of public areas   Chiller / Freezer Pod: Where freezer and chiller pods are attached to the building these should also be measured to GIA but recorded as an ‘other addition’. These pods are attached to the main building and the cladding often matches the outside decor, however these pods are prefabricated off site and transported to the site and connected to the main building. Outside storage units either purpose built or containers should be measured to GIA and recorded as a separate line entry.   Whether there is any unused/ surplus space   Any passenger or food lifts   A record of any Wi-Fi and the provider recorded if this can be identified and requires a separate unit of assessment.   Any Disability Discrimination Act adaptations.   Photograph examples of the main accommodation uses, including the dining area, kitchen and servery.              
Plant and Machinery Details of any items present should be noted. For rateability and valuation, reference should be made to the VOA Rating Cost Guide.  Rating Manual: section 6 part 5 - Plant and Machinery      
Fire Precautions Sprinklers Security CCTV      
Air Conditioning (age) Cassette or ducted. Extent of area covered. Air-conditioned areas need to be identified separately on the survey.   Record make of system.    Heating. Fuel. System            
General remarks      
Date of survey   Survey by:  

Practice note: 2017: Drive-to and drive-thru restaurants

1. Market Appraisal

1.1 General

Since 01-Apr-2008 the UK economy has experienced turbulent times in terms of economic performance, however, the A3 restaurant sector does not appear to have experienced difficulties to quite the same extent as other retail operators.

1.2 There has been a dramatic rise in discount vouchers and saver meal menu’s in many sections of the food retailing business. However restaurant openings have increased, seeing growth in the strength of popularity for both Drive-To and Drive-Thru restaurants, with many landlords looking for the attractive covenant names.

1.3Operators such as McDonalds, KFC, and now coffee company chains, such as Costa and Starbucks, continue to be active in the Drive-Thru market, whilst names such as Frankie and Benny’s, Chiquito’s, Nando’s and Prezzo have expanded their outlets in the Drive-To sector of the market.

1.4 Rents show two different rental markets and it is best to look at these sectors separately:

Drive Thru:

1.5The Drive-Thru sector as a whole has expanded. Both McDonalds and KFC have development site ‘hit lists’, with both looking to expand their Drive-Thru businesses by a reported 300-400 sites each within the next 10 years. Naturally, this may give rise to a future saturation of the market, however, at present, their expansion plans appear to be showing an increase in portfolio between 40-50 stores per year from 2014 - See Market knowledge index at : P:\VPs & CCTs\Commercial Valuation Panel\Class Co-ordination Teams\30 - Drive To & Thru (Standalone Restaurants)\2017_MK (wef 01-01-2014).

1.6McDonalds particularly have been increasing planning applications to operate their Drive-Thru units for 24 hours per day, and currently have an extensive range of products on offer.

1.7McDonalds have been relatively successful in obtaining former Little Chef units, and converting them into drive thru units, and now appear to be looking to develop a new purpose built two-storey concept unit, with drive thru facility throughout the country.

1.8KFC on the other hand appear to be prepared to wait fort a site that fits their particular model and in their desired locations.

1.9Some of the deals done have been by the coffee company operators. This may lead to an increase in rental levels on such retail/ leisure parks offering the coffee shop range, however, that remains to be seen. They have big expansion plans in their drive thru market concept, and in 2013 were hoping to have 70 - 80 Drive-Thru branches within 5 years.

1.10Likewise, 2014 saw a Starbucks drive thru open in Milton Keynes, and they have big expansion plans with the announcement they aim to implement 200 new drive thru restaurants over the next 5 years. Starbucks have also taken on some vacant former Little Chef roadside restaurants guided by local rents. This appears to be a test to see if the market for their concept is viable. These rents should be treated with caution as they often relate to the former buildings.

Drive To:

1.11The general increase in popularity of chain restaurants has seen a keen increase in new openings since 2008, particularly on retail/ leisure park locations.

1.12All of the main brands are expanding into large leisure venues such as stand alone restaurants at the O2 in Greenwich and other tourist attractions.

