Restaurant people used to consider ‘former resto’ locations cursed. If an eatery failed at a certain ad-dress, you NEVER saw another one go in there. Never, ever. But things have changed dramatically in the resto real estate sector…
What brand might go in at this resto location next?
And that change in rest real estate ‘culture’ signals the emergence of another phase, or aspect of the dining-out shakeup I’ve been predicting for years, now…
No longer ‘location first’
The factors governing spotting a restaurant location have changed with the evolution of the ‘fast’ and ‘casual’ dining sectors. That’s largely because the factors governing the market-worthiness of a given brand at a given location have changed dramatically.
It used to be that a given style of resto and or its menu determined whether it would be successful in a certain neighbourhood. Conventional wisdom was, a resto would either emerge successful or fail within 3-6 months after it opened. And if successful, it would usually continue down its chosen path pretty much forever.
Business-model evolution
But those days are gone, especially in the case of casual-chain eateries and fast food brands. Both those sectors have been struggling to maintain market share in the face of mounting competition. And the incursion of each of those sectors into the fan bases of the other. But recently, something new has been going on. Fast Food joints have been differentiating themselves more from ‘casual, sit-down restos, again.
The much-touted ‘Restaurant of the Future’ (RotF) concept fast food operators are counting on as their way ahead is pushing them away from the boundaries of the ‘casual’ niche. It makes Fast Food joints less dine-in friendly, but massively more accommodating to take-out, delivery and drive-thru traffic.
A ‘casual’ resurgence’?
With the easement of Fast Food’s crushing pressure on the ‘casual’ sector, some casual chains are bouncing back. And they’re taking advantage of the closure of their one-time competitions’ outlets to pick up locations they didn’t previously have access to.
After a neighbourhood was fully built-up, opportunities to put in new restos were gone. Unless or until one of the existing restos closed. Which was rare. Until recently, that usually meant things had changed in the neighbourhood and the climate was no longer right for a restaurant in a given loca-tion. Now-a-days, though, it may simply mean that kind of resto or that kind of food isn’t working there, anymore.
The ‘Restaurant Shuffle’
So what we’re seeing more and more is what I’m calling ‘The Restaurant Shuffle’.
A lot of prime commercial real-estate has come on the market in desirable, mature communities. Those spots are where restos that were there for a long time – Red Lobster, Denny’s or TGI Fridays, notably – have closed.
Those old, tired chains have faced grim times since the end of the COVID Era. They’ve had to close hundreds of ‘under-performing’ locations as the consumer demographcs of their service areas has evolved. The folks who live there may have become older or younger, on the whole. Maybe there’s been a cultural or ethnic shift.
“This is not an ‘oh my God’ kind of moment. This is completely expected,” Jeff Kreshek, a senior VP at Federal Realty told CNN. Federal recently snapped up one vacant Red Lobster property in Maryland and two TGI Fridays locations that (for now, at least) remain open, in Maryland and California. “I look at this as an opportunity. It’s real estate that hasn’t been available to the broader market in 20, 30 years.”
What’s going in?
And in a majority of cases, it’s the former competition, or Fast Food chains looking for suitable trans-plant or new-location sites, that are taking over those locations.
“In Woodbridge, Virginia, LongHorn Steakhouse will take over an old TGI Fridays,” CNN reports. “And Chick-fil-A is taking over a shuttered Red Lobster in Naples, Florida.”
My take
While some chains, such as the aforementioned Red Lobster and TGI Fridays, are shrinking, some – which have already undergone ‘rescues’ under visionary new management (Chipotle) or had the right idea all along (Chick-Fil-A) – are expanding. And they’re quietly moving into old locations with new stores of their own they feel will work better there.
So… Instead of the crash I once foresaw, the ‘Great Shift’ in the ‘casual’ and ‘fast food’ sectors has turned into a symbiotic sort of dance. Maybe something more like the water levels equalizing in a network of interconnected ponds.
Whatever the mechanism in play, it’s turning out to be a lot less traumatic or damaging than many obser-vers thought it was going to be.
But make no mistake: the ‘Shuffle’ is far from over, yet!
~ Maggie J.