Real estate investment has always been considered a reliable and lucrative way to build wealth. However, due to their numerous benefits, many investors are beginning to grow their real estate portfolio by acquiring triple-net (NNN) properties.
With a triple net property purchase, the tenant handles the three main operating expenses, including property maintenance, insurance, and taxes.
AutoZone, a renowned auto parts retailer, is one of the popular NNN properties to consider for commercial real estate investment due to its stability and reputation in the real estate industry. However, before you purchase an AutoZone property for sale, there are a few AutoZone real estate requirements to consider, including the property’s condition, lease term, and location.
This article provides a detailed guide on purchasing AutoZone properties, highlighting the crucial steps for a successful investment. From navigating the site selection process to determining whether AutoZone real estate is the best investment for commercial property investors, you’ll get all the necessary information to help you own one of the AutoZone stores.
Before exploring the site selection process and the lease requirement, let’s take a look at the history of AutoZone.
A Brief History of AutoZone
AutoZone is a leading automotive replacement parts retailer in the United States, Brazil, Puerto Rico, and the Virgin Islands. Founded in 1979, the company has grown and expanded into over 6,800 stores worldwide. This multi-billion dollar company’s success results from providing excellent customer service and high-quality products.
AutoZone was founded by a Memphis entrepreneur, J.R. “Pitt” Hyde III, who decided to create a new type of auto parts retailer business instead of focusing on his family grocery business. Pitt Hyde’s decision to create AutoZone stems from his desire to provide customers with a diverse selection of automotive parts at competitive prices, along with excellent service and knowledgeable staff.
The first AutoZone store was opened in 1979 in Forrest City, Arkansas, and the automotive replacement parts brand began expanding across the United States. By 1986, AutoZone stores had increased to 100, and by 1991, the company was listed on the New York Stock Exchange (NYSE) after going public.
Over the years, AutoZone has continued to expand its retail business, opening new stores and acquiring competitors in strategic locations. The brand started its expansion into the Brazilian market by acquiring a local auto parts retailer in 2004. AutoZone also bought AutoAnything (an online automotive accessories retailer) in 2012.
Presently, AutoZone is the leading automotive replacement accessories and parts retailer in the U.S., with over 90,000 employees in more than 6,800 stores. The company’s commitment to providing excellent customer service and high-quality products has helped to position AutoZone as a leader in the automotive retail industry.
Who Owns AutoZone?
AutoZone is a leading distributor and retailer of automotive replacement accessories and parts worldwide. Since its founding, AutoZone has become a large and highly-recognized auto parts retailer worldwide.
Formerly called Auto Shack, AutoZone is now a publicly-traded automotive brand listed under the symbol “AZO” on the New York Stock Exchange (NYSE) market. The company ownership spreads across various institutional and individual investors who own the company’s stock shares.
However, a few key players own a major part of AutoZone’s outstanding shares. While the largest shareholder is Pitt Hyde, who owns about 9.6% of the shares, other AutoZone shareholders include Fidelity Investments, JP Morgan Management, Black Rock Fund Advisors, and Vanguard Group, all with substantial stakes in the brand. These institutions altogether own about 25% of the company’s outstanding shares.
While AutoZone Inc ownership may change over time as investors sell and buy shares, the company’s publicly traded status means that ownership continues to spread across different investor groups with shares in the company.
Is AutoZone a Franchise?
AutoZone isn’t a franchise. Instead, it’s a retail store chain operated and owned by the company itself. The company’s business model focuses on selling automotive replacement accessories and parts to customers through its over 6,500 stores across the U.S., Brazil, Mexico, and Puerto Rico.
AutoZone operates all its stores directly, meaning each location is managed and owned by AutoZone itself rather than by individual franchisees. This absence of a franchise enables the brand to maintain consistency in customer experience, operations, and branding across all its stores.