1.14 The Restaurant Group, formerly City Centre Restaurants, who operate Frankie’s, Chiquito’s, Garfunkel’s and Coast To Coast have been very busy in the market and continue to grow with 5 new F&B openings in December 2014 alone.

1.14 Prezzo, the Italian food chain, have moved from strength to strength since the last AVD, opening some 50 new stores since, putting themselves firmly in competition with the likes of Pizza Hut, Pizza Express, Zizzi and Ask.

2. Changes From The Last Practice Note

2.1There have been no changes in approach from the 2010 Practice Note.

3. Ratepayer Discussions

3.1To date, initial discussions have taken place with representatives of the industry and are ongoing.

4. Valuation Scheme

4.1 Rental Information

It is still expected that detailed rental schedules are going to be provided by the main operators (or their agents). Some of this information is being supplied by VORC to the MIT. Headline rents on new lettings appear to have been olding up despite the economic downturn in previous years although these may include more incentives than they have previously.

4.2Rents quoted may relate to franchise rents rather than the rent of the individual unit so care needs to be taken. A franchise rent includes payment for branding, goodwill, non-rateable items etc.

4.3 Non Ground Floor Accommodation

In the absence of direct rental evidence to the contrary, first floor and basement/ lower ground floor accommodation should be valued at 50% of the ground floor £/m². These factors are present in the analysis and valuation scales.

4.4 McDonalds and KFC are both now opening two-storey purpose built Drive-Thru restaurants. The first floors in these premises have lift access and often house two-thirds of the restaurant seating and customer washrooms. These are vastly different to converted properties.

4.5 Accommodation found on second floors, or in a basement, particularly in a unit which is a converted public house, should be analysed and valued using a scale factor of 25% - reference should be made to the CCT member for the particular unit, should there be any queries over relativities.

4.6 Quantum

For the new concept two-storey units, analysis of rents would indicate that quantum does not apply. For single storey units, quantum may be appropriate if the rental evidence supports it.

4.7 Freezer/ Chiller Pods

‘Other additions’ tables should be amended so that these items are valued at a rate of £90.00/m². The area of the pod should be captured as an ‘other addition’ using codes ZO1 for Chiller and ZO2 for Freezer.

4.8Valuations should be in an address based matrix across a range of Billing Authorities.

4.9Car parking should be reflected in the unit value and the car parking table WCREFLECT1 adopted.

Practice note 1: 2010 - drive-in and drive-thru restaurants

1. Co-ordination Arrangements

Co-ordination responsibilities are set out in Rating Manual section 6 part 1.

Drive-in (Scat Code 091) and Drive-thru (Scat Code 092) restaurants are SRU classes and as a consequence responsibility for ensuring effective co-ordination lies with SRUs. As an SRU Class the appropriate SCAT suffix is S.

Initial co-ordination for R2010 will be led by the Specialist Rating Units, including co-ordination at the interface between Group and SRU.

2. Scope of Practice Note

This Practice Note applies to all Drive-in and Drive-thru restaurants only. It does not apply to “roadside restaurants”, such as were principally occupied by Little Chef, which are dealt with separately (RM5:880) and remain a Group class. However, where such units have ceased to be occupied by a roadside restaurant brand, notably Little Chef, and have become occupied by a recognised “Drive-in” brand then the property will fall to be dealt with by SRU. Liaison/co-ordination between Group and SRU is essential in all such cases especially at the interface between Group and SRU responsibility.

3. Overview of the Market

3.1 General

Historically Drive-thrus were identified as attracting a ‘premium’ in rental levels by comparison to Drive-ins. It is now recognised that in fact the two classes form two completely different markets with differing styles of layout and size: comparison of rental levels between the two is therefore inadvisable. Comparison should be made of only like with like. However, the evidence from Stevenage Leisure Park shows that on the recent reviews there is little difference between the rents of the Drive-ins and Drive-thrus. The former have shown rental growth of about 20% over 5 years and the latter only 10%. The rents also show a discount for size of about 20% between 300 m2 and 600 m2.

