Shopping Center Business is the leading monthly business magazine for the retail real estate industry.
Issue link: http://shoppingcenterbusiness.epubxp.com/i/903727
RESTAURANTS 124 • SHOPPING CENTER BUSINESS • December 2017 T he old fashioned, full-service concept in the restaurant in- dustry is fading as the life- style and priorities are changing for the average American. Today, people are looking for efficiency and quality when it comes to dining. Examining the trends, very few customers no lon- ger appear interested in a two-hour dining experience. Millennials today have an intense focus on time and crave the ability to do more with less. As a result, the country's budding restaurant industry has provided a plethora of options that supply customers with better quality food offerings and serve it faster than ever before. Speed, quality, and unique tastes being offered by today's fast growing fast-causal concepts are beginning to put the national full-service restaurant chains out of business. Unless these full-service chains adapt their busi- ness plan and embrace this new trend, full-service restaurants can easily be- come the next Blockbuster Video of the food service industry. OPPORTUNITIES AHEAD In this hectic and competitive world, most patrons can't spare the time to dine out anymore, and the fast-casual concept is on the rise. This budding tenant pro- file has created significant change in the design and execution of retail properties throughout the United States. Success in this sector has allowed fast-casual concepts to become one of the highest paying tenants in the retail industry. As a result, we expect a pleth- ora of new opportunities for owners and developers to add significant value to their existing portfolios. One of the most profound changes expected is the repurposing of larger retail boxes — tak- ing advantage of the vacant H.H. Gregg, Best Buy, Sears, Kmarts and other vacant boxes in primary and secondary markets throughout the United States. Considering their typical high park- ing ratio and strong location, these boxes can be reduced to a smaller footprint and divided into small- er spaces to accommodate multiple new restaurant concepts or national tenants. Despite the smaller leasable area, gross rent will be higher, and the value of the real estate is improved dramatically. Tenants will benefit from this trend as well. Locations in dense, infill markets with high barriers to entry will create opportunity that did not exist previously. Expect to see new concepts emerge and buildings repurposed in major markets near you. GROWING COSTS AMPLIFY TREND Since fast-casual concepts have smaller real estate requirements, employ fewer people, and require lower startup costs, they have been less susceptible to rapidly rising costs when compared to full-service concepts. As a result, their net earnings per foot and financial performance have drastically outpaced that of their strug- gling full-service predecessors. Restaurants and businesses throughout the country have been hit by a dramatic hike in the minimum wage. In the beginning of 2017, 19 states raised their rates. Massachu- setts and Washington boast the highest in the country at $11 per hour, while New York City plans to raise its minimum wage to $15 per hour by the end of 2019 for all employers (most large employers will see it rise to $15 by the end of 2018). In addition to rising labor costs, many restaurant goers have become more edu- cated in the idea of going green and us- ing organic and sustainable foods. The full-service restaurants are having trouble adapting to the new type of demand with only a small fraction of the national restau- rant chains offering locally sourced menus and more health-conscious options. In order for the national full-service chains to succeed, they will need to think outside the box and reinvent themselves. If they are not willing to change, their ability to compete with the fast-casual in- dustry on quality, service and experience will be an unwinnable war. Time will tell whether full-service restaurants can find the right balance between cost and quality to win back the American consumer. TECHNOLOGY OFFERS OPPORTUNITIES It is a blessing for restauranteurs that we live in a growing digital age because technology can aid them in cutting their budgets and enhancing what they offer consumers. Can Full-Service Restaurants Survive The Fast-Casual Craze? To stay alive, restaurants will be rethinking their staff, menus and efficiency. James Medefind Millennials today have an intense focus on time and crave the ability to do more with less. As a result, the country's budding restaurant industry has provided a plethora of options that supply customers with better quality food offerings and serve it faster than ever before.