While AutoZone isn’t a franchise, it offers small business owners and entrepreneurs many opportunities to partner with the brand. For instance, AutoZone’s commercial sales program allows businesses to buy supplies and parts in bulk at discounted rates.
In addition, the company offers various business-to-business (B2B) solutions, such as fleet management services, to enable businesses to manage their automotive repair needs.
Through AutoZone’s commercial program, the brand offers various services to enable businesses to manage their fleets, such as competitive pricing, personalized product recommendations, and access to a dedicated and experienced sales team.
Also, AutoZone offers free delivery on some orders and a customized online ordering system on their website. Besides its fleet management services, the commercial program also includes other B2B solutions like the ability to create and customize product lists, credit terms, and bulk purchasing options.
Furthermore, AutoZone partners with various vendors and suppliers to source products for its stores. While these partners aren’t franchises, they work closely with AutoZone to ensure the brand meets its customers’ demands.
Does AutoZone Own Its Real Estate?
AutoZone owns all its real estate properties, including the distribution centers and stores rather than leasing them, enabling the company to exercise more control over the store locations and manage its costs over time.
AutoZone’s ownership of its real estate properties offers several benefits, including increased flexibility in store network management, reduced occupancy costs, and more control over store locations.
Additionally, AutoZone’s real estate ownership enables the company to generate more revenue by leasing out AutoZone properties sometimes to third-party tenants. The company may also choose to sell its property and lease it again from the new owner. That way, they can raise capital while maintaining property control.
Besides its distribution centers and stores, AutoZone owns many properties used for facilities like corporate offices, including the company’s headquarters in Memphis, TN.
AutoZone’s ownership of its real estate properties has helped it build a sustainable and strong automotive replacement accessories brand over time. By owning its real estate properties, AutoZone has greater control and flexibility over its store network, helping them generate more revenue from leasing these buildings to third-party tenants.
AutoZone Site Selection Process
AutoZone is a leading automotive retailer in the U.S., Mexico, Brazil, Puerto Rico, and the Virgin Islands, offering various auto parts, tools, and accessories to professional mechanics and DIY customers.
To ensure a successful brand, AutoZone employs a rigorous site selection process to help them evaluate and identify potential locations for its new stores. The first step in this site selection process is to choose potential markets with a growing demand for automotive services and products.
The company’s site selection process involves analyzing demographic data and market research, including vehicle ownership rates, income levels, and population density.
Once AutoZone identifies the potential markets, it’ll thoroughly analyze the potential site in the chosen markets. Some of the evaluating factors include competition, accessibility, visibility, and traffic patterns.
AutoZone considers the building or land cost and other zoning regulations and restrictions that might affect the stores’ operations in those locations. After selecting a site, the company conducts a detailed feasibility study to help determine the new store’s potential profitability.
The feasibility study analyzes projected revenue and sales and estimates the construction cost, operating expenses, and inventory. AutoZone works with local community leaders and government officials throughout the process to ensure the community welcomes and supports the new stores.
The community acceptance process includes engaging in outreach efforts in the community and addressing issues and concerns that may arise. AutoZone designed its site selection process to identify and evaluate great locations for its new stores while considering various factors that might affect each location’s success.
By carefully choosing and evaluating the new store locations, the automotive replacement accessories brand can maintain its leadership in the automotive replacement part industry.
Factors That Impact AutoZone Site Selection Process
As a leading automotive replacement accessories brand in the U.S. and beyond, AutoZone pays adequate attention to any site it chooses for its new stores, considering that the site location significantly determines its success.
The multifaceted and complex site selection process depends on some factors that might impact the store’s success and profitability. Generally, AutoZone’s site selection process considers the following factors before deciding on a new store location:
Demographics
One crucial site selection factor AutoZone considers is the location’s demographics. The automotive replacement parts retailer looks for places with a high number of professional technicians, do-it-yourself (DIY) customers, and vehicle ownership rates.