There has been a significant drop in the number of new Drive-thru restaurants being brought in to the rating lists from a peak of 140 in 2000/01 (some of this could have been due to the List year change) down to an average of around 20 per year from 2004 onwards. In 2007/8 this dropped to just 10. In contrast the market for Drive-in’s has held up better dropping from a peak of 74 in 1998/9 to an average of just over 30 per year from 2001/2 onwards. These facts go a long way to explaining why the rental values of the Drive-ins have been growing faster than the Drive -thrus, reinforcing again the dual nature of the market.

The average size of new Drive-ins is currently 370 m2, where the average size of new Drive-thrus is currently around 260 m2 having dropped from 290 m2 in 2000. This reflects the fact that the majority of new Drive-thrus are KFC’s and they are smaller than the average Burger King or McDonalds.

Occupation of Drive-thrus remains dominated by McDonalds, Burger King, KFC, particularly in respect of the main road/’chimney pot’ locations. On retail and leisure parks representation is generally more diverse for Drive-thru and Drive-in restaurants. The main players in the Drive-in market are the likes of Pizza Hut, Deep Pan Pizza, TGI Friday, Bella Pasta, Frankie & Benny’s, Nandos and Chiquito, the latter three expanding significantly in recent years.

3.2 New Developments

The move towards healthier eating habits has caused problems for the Drive-thru’s as their offer has been perceived as being too high in calories. McDonalds, in particular, has sought to modify its menu and maintain appeal with an accompanying fall in new openings. Nevertheless, some Burger King & McDonald franchisees have gone under. KFC had around 50% of the new Drive-thru openings in the year 2006/7 and are thus the most expansionist chain at the moment.

On the Drive-in side Pizza Hut, Frankie & Benny and Nandos were the most expanding brands. A new entrant into the market is Starbucks.

Non-branded operators, such as Chinese buffet style restaurants, have more recently been evidenced moving into the Drive-in market. At AVD, this had largely been confined to larger off-peak units, no longer popular with branded operators, at low rents.

3.3 Rental Information

It is still hoped that detailed rental schedules are going to be provided by the main operators (or their agents). However, to date information has not yet been provided and, due to a tightening in the market, rent reviews are taking longer to settle. It therefore may be much later in the year before many 2007 reviews are settled. New lettings are expected to be down on previous years and may include more incentives than in the past.

Where direct rental evidence does not exist, comparison with comparably located and type of unit is essential as this pattern may vary regionally or park to park.

4. Survey Requirements

Survey Data should be captured in RSA using the appropriate floor level indicators and the accommodation use codes detailed in Scale Ref VXSDRIVEIN1.

5. Valuation Approach.

5.1 Rental Adjustment and Analysis

In the vast majority of cases leases relate to a ‘shell’ only and an adjustment to the rent paid will be needed to reflect the value of the tenant’s rateable fitting out. It is recommended that 10% be added to shell rents, to reflect the standard of fitting out typical of this class of property compared with the unfitted demise; this addition includes air conditioning which is a normal feature and invariably a tenant’s improvement.

The Freezer / Chiller units (also referred to as ‘chiller pods’) which have traditionally been found attached to the rear of most McDonald’s prefabricated modular drive-thru restaurants and on some of the newer KFC units are now being added to some Pizza Huts. These are almost invariably a tenant’s improvement and not included in the rent. The pod may be accessed wholly internally, either via a lobby or direct from the main area, or externally if no lobby exists, but the pod itself is not located within the main shell of the building. The recommended 10% addition for fitting out does not reflect this additional accommodation. As a consequence, the adjusted rent should be analysed against the GIA excluding the freezer/chiller pod.

5.2 Valuation Issues

The following paragraphs offer guidance in respect of issues raised on 1995 and 2000 Rating Lists appeals to the Lands Tribunal, which were settled by Consent Order. The guidance follows the understanding reached on settlement of these LT appeals and the generally accepted practice followed for the 2005 lists.

5.2.1 Freezer/chiller pods

The value of chiller/ freezer pods at Drive-Thru Restaurants has been agreed with agents and for the purposes of the 2010 Rating List such pods are to be valued at a rate of £90.00/m².

There have been extensions to some restaurants and replacement of the pods with larger chiller/ freezer units. When dealing with appeal and maintenance casework it will be necessary to undertake a full inspection of such restaurants to ensure our survey records are correct before the rating assessment is altered.

