After a coffee shop in a West Sacramento apartment building closed down during the pandemic, landlord Jeff Gallagher needed to fill the 2,000-square-foot, ground-floor retail space. Leasing was an option, but he went another way: He became his own tenant. Gallagher became a franchisee of quick-service restaurant Teriyaki Madness, and a division of the restaurant company will manage the restaurant.

Gallagher, a seventh-generation rice farmer from Sacramento, and his brother started investing in small commercial real estate spaces in the Sacramento area about 10 years ago. Timing was not on their side, though, when they purchased that latest property in December 2019. The coffee shop had been the perfect retail tenant for the ground floor of the four-unit apartment building, but the pandemic forced the shop to file for bankruptcy last summer and close.

After talking to local brokers and reviewing proposals from a handful of potential tenants, Gallagher talked to a franchise consultant and found Teriyaki Madness’ turnkey franchise program. “We had a couple of tenant opportunities that were possible but weren’t very great, so we started looking at putting in something ourselves that would kill two birds with one stone: filling the unit and getting some rent and also have a business that can make a little bit of money,” said Gallagher.

He had never explored franchising but liked what he saw in Teriyaki Madness, a fast-casual teriyaki shop founded in 2003 that today has nearly 250 franchises across the U.S. What sealed the deal, according to Gallagher, was the company’s sister division, a management program called Restaurant Sherpas.

As a property owner, Gallagher is a passive Teriyaki Madness franchisee, and Restaurant Sherpas manages the franchise location. Teriyaki Madness gets a greater hand in brand-standard quality control, which boosts the franchise’s long-term staying power. Each franchisee signs a franchise agreement with Teriyaki Madness and a separate operating agreement with Restaurant Sherpas. The franchisee can exit the operating agreement within 90 days of its start. The franchisee pays three one-time fees: a franchise fee, a development services fee and an operating fee. Each also pays a maximum of $2,000 per month to Restaurant Sherpas, and the rest of the revenue goes to the owner.

“I’ve obviously got quite a bit going on here at the farm and with different properties, and I didn’t have time to run another business on a day-to-day basis,” said Gallagher, whose family has owned 3,500 acres of rice fields and 400 acres of walnut groves for over 150 years.

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Additionally, the potential tenants looking at the space would have needed about six months to get going. “I could go six months not receiving any rent or use that six months to myself and get something that I think would just be a better, long-term, more profitable fit for the space.”

Gallagher said the city of Sacramento is excited about the project. He purchased three Teriyaki Madness franchise licenses, planning to install a location in each of his other two commercial buildings in the city. He hopes to start construction on the first space in April and open in May or June.

Restaurant Sherpas is involved in nearly a dozen similar deals and plans more, says chief development officer David Biederman. The program’s purpose is “to help and allow an investor or a landlord to get into the restaurant business without ever having to really build or operate their restaurant, so to really look at it as an investment,” he said.

Gallagher seems to be embracing that restaurateur outlook: “I think this will be a long-term deal that people will really enjoy, and once people get in there and try it, it is going to be a hit and I think we will just continue to grow,” he said.