Shopping Center Business

MAY 2017

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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RESTAURANT LEASING 214 • SHOPPING CENTER BUSINESS • May 2017 of $200 to upwards of $750 per square foot. This varies based on the style and type of restaurant with food halls varying even more dramatically. As for the oper- ation of a healthy restaurant, we typically expect prime costs (total food and labor costs) to be around 60 to 65 percent of sales depending upon the overall service levels. Once other costs, as indicated in the chart below, and occupancy costs (typically rent at 6 percent of sales and total occupancy at 10 percent of sales) are added in the mix, restaurants operate on relatively thin margins. Why is it important for owners and de- velopers to understand the margins of a restaurant? A financially healthy, well-run restaurant only leaves a maximum of 10 percent profit. If everything is managed right and operators can actually attract the budgeted number of guests at the project- ed check average, the chances of success are greatest. A successful restaurant sur- vives based on volume and table turns combined with people spending. If your customer counts are lower because of less overall traffic or an overbuilt market, then it doesn't matter how great the food, ser- vice or atmosphere is. On average, restau- rants need customer counts ranging from 75,000 to upwards of 250,000 people to be viable for the long term. The foodie trend and restaurants are here to stay and will continue to grow as long as they are unique and operated well. Today, over 85 percent of millennials identify themselves as "foodies" and this coupled with more experience driven eating out trends, has fueled the growth in the industry for the past few years. To- day the restaurant industry remains strong overall with almost $800 billion in sales in 2017 at over 1 million locations. Develop- ers need to keep in mind that seven out of 10 restaurants 3 are single-unit operators. It is essential that as restaurants grow, developers understand the level of part- nership needed for ultimate success of the restaurant and long-term sustainability in the form of rent payments. SCB Jeffrey McNeal is president of Fessel International. 3 National Restaurant Assoc. 2017 Industry Outlook Coral Town Plaza | Naranja, FL Pines City Center | Pembroke Pines, FL Doral Commons | Doral, FL Naples Fifth Avenue | Naples, FL Vicenza Plaza | Hialeah Gardens, FL Call 305.261.4330 or email to lease your Florida location today! Developing Great Places. Helping You Grow. Source: National Restaurant Association/ Forecast

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