5 ways restaurants should rethink real estate5 ways restaurants should rethink real estate

This is part of Nation’s Restaurant News' special coverage of the 2017 MUFSO conference, taking place Oct. 1-3 at the Hyatt Regency at Reunion Tower in Dallas. Follow coverage of the event on NRN.com and tweet with us using #MUFSO. Stay connected on the go by downloading the MUFSO app.

In a highly competitive environment with hundreds of chains looking to grow into roughly the same type of location, the real estate market is tough for restaurants today, restaurant-development executives told moderator Jonathan Maze of NRN in a MUFSO panel Monday.

Add to that a rapidly changing industry, which is adding delivery, catering and to-go business as a significant source of revenue, and what makes for a good restaurant location is evolving. Negotiating leases and selecting sites has become more challenging than ever, too, they said.

David Bloom, chief development officer for the Las Vegas-based sandwich chain Capriotti’s, warned that it’s not as simple as plug-and-play. “Conversations are a lot harder to go in and convince people why you’re the right tenant.”

Here are five tips the executives gave for rethinking real estate: 

1. Use data analytics.

All three of the panelists said they use data analytics specialists to help find the right sites. But they warned that such partners should be considered tools in one’s arsenal, not what makes the final call on a real estate selection.

“Nothing replaces the qualitative boots-on-the-ground site analytics that we always do,” said Chris Cheek, chief development officer of the fast-casual Newk’s Eatery, based in Jackson, Miss.

Cheek said Newk’s uses Buxton for site research, which helps determine the right trade areas in a market, and helps filter down to “the right doorknob.” They might also use it for cannibalization studies.

It’s an expensive solution, he said, especially knowing the accuracy could only be about 75 percent. “But it does give you guidance, directional guidance,” he said.

The challenge is that much of the data available to evaluate real estate looks backwards, rather than forward, said Bloom.

“None of us knows what will happen in five years,” he said. “We’re doing deals today that are five to 10 years, and we don’t know if we’ll be driving cars in five years or what the future of pickup and drive-thru and mobile ordering will be.” 

2. Get smaller. Or get bigger. Or both.

Brands like Conshohocken, Pa.-based Saladworks LLC, a chain with about 92 units in 12 states and two countries internationally, are looking to shrink their box, said Jena Henderson, Saladworks’ vice president of growth.

In December, Saladworks will open a unit in Atlanta with 22 seats, rather than the usual 55. The new unit will also have online and kiosk ordering, and place greater emphasis on pick-up and takeout, she said.

Capriotti’s, meanwhile, is looking at both smaller and bigger units to allow for versatility with real estate. Where there used to be one prototype from which a chain could grow, Bloom said, now there are many.

“Today, everything’s a snowflake,” he said. 

3. Work closely with the operations team.

Cheek said Newk’s is also tweaking the footprint, looking at a smaller kitchen and larger patio. But he recommended first involving the operations team in such conversations.

“We didn’t just send the design off and say go figure it out,” he said. 

4. Maybe rethink malls. And outlet centers.

None of the panelists were high on mall locations.

“Malls? No. I wouldn’t go into a mall, unless it’s in downtown Chicago on Michigan Avenue,” said Bloom. “And outlet centers are still being built for some reason. I think those are scary.”

Henderson said Saladworks was born in malls and some units are still located there. But even malls are charging high rent, despite the loss of traffic to online shopping. When leases come up, that will require some decisions, she said.

Still, restaurants are attractive tenants for landlords, typically bringing in higher sales per square foot than other businesses, noted Bloom. 

5. Grow into new markets quickly.

Cheek recommended that restaurant operators push ahead with growth in new markets as fast as possible.

“Don’t measure the market by the first store you open, or even the second or third,” he said. “You have to have the guts, or the franchisee does, to drive in with a unit count that will then, typically, lift all boats.”

Contact Lisa Jennings at [email protected]

Follow her on Twitter: @livetodineout

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Presenting sponsors are: Blount Fine Foods, The Coca Cola Company, UNiDAYS

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