Dollar Generals for Sale
In an era where smart investments make are the key to one’s financial well-being, the retail real estate market has always been a smart move. With a shift towards affordable shopping options, convenience stores like Dollar General, Family Dollar and Dollar Tree stand out as leading players. These low price discount store business models, along with their double-net and triple net lease type, are a solid investment for both the tenant and the landlord.
Understanding Dollar General's Business Model
Dollar General is an Amazon-proof, recession-proof and pandemic-proof multi-billion dollar corporation that started out as a family-owned business. It targets rural locations where big retailers like Walmart are scarce.
Dollar General’s strategy includes leasing store locations instead of buying them. This approach lowers Dollar General’s opening costs to about $250,000 per store. This compares favorably to costs running into millions for large general market. Long-term triple net leases with corporate guarantees offer attractive terms and potential rent bumps for investors.
Benefits of Investing in Dollar General Properties
Investing in Dollar General properties offers stability with potential growth. About 70% of Dollar General stores thrive in towns with populations under 20,000. This means they face less competition from larger retailers and shopping centers.
Lease terms for Dollar Generals are absolute triple net (NNN) for 15 years. Dollar Tree and Family Dollar, on the other hand, are double-net with 10 year terms. Dollar Generals’ long-term leases provide security and predictability in cash flow, making them attractive to investors. As of 2024, newly constructed Dollar General stores generally range from $1.3 million to $2.5 million, depending on factors such as location, store size, and market conditions. Prices typically fall between $130 to $220 per square foot .
The average cap rate of 6.20% highlights the strong investment potential of Dollar General properties in the commercial real estate market.
Dollar General as a Tenant: An In-Depth Analysis
As of January 2024, Dollar General operates over 20,000 stores across the contiguous United States and Mexico. The company has been expanding its footprint, with plans to open approximately 575 new U.S. stores and remodel about 2,000 existing ones by January 2026.
Description of Dollar General’s Brand and Market Position
Dollar General’s strong brand recognition ensures a loyal customer base. Dollar General Corporation, founded in 1939, is a leading discount retailer in the U.S. With over 20,523 stores, it serves mainly smaller towns with populations of 20,000 or fewer.
Dollar General offers a broad range of products including includes food, health, beauty, and household items catering to essential needs. Dollar General's business model follows a low-cost, no-frills approach. This means minimal maintenance and low operating costs, allowing for consistent shopper value.
Dollar General is a multi-billion dollar corporation with a strong financial standing. It holds a BBB credit rating from S&P and Baa2 from Moody's. This reflects its reliability and strength as an investment. The company’s commitment to expansion is evident with its presence expanding into Mexico.
Overall, Dollar General maintains its market position by targeting core customers in smaller communities. The brand's approach and wide product selection ensure strong brand recognition and steady sales growth. Dollar General's fiscal year 2024, which ended on February 2, 2024, reported net sales of $38.7 billion, a 2.2% increase from fiscal year 2023.
Key Locations for Dollar General Properties
About 70% of its stores are situated in towns with populations of 20,000 or fewer. This choice reduces competition and fosters customer loyalty. The typical store spans 9,100 to 10,500 square feet with some newer prototype stores in Kentucky, New York, Pennsylvania and Tennessee being built out at 12,500 sq. ft. These stores, often having replaced relocation stoes, are often on busy hwy., ensuring high visibility and easy access for customers.
Pricing Trends and Considerations
The average Dollar General has a net operating income of $93,000 monthly. This suggests strong revenue potential within the discount retail sector. New stores often sign 15-year absolute triple net (NNN) leases with rent hikes of 10% every five years. For investors, the properties offer a cap rate of 6.2%. This rate highlights the attractiveness and potential return of investing in Dollar General properties compared to other retail options.
Current State of the Dollar Store Market
The dollar store market in the United States has experienced significant growth in recent years, driven by consumers seeking value amid economic uncertainties. Here's an overview of the current state of the market:
Market Size and Growth:
Revenue: The dollar store market reached approximately $124.9 billion in revenue in 2024, with an annual growth rate of 4.7% over the past five years.
Store Count: As of 2024, there were over 38,000 dollar stores across the United States, an increase of roughly 4,000 since 2021.
Major Players:
Dollar General: Operating over 19,000 stores, Dollar General plans to open approximately 575 new U.S. stores and remodel about 2,000 by January 2026.
Dollar Tree: Including its Family Dollar brand, Dollar Tree has over 8,000 locations. However, the company announced plans to close around 1,000 underperforming stores over the next several years, citing economic pressures and changing consumer behaviors.Insights into Dollar General’s Nationwide Store Count
Investment Potential of Dollar General Properties
Dollar General provides excellent real estate investment opportunities because they sell at a higher-than-market cap rate and come with 15-year absolute nnn leases, providing investors with stable, long-term income. As for dollar store chains, Dollar General is, by far the most secure tenant.
Dollar General's strategic expansion and strong financial position make it an appealing choice for investors in the commercial real estate market. With its focus on long-term leases and attractive locations, it is a promising addition to any investment portfolio, especially in retail corridors.
Risks and Considerations for Investors
Investing in Dollar General properties comes with some risk. Most of their stores are in smaller communities with populations under 20,000. While this reduces competition, store performance is tied to the local economy. Economic shifts in these areas can influence store sales and, ultimately, the viability of the store.
Evaluating Market Conditions
Dollar General plans to continue its expansion into small communities, even as these areas face economic challenges. Their target customers are households earning $40,000 or less. This focus on value-conscious shoppers helps hedge against competition from online giants like Amazon. As large retailers shutter stores, Dollar General thrives by serving those needing immediate access to essentials.
The discount retail market is crucial in today's economy, with Dollar Stores becoming an essential part of the retail landscape. Despite challenges, Dollar General's strategy to expand into underserved areas bolsters its market position, enabling it to capture a niche previously overlooked by core demographics.