Flexible restaurant designs are giving operators an advantage when faced with a real estate market that offers fewer pristine rectangles available for developing and growing concepts.
Chains like Subway, McAlister’s Deli, La Madeleine Country French Café and The Greene Turtle are getting a leg up on the competition by equipping themselves with several different designs that can adapt to atypically shaped footprints or spaces previously occupied by other retail tenants.
Frank Paci, president and chief executive of Ridgeland, Miss.-based McAlister’s Deli, said one of the challenges for growth today is a concept’s ability to find locations in a real estate market that has less virgin space because of new-construction cutbacks during the recession.
Commercial construction dropped off precipitously in 2008 with the recession and credit crunch and then hit a 50-year low in 2011, according to the McGraw–Hill Construction index. This year, while construction is again picking up, less of it is in retail than in storage, warehouses, offices and hotels.
With less new retail development, Paci said, astute operators must develop several different designs to accommodate good locations or reuse a space.
McAlister’s, he said, now has created several different designs. “A lot of times you have to look at going into second-use space,” Paci said. “We have the flexibility to do end-cap concepts. We have franchisees who have built freestanding [units] with a pick-up window, as well.”
Phil Costner, president and chief operating officer of the Dallas-based La Madeleine Country French Café, agreed.
“While there is a lot of real estate available, very little of it is conducive to fast-casual brands,” he said. “The perfect rectangle or square box that are generally drawn on napkins to start a restaurant process are very few and very far between.”
One pioneer in adaptive real estate is Milford, Conn.-based Subway, which has found its smaller-scaled units and streamlined operations well-suited for the challenge.
John Devine, Subway’s director of real estate, said: “Over the past several years there’s been a turn-down in the market. But we see that as a huge opportunity and a huge advantage as many pieces of real estate have come onto the market — some very good locations — that we have been able to take advantage of and negotiate very strong deals with these developers and landlords.”
Subway has become adept at adapting spaces that stray from the perfect squares and rectangles. And much available real estate left from restaurant closures, of which the most recent recession has produced a trail, is oftentimes less in the prime A sites than in the often imperfect proportions of B and C locations.
“That’s one of the unique advantages that Subway can offer: Our flexibility and our ability to fit into very unique spaces,” Devine said. “Our operations are relatively simple, so we can go into many spaces that other tenants and other restaurant uses aren’t able to go into.”
With a simplified operational model that requires no venting, Devine said, Subway is “able to go into a number of nontraditional locations, hospitals, churches, car dealerships and all sorts of these locations that would otherwise not have a tenant.”
The chain, which this month opens its 37,000th global unit and plans to add 1,200 restaurants in North America this year, also can trade up to some “higher caliber locations” when they come on the market, Devine said.
“We’ve been able to negotiate extremely good long-term deals with multiple options.”
Subway units can fit in as little as 300 square feet and expand to 2,000 square feet, he said. But the typical unit is 1,200 square feet to 1,500 square feet.
“I’ve yet to see a location where we can’t figure out how to make it work,” Devine said. “We’re constantly looking at our equipment and our operational standards and our throughput and tweaking that. One of the issues we’re always looking at is how to design a restaurant most efficiently for smaller spaces and nontraditional spaces.”
Subway has fit eateries in such spaces as a crane that was building the Freedom Tower in New York, where it rose as construction took place; a riverboat on the Rhine River in Germany; and a church in New York State, Devine said.
Flexibility also is being found at large-scale restaurant concepts. Bob Barry, chief executive of The Greene Turtle, based in Ocean City, Md., recently saw the opening of that brand’s 33rd unit, with more on the boards.
“We are very flexible,” Barry said. “We range in size from 5,500 square feet up to 12,000 and everything in between. Our typical wheelhouse is right around 7,000 square feet. We are not cookie cutter, and we’re not afraid of conversions as long as we can fit the elements and design into the shape. But we’re not afraid to go into several different shapes to make it work.”
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The 60-unit La Madeleine fast-casual chain, which generally has units at about 4,000 square feet, began planning for its flexibility several years ago in a warehouse, Costner said, producing plywood “modules” that ranged from kitchen stations to the display pastry kitchen to the restrooms.
La Madeleine built its modular model twice with consultants.
“We went into a warehouse in Mesquite, Texas, and we built the entire kitchen out of chipboard plywood,” Costner said. “Every piece of equipment was a box, built full size. We spent about a week moving people and food through and looking at it from all angles.”
The plan was tested for things like crowding on the floor and on shelves, he said.
“We had two carpenters there. We’d stop and lower tables, round corners and add shelves.”
An architect was brought in, and everything was field- measured and documented, then put away for a month because of holidays. It then was rebuilt in January with real materials, Costner recalled.
“We brought in actual cooks, not top chefs, and real food,” he said. “We also took an order mix from a two-hour window at one of our restaurants in Dallas. We had the actual orders going through the screens at the exact time that it really happened.”
That week-long run ended with output at the test unit nearly double the “traditional” La Madeleine kitchen, in about half the footprint.
“That was a big success,” Costner said.
The testing of the flexible concept has helped the company’s business model, as well, he added.
“By doing this, you can really nail down your equipment package,” he said. “You nail down the cost to build or renovate. Whether you are talking company or franchise locations, it’s a plus to have budgetable numbers and take out as much of the gray area as you can. This modular piece also nails down training and the movement of food and the ergonomics of the kitchen.
“You are building a training, education and audit model that is more replicable across the brand,” he said. “You take away the ‘yeah, buts’ — ‘yeah, but my refrigerator is in the back,’ or ‘yeah, but my oven is over there.’”
The first “modular” La Madeleine was the Dallas NorthPark mall location that opened in October. The next two will be located in Tysons Corner Center mall in Virginia in September and in Silver Spring, Md., in mid-October.
“Both of those will have the modified modular kitchen,” Costner said.
Paci of 307-unit McAlister’s said that concept’s several designs range from 3,000 square feet to 4,000 square feet, with the sweet spot at about 3,600. Some units are being configured to allow for curbside delivery, which is being tested at several units.
If a concept has a highly flexible format, it can take advantage of the real estate market, Devine said.
“The real estate market right now offers huge opportunities, with great locations and very, very attractive economic terms,” he said.
Robin Lee Allen contributed to this report.