If restaurateurs are wondering whether there is growth in nontraditional venues, they should take a glimpse at Subway, because the sandwich giant can be found everywhere — from athletic facilities to truck stops to the True Bethel Church in Buffalo, N.Y.
“People have been clever,” noted Elizabeth Rolfe, director of new business development for the Milford, Conn.-based company whose units are100-percent franchise-owned. “I love it that people have looked and [they] saw where there was an opportunity where people were there and saw [that] this could work.”
Subway, which has a total of 28,800 locations worldwide, including some 6,680 nontraditional units, represents one of many restaurant chains exploring business beyond the traditional model.
Nontraditional locations, which include everything from hospitals to department stores to bus and train stations, offer new opportunities to restaurant players across the spectrum, restaurateurs said. First and foremost, these unique venues help to expand a restaurant's brand. In addition, because of the extreme amount of foot traffic at these busy locations, such as airports, the venues often pull in a company’s best per-unit sales figures.
Some of Kahala Corp.’s airport locations bring in an excess of $1 million annually, which is two times the average unit volume, according to Chris Prasifka, executive vice president to the chain's chief executive. Scottsdale, Ariz.-based Kahala represents 12 strong brands, including Cold Stone, Blimpie and Samurai Sams.
Nontraditional “has become more and more of our focus because of the active lifestyle of folks,” Prasifka said. “In the foodservice industry, they always say location, location, location. There is such an opportunity … to place our brands in nontraditional venues, like airports, train stations, sporting arenas, etc.”
Nontraditional locations not only can be extremely lucrative on the revenue side, but also they often cost less to open because the menu and footprint are smaller. While a traditional location can cost upwards of $150,000 to build, Prasifka said, starting up a nontraditional unit can range from $30,000 to $150,000.
Brand power
While the nontraditional restaurant concept is not new, there is more of a demand for known brands in these locations today, some industry experts said.
“The biggest trend in the last five to six years has been from independents to brands,” said Geoff Hill, president of Cinnabon, a bakery with more than 600 units worldwide as of July 2005.
While an independent may have had a business on a college campus a few years ago, today that on-campus business is more likely a Starbucks or Quiznos sandwich shop, he said.
“If [foodservice operators] can put a brand in there, they can use it as a drawing card to bring other people in there,” said Subway’s Rolfe.
Added Prasifka: “Consumers typically gravitate toward quality brands because of the consistency they get.”
The preference for different restaurant brands has changed over time, said Mike Brandon, director of brand development for Compass Group, The Americas. Companies such as Compass PLC, a major international food and support services company, and HMSHost Corp. frequently control the foodservice operations at such nontraditional venues as airports and stadiums.
Coffee brands continue to grow in the nontraditional arena, along with multi-daypart brands, Brandon said. The relationship is mutually beneficial for the foodservice company and the chain, he added.
“It benefits us because we can bring brands to these environments and the brands like it, too,” he said.
An adjustment
While venturing into nontraditional locations can be profitable, it is not as easy as it initially may sound.
Chains frequently have to modify the menu offerings to make the concept work at a smaller site. The key to success is maximizing every inch of space.
“You can’t think it’s going to work anywhere,” Hill said.
Cinnabon, which has 350 franchised locations in North America, including 90 nontraditional venues, has learned some hard lessons about nontraditional locations, Hill said. For example, the chain has found that sales are lower on college campuses compared with airports because of the lack of new consumers. Bakeries, unlike restaurants, typically do not lure people back every day, according to Hill..
“We need a great deal of foot traffic, but it has to be new foot traffic,” he said. “It’s got to be new people coming through.”
The company is working on initiatives to help increase business at colleges, he said. It also is relaunching its “mini indulgences” line of pastries to cater to those consumers that might want smaller bite-sized treats, Hill added.
Going forward, Focus Brands Inc., which owns, Cinnabon, also hopes to piggyback Cinnabon onto other brands, like Schlotzsky's and Moe’s Southwest Grill, on college campuses.
Focus is working on perfecting its other nontraditional businesses as well, Hill said, adding that the group also is bringing a micro-bakery concept to an airport location over the next two months.
The importance of maintaining brand identity in a smaller nontraditional space cannot be overstated, he said.
“You have to maximize square inches, not square feet, but you don’t want to lose your brand identity,” Hill said.
Others agreed. The nontraditional business at Kahala is thriving, but the company’s growth strategy does not involve building more nontraditional than traditional units, Prasifka said, noting that the company's current breakdown is 90 percent traditional and 10 percent nontraditional.
The reason? Nontraditionals cannot represent the brand as well as traditional locations, he said.
While a nontraditional location serves as an extension of the brand, “I don’t think you can build a brand on a total nontraditional format and build that brand’s essence,” Prasifka said.
