Shopping Center Business

MAY 2018

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

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RESTAURANT EXPANSION 156 • SHOPPING CENTER BUSINESS • May 2018 M ore storefronts are opening than closing, and not a lot of retail space has been built over the past 10 years. In many metropolitan markets in the U.S. retail space is at a pre- mium. That's leading to some expanding retailers jumping to secure space, some- times in locations that don't fit their con- cepts, markets or budgets. Jason Baker, principal with Houston-based Baker Katz, recently offered some advice for working with retailers and restaurants who want to open multiple locations in a given market. SCB : You, and your firm, have a lot of experience with new restaurants enter- ing the Houston market. Who have you worked with over the years? JASON BAKER : Our experience started 15 or 20 years ago with a sandwich concept coming into the market and making doz- ens of deals. That relationship grew and evolved into something that was more fast food related. Over time, we parlayed our relationship with that retailer into other fast-casual restaurants like Chipotle, Zoe's Kitchen, Noodles and Piada. Along with that, more into the full-service world with concepts such as Carrabbas and Outback Steakhouse. Most of those had pretty strong regional programs when we start- ed working with them. There were cer- tainly some exceptions — Zoe's Kitchen didn't have much of a regional presence here when we started and we helped them grow up to 15 deals in our market, and then there are some recent examples like Snooze that have no presence. They had ten or fewer stores in their entire chain when they hired us to help them grow in Houston. We've just recently opened up our third and are about to open up our fourth Snooze restaurant. SCB : When you get a restaurant client that wants to expand in the area, how do you sit down with them and develop a plan of attack? What fits your criteria? BAKER : There have certainly been exam- ples of where we've picked up a restaurant as a client and they've already got a Hous- ton presence and we're just helping them build out the rest of the market. And then, like Snooze, there are chains that have no presence, and they want to execute a strategy. In that case, before we ever did a tour, I flew to Denver and Arizona to visit their restaurants. I wanted to see who they were serving, I wanted to see the quality of their build-out and I wanted to try their food. Because restaurant space is about as competitive of a space as there is in retail, if we don't believe in the food and the op- erations, it just doesn't make sense. We've got enough experience now that we've got to be sold before we can convince land- lords that we're the right use for the space that they've got available or the space that they've got coming online. The sec- ond thing that we do is a lot of listening. Snooze is a breakfast concept, and they were looking for something different than most of our other restaurant clients. A retailer that's in that fast-casual segment, like MOD Pizza, for example, has enough of a track record that they know what real- ly works for them, and they are expanding pretty rapidly. They've got a format and a process that works for them that they really adhere to and stick to. Oftentimes it's a certain kind of co-tenancy, it's a cer- tain kind of building design, it's a certain kind of access and visibility, and they have a much more predictable process than a chain that's small like Snooze. Snooze ap- proaches each market very uniquely. They understood that their ideal customer was a mix of male and female, very artsy, much more eclectic, a high-income, and a high edu- cation level. But they also were really focused on not moving into a space that was just stan- dard construc- tion. They want- ed to operate in a space that was less traditional and felt more local. So they moved into an office space we converted to restaurant that was built sometime in the 1950s. It feels older and it's got more of a unique design and that's what they were looking for. One-third of our clients are looking for similar space now, where they don't want to feel like a chain, they want it to feel like they've been there for 25 years. That's hard, partly be- cause in the case of Snooze, we had to get a variance for parking, you're in the urban core of our city and parking comes at a premium. It's a lot tougher requirement, but that's what they were looking for and that's what we had to find. SCB : What success stories have you seen using this sort of approach? BAKER : Postino. They are part of Up- ward Projects and they've got half a doz- en brands inside of their company, from Federal Pizza to the Webster to Postino to Churn. They were really looking for a different type of co-tenancy than many of our clients are looking for. They wanted to start in the dense, urban core of our city — they sought out high incomes, high education levels — and that's what we found for them in The Heights. Some Working With Expanding Chains Many markets are seeing new concepts expand and grow. But are they doing it smartly? Here's advice on working with expanding concepts to develop a smart plan of attack for a market. Interview by Randall Shearin Jason Baker Principal Baker Katz

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