Also, AutoZone analyzes demographic data like age distribution, income levels, and population density to determine the market demand for automotive replacement products and services in a location.
Traffic Patterns
AutoZone evaluates potential locations based on traffic patterns. Areas with easy access and high traffic volume will likely drive more sales and increase foot traffic.
The automotive replacement parts brand prefers locations easily accessible from main roads and highways in places with heavy commuter traffic.
Competition
Competition is a vital factor that AutoZone considers when choosing a new store location. This automotive replacement accessories brand evaluates the location’s automotive retail landscape to determine the competition level in the area.
Areas with high competition levels might be less attractive, while locations with no or few competitors are often desirable.
Zoning and Regulations
AutoZone considers regulatory and zoning factors when choosing the location for a new store. The company ensures the site complies with local codes and regulations and is zoned for commercial purposes.
Also, the automotive retailer looks for locations that aren’t subject to restrictions that can affect its ability to operate or limit its expansion.
Real Estate Costs
The real estate property and land cost is another AutoZone consideration when searching for a site for a new store. AutoZone seeks to acquire and develop the area with an amount lower than the potential revenue that will be generated from the location.
The automotive replacement brand might decide to lease space instead of purchasing it outright to reduce upfront costs.
Accessibility
The last consideration for the AutoZone site selection process is accessibility. AutoZone looks for areas easily accessible to customers, including people with disabilities.
The automotive retail brand evaluates factors like overall property layout, entrance and exit points, and parking availability to ensure accessibility to all customers.
Average AutoZone Lease Rates
The average AutoZone lease depends on various factors, such as the lease term length, space size, and store location. AutoZone lease space ranges from 6,500 sq ft to 8,000 sq ft, with lease terms running for 15 years with a 10% potential increase every five years.
The AutoZone average lease rate is approximately $270 to $310 for each square foot yearly. However, lease rates vary significantly depending on the store’s specific location. For instance, lease rates in bigger cities and metropolitan areas like Los Angeles and New York City will undoubtedly be higher than properties in rural areas and smaller towns.
Also, AutoZone offers opportunities to investors interested in adding an AutoZone store to their real estate portfolio. If you’re considering buying an AutoZone real estate property, it’d be best to work with a real estate development manager to help determine the property’s suitability.
AutoZone property cost varies depending on store size and location. Simply put, the average AutoZone lease is influenced by various factors, including the lease term length, location, and market demand. However, the average price for AutoZone properties for sale is between $450,000 to $5,082,000.
AutoZone evaluates every potential location before picking the best place to start a new store to secure the best lease rate and maximize each store’s profitability.
Requirements Needed to Secure AutoZone Lease Agreement
Securing an AutoZone lease agreement can be an ideal opportunity for businesses considering expanding their retail presence or an investor looking to add triple net properties to their commercial real estate portfolio.
However, before signing an AutoZone lease agreement, you’ll need to meet the requirements considering the brand has these requirements to ensure its store’s success and safety.
Some of the requirements investors will need to meet before securing an AutoZone lease agreement are:
Financial Stability
As a well-established brand with a strong reputation and image in the automotive industry, AutoZone’s interest lies in securing tenants that can demonstrate a good credit score and financial stability.
Before entering into an AutoZone lease agreement, providing documentation showing your financial health is crucial, especially if you decide to use the building for business.
The documentation you might need to provide includes credit reports, financial statements, and other information demonstrating your ability to meet other financial obligations and pay rent.
Location and Property Requirements
AutoZone prefers locations easily accessible to customers and visible from highways and major roads. When choosing an AutoZone location, it’s essential to consider factors like proximity to other businesses, parking availability, and traffic volume.
The building needs to meet specific requirements in terms of layout, size, and other factors necessary for a successful commercial business. If you’re considering buying an AutoZone property, check that the building and location meet your preferred specification and needs.
Experience and Track Record
AutoZone might consider the track record and experience of the investor when analyzing lease applications. If you’ve got experience and a proven track record in the retail industry, you can utilize the experience to secure an AutoZone lease agreement.
