Fast Casual- But How Much Can You Eat? 7:05 pm
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A good friend of mine bought me a great book written by Fred DeLuca, who started the Subway restaurant chain called “Start Small Finish Big: Fifteen Key Lessons to Start and Run Your Own Successful Business”. He started the first Subway store and now has 36,000 units in over 98 countries.It’s a great book but apparently too many people have read it because everything that is leasing now seems to be a food use.
If you want a hoagie, you have battles between a Subway, Planet Hoagie, Primos Hoagie, Quizno’s and the list continues. Grab a burger? Battles between Five Guys, Bobby’s Burger Palace (Bobby Flay now has his own “burger” place? Wow- talk about niche market!), Sonic and any other fast food restaurant.
Frozen Yogurt? Whew- I just looked at locations with three different companies entering the Philadelphia market….For FROZEN YOGURT! I mean, I have a frozen yogurt maybe once a month for 5-6 months a year if that.
It’s a neat concept, with incomes down across the board, the loose definition of “fast casual” is a type of restaurant that does not offer full table service, but delivers a higher quality of food and atmosphere than a fast food restaurant. The concept seems to be positioned between fast food and casual dining, with the typical cost per meal in the $8 to $15 range.
It makes perfect sense. Incomes are down and people don’t eat out at restaurants as much. Ever stop at a Panera Bread? Free Wi-fi and great sandwiches but the phenomenon has become the death of the small office space. I’ve gone in and have seen full business meetings with documents and 8 people at a table working on a business problem or proposal.
While empty retail stores aren’t good for anyone, I wonder what the true impact will be a few years from now by placing close to 50% of tenants as a food use in a retail center.
To me, this looks like it could be the next “retail bubble”. It’s just an observation but how much food can people eat? The retail strip center is morphing into a giant “food court”.
For example, years ago, Superfresh and ShopRite seemed to be the “hot supermarket deals”. Then Genuardi’s- which sold to Giant, and now Wegman’s is the hot “supermarket” experience in the market here in Philadelphia. Instead of buying a vacation home, I told my wife Wegman’s is now in the market! It is a pretty remarkable experience for sure.
I was in Wynnewood, PA last week for a lunch meeting and I couldn’t believe my choices. In addition to a full food court in Genuardi’s, we had our choice of Delancey Street Bagels, Poppi’s Pizza, Sam’s Grill, Yapple Yogurt, Santa Fe Burrito, Elevation Burger and Tiffin Indian Cuisine. Of the 19 tenants, 8 of them are food. The other occupants were Old Navy, a bank, a dry cleaners, barber shop and a few generic stores. The guy you gotta feel for is Sam of Sam’s Grill who has been there forever (not sure of the exact term, but as long as I remember). Just because there are more food tenants it does not mean people are eating out more. It simply means they have to make a choice as which one place they will spend their money. What ends up happening is the retailer watches his sales decrease because they are constantly adding food into a shopping center with the lack of other retail expansion and growth of speciality items purchased over the internet.
I wonder who’s going to fill these spaces in the next 10 years? Owners of strip centers watch the evening news and their customers check their twitter feed. Owners are excited to get a Foot Locker or Payless deal as a tenant- I just bought my first pair of shoes from Zappos.com. They offer free shipping, and make just 1% margin on what they sell? That can’t be good for a retail strip center owner.
I loved the movie Wall Street 2 where Gordon Gekko talks about “Tulip-mania” and the “next bubble”. If you’re looking to buy a strip center and 50% of the center is food, are you buying a strip center or buying a food court? With the majority of expansion being “fast casual” right now, what are we going to have in 10 years besides dry cleaners, barber shops and a gazillion different categories of food?
I have no idea, but I can’t dwell on that since I’m hungry and want to get something to eat….Any suggestions on where I should go?
Jim Jacobs is the president of Jacobs Realty Group, a commercial real estate brokerage and advisory firm. He can be reached at jjacobs@jacobsrg.com
