If you’re wondering if restaurants are expanding their footprints as we pass the mid-year mark of 2024, one look at the headlines reveals the answer. “Freddy’s Frozen Custard & Steakburgers to Expand Texas Footprint with 20-Unit Development Deal.” “Potbelly is Expanding its Footprint in San Antonio.” “Wendy’s to Expand into Two European Markets.” “Cava Expands Its Flavorful Footprint.”
That’s a lot of footprints covering a lot of ground.
To successfully take on the world or, at minimum, add to your existing brand, it’s essential to understand the current real estate market. What are customers looking for, where are the hot spots, and how are restaurants working through the high costs associated with today’s market?
Here, we’ll explore some key real estate trends to consider, whether opening your first restaurant or your 50th.
Smaller Markets & the Sun Belt
Modern Restaurant Management recently interviewed Satya Guduru, CEO of Janapriya Upscale USA, a privately owned real estate investment firm. He spoke about the trending markets, including the Sun Belt markets of Arizona, Florida, and Texas—areas seeing a net growth in population and a growing demand.
The bigger markets within these states, however, are associated with higher land costs. Adding on today’s higher construction costs results in the need for massive upfront capital, putting pressure on today’s restaurant investors. To accomplish a faster return-on-investment, smaller markets with reasonable land rates are an attractive option.
Recently, MMG Research pointed to the shifting landscape in Texas, where a significant amount of small and mid-sized apartment markets are primed to surpass the major Texas markets. The allure lies in a more balanced dynamic between supply and demand and a pace of development incorporating a sustainable growth model.
Fastest-Growing Metro Areas
Five of the 20 fastest-growing metro areas in the U.S. are found in Texas. Austin, of course, claims the top spot, with a growth rate of over 25%. McAllen placed last in the top 20, though growing at an impressive rate of over 10%. Florida had the second highest number, with Orlando, Sarasota-Bradenton, Jacksonville, and the Tampa-St. Petersburg-Clearwater Metro Areas all making the list.
Additional Real Estate Trends to Consider
In addition to the geographic location, the type of property and possible lease terms carry significant weight. Mixed-use developments are still going strong, with many looking for restaurant brands as anchor tenants. These developments come with a built-in customer base, enhanced visibility, and a location that’s often within walking distance of residential tenants.
Developers are also leaning toward flexible lease options, agreements that appeal to restaurants during times of economic uncertainty.
Smaller footprints continue to dominate the market as restaurants optimize kitchen space while maintaining spacious dining and bar areas for their guests. One example of a brand’s commitment to smaller units is Bloomin’ Brands, the parent company of Outback Steakhouse.
While these restaurants typically came to about 6,000 square feet, the newer footprint has been reduced to 5,000 square feet. According to Brett Patterson, President of Outback Steakhouse, “This new restaurant design features the Aussie spirit of Outback from the moment you arrive at the restaurant with a warm and welcoming dining room while also allowing us to optimize Outback’s strong to-go and delivery channels. The smaller size also allows us to bring restaurants to areas where larger units may not have been possible.”
Choosing the Right Restaurant Space
Choosing the right restaurant space is the first step toward a successful business strategy. Understanding market trends helps direct those steps, ensuring one unit leads to another.
At Emerging Concepts, we execute data-backed real estate strategies for today’s leading restaurant and entertainment concepts. To learn more about the latest strategies or to schedule a consultation, contact EMERGING.