However, if you’re venturing into the retail industry, you’ll need to demonstrate your willingness to work hard and commitment to learning about automotive replacement accessories to make your store successful.
Legal Requirements
Before signing an AutoZone lease agreement, ensure you’ve gotten the necessary licenses and permits to operate a retail business in your preferred location. These requirements include approvals required by state and local authorities, including sales tax permits and business licenses.
Also, you’ll need to comply with zoning requirements and other regulations that might apply to your business. However, you might only need some of these permits and licenses if you’re buying it to add to your investment portfolio.
Insurance Requirements
AutoZone requires you to have the right insurance coverage to protect your investment and AutoZone’s assets and property in case an unforeseen circumstance like an accident occurs. You’ll also need property insurance, liability insurance, and other coverages contained in the lease agreement.
Meeting these requirements can help you secure a lease agreement with AutoZone, ensuring a successful partnership and investment with the company.
Who Are AutoZone’s Competitors?
Although AutoZone is a leading aftermarket automotive parts retailer globally, the company offers various products and services for mechanics and car owners, including maintenance items, accessories, and tools.
While AutoZone is the automotive retail market-dominant player, the company faces stiff competition from many retailers in the automotive replacement accessories industry.
The following are top AutoZone competitors:
O’Reilly Auto Parts
One of the country’s largest automotive parts and accessories retailers, O’Reilly has over 5,500 stores across the United States and Mexico. The company offers various automotive products, including batteries, engine parts, and brakes. O’Reilly also sells car accessories and tools.
Advance Auto Parts
With more than 4,800 stores worldwide, Advance Auto Parts is also a reputable automotive replacement accessories brand in the United States, the Virgin Islands, and Puerto Rico. Advance Auto Parts specializes in the sale of numerous automotive products, like maintenance items, accessories, parts, and vehicle servicing, including battery installation and oil changes.
NAPA Auto Parts
A subsidiary of Genuine Parts Company, NAPA Auto Parts has more than 6,000 stores across the U.S., Mexico, and Canada. The company offers various types of automotive replacement accessories, parts, and professional mechanics tools.
Pep Boys
Pep Boys is another leading automotive retail and service chain with more than 1,000 locations across the U.S. and Puerto Rico. This automotive replacement brand offers many products and services, like car maintenance items, accessories, vehicle parts, and services such as brake repair, tire installation, and oil changes.
Although AutoZone faces stiff competition from the automotive retailers mentioned here, its strong reputation, extensive store network, and broad product selection help it retain its recognition as a leading automotive replacement retailer.
While some commercial real estate investors have reservations about AutoZone’s competition with megastores like Amazon, the auto parts retailer physical stores have held up well in the automotive replacement accessories industry.
This growth results from their customer base, consisting of mostly professional mechanics and DIY experts who often need auto parts at short notice and might not have the patience to wait for Amazon’s delivery which can take weeks.
So rather than go through the long process of online purchase and waiting following delayed delivery, auto parts customers can quickly walk into an AutoZone traditional retail store to purchase their auto parts products. Therefore, it’s unsurprising that AutoZone retail stores keep increasing yearly, leading to higher company sales.
The automotive retail brand subsidiaries include AutoZoners, LLC, AutoZone Parts Inc, and AutoZone Stores Inc.
Is AutoZone a Good Investment?
As one of the biggest auto parts retail chains in the U.S. with more than 6,800 stores worldwide, AutoZone has witnessed significant growth since it was founded in 1979. While many triple net investors prefer AutoZone real estate, the following indicators will help you decide if the automotive parts brand is a great investment for you:
Financial Performance
When considering whether investing in AutoZone Inc is worthwhile, check the brand’s financial performance. AutoZone has been performing pretty well financially, with consistent growth in gross sales over the years.