This agreement is in respect of pre-fabricated chiller/ freezer pods that can be delivered to the site as a modular unit.

The area of the pod should be captured as an other addition using codes ZO1 for Chiller and ZO2 for Freezer. Whichever code is used the description must be overwritten with ‘chiller/ freezer pod’ for example (if the pod combines the two functions). Other additions tables should be amended so that these items are valued at a rate of £90.00/m². No transitional certificate as at 31 March 2010 is required for this alteration.

This agreement does not apply to Drive-To & Drive-Thru Restaurants where the cold room is within the structure of the building. Chiller/ Freezer units situated internally i.e. under the main roof space are to be valued at the restaurant rate.

This agreement does not apply to cold rooms found in two-storey pre-fabricated Drive-Thru and Drive-To restaurants.

5.2.2 Non Ground Floor Accommodation

In the absence of direct rental evidence to the contrary, first floor and basement/lower ground floor accommodation should be valued at 75% and second floor accommodation at 50% of the ground floor £/sqm. These factors are present in the analysis and valuation scales.

5.2.3 Unfitted/Disused Accommodation

In a small number of cases, mainly McDonalds, areas of basement/first floor accommodation, are disused, apart from occasional rough storage. This accommodation, which is unfitted/shell quality should be valued at 25% of the appropriate £/sqm.

Other largely disused areas arise in units, again generally McDonalds, built to a size no longer, if they ever were, required by the market. Such fitted out unused areas are valued at 100% and the superfluity is then reflected via an allowance for quantum.

5.2.4 Drive-thru Adjustment for Quantum

In certain instances it may be appropriate to make an adjustment to the ‘standard’ price per m2 when valuing larger format Drive-thru Restaurants.

Adjustment for quantum does NOT apply to Drive-in restaurants, which are generally larger, often significantly, than Drive-thrus and serve an increasingly identifiably different market. (See Overview of the Market)

A standard size Drive-thru is taken to be 250-350 sqm. With the average size of new Drive-thrus at AVD being around 260 m2 having dropped from 290 m2 in 2000.

The level of quantum should be derived from local market evidence. The precise discount for size, if applicable, will be determined once all the rents have been analysed. However, after rental analysis has been carried out and as local scheme development progresses, further guidance will be provided to assist where local evidence is limited. It has been noted that some rental evidence suggests a discount for size of about 20% between 300 m2 and 600 m2, which is greater than established for 2005.

It is stressed that the guidance should only be adopted in cases where there is insufficient reliable local rental evidence upon which the quantum effect can be judged.

For Reval 2010, size refers to total equated GIA, excluding the area of external stores, pods, any void unfitted areas which have been valued at 25% and play areas where the EGIA has been adopted.

5.2.5 External Stores

The value of the small pre-fabricated external stores, which are delivered to site already attached to the yard/corral wall of the typical prefabricated McDonald’s drive-thru units, is deemed to be reflected in the main space price adopted for the hereditament. In the event that external storage accommodation is either of more substantial construction or more extensive than the norm then this accommodation should be valued on merit.

5.2.6 Play Areas

In the absence of direct rental evidence to the contrary, dedicated play areas are to be valued in line with the 2005 approach and in accordance with the following table:

Building Type Full A3 unrestricted permission Restricted non A3 use
As Main building 100% 70%
Full height Glass & Steel 80% 50%
Conservatory 80% 50%
Dome 50% 40%
5.2.7 Parking

The basis of valuation reflects parking so an “inclusive” Other Additions table should be used. Where there is insufficient or shared parking only this will be reflected in the matrix price that has been derived from the evidence.

5.2.8 Diverse rental evidence

Where it is found that varying levels of rent have been agreed on units in the same location (usually Retail or Leisure Park) consideration should be given to whether such factors as the relative positions and size of the units provide explanation: if there is no clear reason for the difference it is reasonable to assume that negotiating strengths and the requirements of the Park ‘mix’ have played a part. In such instances it is recommended that all the adjusted rents are included in the ‘basket’ and, having considered the weighting that should be attributed to each, a ‘fair and reasonable’ rental level should be determined.