£1.7 million cost of acquiring KFC outlet

Posted: 16th March 2017

KFCMajor infrastructure projects are notoriously expensive and a large proportion of their cost is accounted for by the high price of land acquisition. In one case, Transport for London (TfL) was ordered to pay more than £1.7 million in compensation to the leaseholder of a Kentucky Fried Chicken franchise that had to be compulsorily purchased to make way for the Crossrail scheme.

The chicken shop’s lease was due to expire shortly after the acquisition but it was agreed that compensation should be assessed on the basis that the leaseholder would have been entitled to a 15-year extension. The leaseholder and TfL could not agree on the correct valuation of the lease and the matter was referred to the Upper Tribunal (UT) for resolution.

The shop was estimated to have generated earnings of £107,000 a year and the leaseholder argued that that sum should be multiplied by 17 in order to calculate the compensation due for the extinguishment of its business. TfL contended for a multiplier of 7.5.

In ruling that the relevant multiplier should be 14, the UT was in no doubt that the compulsory acquisition had deprived the leaseholder of a thriving business that had a profitable future. Compensation for extinguishment of the business was assessed at £1,498,000. The leaseholder’s total award, after other heads of compensation were taken into account, came to £1,707,969.