In a recent financial statement, the brand reported about $14.6 billion in total revenue in the 2022 fiscal year, a 13.8% increment from the previous year. AutoZone also reported a $3.7 billion net sales, a 9.5% increase from 2022.
This revenue growth indicates that AutoZone is a stable and reputable real estate investment for commercial property investors.
Strong Market Position
Besides its financial performance, AutoZone is a leading automotive replacement accessories brand with a strong market position. As one of the largest automotive parts retail chains in the country, AutoZone is a well-established and reputable brand.
AutoZone offers various auto services and products, such as diagnostic equipment, tools, accessories, and parts. These products help AutoZone capture a more significant share of the automotive replacement parts market, making it resilient to market fluctuations and economic downturns.
Competitive Advantage
The last factor to consider before making an AutoZone real estate investment is its competitive advantage. AutoZone offers many benefits that place it far ahead of the competition.
For instance, the retail outlet has a robust distribution network, with more than 100 distribution centers worldwide. The network allows it to efficiently and quickly deliver products to customers and their stores, placing it far ahead of smaller retailers.
Also, AutoZone heavily invests in its employees, providing extensive development and training programs to help them stay updated with the latest technologies and trends in the automotive parts industry.
Potential Cons of AutoZone Real Estate Investment
Despite its competitive advantage, market position, and financial performance, you’ll need to be aware of some risks of acquiring AutoZone real estate. One such potential risk is online retailers’ threat.
As more customers turn to online shopping, the AutoZone website has witnessed more site visitors, although its brick-and-mortar stores might see a decline in sales and foot traffic.
AutoZone Inc has taken steps to focus on its online presence expansion, offering convenient online shopping for its customers. The effect of economic downturns on the industry also poses another risk. During periods of economic uncertainty, some customers might park their vehicles for a while, leading to a decrease in auto parts demand as witnessed during the COVID-19 pandemic.
AutoZone is a great investment option for investors looking for a well-established, stable brand with strong financial performance, competitive advantage in the automotive replacement retail industry, and top-quality products and services.
As with all investments, it’s best to do your own research before deciding on the property acquisition. Also, consult a triple-net commercial real estate broker before buying AutoZone real estate.
Conclusion
Purchasing a triple-net AutoZone real estate can be a profitable investment for people looking to buy commercial properties. As a financially stable and well-established company with a competitive advantage and strong market position, AutoZone is a great and desirable brand for commercial real estate investors seeking a long-term and reliable rental income source.
However, it’s crucial to carefully consider the building condition, lease terms, and location before making a purchase. Real estate investing can be an involved and complex process, so it’s best to do your research before buying AutoZone real estate. Consider working with a triple net real estate broker experienced in commercial property transactions and consult an attorney and financial advisor to ensure the investment aligns with your financial strategies and goals.
Investing in an NNN AutoZone real estate can be a profitable and smart investment. However, it’s crucial to approach the investment process with due diligence and careful consideration. By carefully evaluating potential triple-net properties and working with an experienced and knowledgeable broker, investors can benefit from the lucrative and growing NNN real estate market.
Invest in AutoZone With NNN Deal Finder
If you’re considering buying a triple-net property for sale, only a few investments are as profitable as AutoZone. Start with working with a leading real estate company like NNN Deal Finder if you want to add this top auto parts retail brand to your commercial real estate portfolio.
At NNN Deal Finder, our team of experienced and knowledgeable commercial real estate brokers specializes in helping investors find triple-net properties in their preferred industry.
Search our various listed AutoZone real estate properties for sale to find the best property according to your budget and preferred location. Depending on your chosen industry, you can also acquire NNN properties in different sectors or buy other auto parts retail chains like O’Reilly.
Whether you’re a new commercial property investor or a seasoned entrepreneur looking for franchising opportunities, you’ll find your preferred commercial real estate at NNN Deal Finder by scrolling through our listings. Give us a call to discuss Autozone real estate requirements and opportunities today.