Little Caesar's and Big Profits

Written by: Anita Huedepohl Posted: 10/19/2016
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You may be reading this and asking wondering what Little Caesar’s has to do with a self- storage facility. In a word: Everything! At least when it comes to your bottom line.

Oftentimes, clients ask us how to improve their bottom line and the answer is two-fold. First, increase visibility and second, do so with a complimentary product line.

Right about now, some of the dyed in the wool self storage operators are rolling their eyes while about to click past this unconventional idea but sit tight. Open up to some possibilities that have nothing to do with selling a bigger cardboard box or the latest key lock on the market.

Consider who your customer is and what are they doing when they come to your facility. First and foremost, your customer is in transition. Whether they are downsizing from a large home, moving office buildings or empty nesting, they are on the move with little or no time to eat, much less prepare a meal with pots and pans buried deeply into one of the boxes now stowed safely away behind your roll-up door. Bearing that in mind, fast food is likely their only option which is where Little Caesar’s plays a role.

A few years ago, a client sent over a PnL (profit and loss statement) for a refinance of his storage facility. One of the line items was income marked ‘Little Caesar’s’ with a significant amount of income. When asked about the typo, the borrower said, “Oh no…that’s a real money maker for us.”

The client went on to explain that when he built the facility, his plan was not only to be the only climate controlled offering in the area, but as an added bonus, he added a small, retail strip center at the front of the property facing a major highway. Although the self storage facility was far off the street and not visible, he leased out the spaces to attract clients with a Little Caesar’s and a UPS Store. The Little Caesar’s fed those who were moving with no time to cook and they used the UPS store while in transition. It epitomized a win-win. Customers were not only coming and going with storage needs, but each revenue stream fed the other. The pizza delivery car was lit up like a Christmas tree with signage for the self storage business and likewise, the free box truck was plastered with pizza moving specials.

Whether you add a strip center or high visibility retail pad, a little thinking outside the bubble-packed box can spell big profits. Add to it road frontage signs on the retail center and freeway billboards for both, and your profits will grow exponentially.

Retail comes in two different forms. One is as pure rental income, whether NNN (tenant pays all taxes, upkeep, etc) or through becoming the owner/operator of the given retail space.

The financial bonus can be significant. Depending on your facility’s proximity to a major road or interstate, the retail alone can overshadow the storage income depending on the number of tenants. Add to that a name brand, fast food such as Little Caesar’s and the name recognition can boost sales tremendously.

What does this translate to when working with a lender? It means your revenue is not subject to the ups and downs of the cycles of the self storage business alone because you are no longer relying on one income stream. A diversified revenue stream spells bigger profits and an enhanced NOI (net operating income). A lender looks favorably on businesses that have multiple sources of income because if one area slows, the borrower will not miss a payment with multiple sources of income.

A little ingenuity coupled with some big profits can translate into a more profitable self storage facility. If your facility is in a college town or near a military base, consider pairing with a fast food restaurant. If your facility is in the only ticket for desert storage of RV’s and boats, you could add a self-serve car wash to get the dust off. Anything that makes your tenant’s life easier can add profits to your business. So before you bite into your next pepperoni deep dish, think about how you deserve to get a bigger slice of the pie!

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