February 3, 2010
Specifically, 49% of quick service franchisees are projecting to add net new units during 2010, while 39% of casual dining respondents plan to add net new units during the year. The expectation to add new units lines up fairly consistently with respondents' sales projections -- 52% of QSR respondents and 39% of casual dining respondents are expecting a rise in same restaurant sales during 2010.
SunTrust's survey revealed that QSR franchisees have greater growth plans than traditional restaurants. Survey respondents representing specific brands projecting net growth included Sonic, Red Robin and Taco Bell.
Following are spotlights on just a few growing restaurant concepts:
Pizza Fusion
Pizza Fusion, a pizza concept that specializes in organic ingredients and sustainable building and business practices, has caught on quickly with franchisees. The company currently has 22 restaurants in 11 states and has franchise units in the works for 80+ new restaurants to open over the next five years. Pizza Fusion's ideal site is a 1,500 to 1,800-square-foot end-cap or outparcel at a grocery-anchored neighborhood center or lifestyle center with high daytime traffic and residential density.Larry Feldman, a master franchisor of more than 1,000 Subway units, has been helping Pizza Fusion with their franchise development efforts and also serves as a Development Agent of South Florida for the company. Feldman recently told the Miami Herald that landlords have been "willing to do deals that haven't been done before," such as dividing spaces, providing construction services, etc.
For landlord representation brokers that would like to see a Pizza Fusion opened in a center they represent, don't expect to deal with a tenant representation broker or the franchisee directly. In September 2009, Pizza Fusion launched a Development Agent program under which entrepreneurs purchase the exclusive rights to secure franchisees to open new restaurants in certain areas. Retail real estate brokers work with these development agents in their consideration of a prospective Pizza Fusion site.
In one lease example from CoStar Tenant, Pizza Fusion signed a five-year, 2,100-square-foot lease with Divaris Real Estate at Short Pump Town Center in Glen Allen, VA for an estimated $38 per square foot. The restaurant opened last spring.
Feldman said that Pizza Fusion has been working with landlords to select and pre-negotiate terms on ideal retail spaces before a franchisee has even agreed to own the franchise. "It's easier for us to help to sell the franchise because we already have the location in place,'' Feldman recently told the Miami Herald.
Tasti D-Lite
Tasti D-Lite has been in business for about 20 years, but only started franchising in 2008. Today, Tasti D-Lite has 50+ units in the chain, recently opening 10 new units in AZ, FL, NJ, NY, TN and TX. It has at least 14 opening soon in CA, CT, FL, IL, NY, NJ and TX and says that it has already secured commitments to open 300 new Tasti D-Lites over the next several years.
The typical Tasti D-Lite restaurant is 600 to 1,200 square feet. The company refers its franchisees to preferred tenant representation brokers to help select the best location for a new Tasti D-Lite. In one lease example provided by CoStar Tenant, Jeffrey Roseman of Newmark Knight Frank represented Tasti D-Lite in its lease of a 750-square-foot space at the base of the Hotel Newton in New York City's upper west side. The tenant paid an estimated $240 per square foot in rent and signed a ten-year lease. The restaurant opened in July 2009.
A new Tasti D-Lite franchisee that is opening a store in Boynton Beach this month said she was able to not only get a prime location in a highly-trafficked shopping center that has suffered from some vacancy, but she was also able to negotiate savings on construction costs for her space. "They've given me main street access on a main road for what some plazas will charge me to be in the back," she told the Miami Herald.
Pita Pit
Last year, pita sandwich chain, The Pita Pit, saw 19 new units open to have 173 restaurants across the country. The typical Pita Pit is 1,000 to 1,500 square feet and located in an area with very high daytime population. In one lease example, Nick Stanton of Portland, OR-based Commercial Realty Advisors represented Pita Pit in an 1,100-square-foot lease for a new restaurant at Hazel Dell Square in Vancouver, WA. The tenant signed a five-year lease for an estimated $25 per square foot, according to CoStar Tenant. The location opened in March 2009.
To fuel franchise growth, Pita Pit has taken measures that many other franchisors have adopted during this recession -- reducing the cost of opening for new franchisees. Pita Pit lowered its franchise fee by $5000 and its royalty rates by 200 basis points. Additionally, it provides partial franchise fee rebates for franchisees opening new stores in ideal locations. Pita Pit has also gained recognition for making strides in having its franchises become Certified Green Restaurants.
Huddle House
Huddle House, a full service family diner concept, is another franchisor that has temporarily reduced its franchise fees in efforts to spur growth of its chain. The company recently reduced its franchise fee by 80% and is waiving the first five months of royalty payments. In a recent interview with Reuters, Huddle House's new Chief Development Officer, Thomas Flaherty, said that interest is up, particularly from those leaving corporate jobs.
Huddle House opened 20 new restaurants in 2009, bringing the chain to 420 units in 17 states. It already has commitments for 30 more restaurants to open through the end of 2010. "Part of our growth plan is to get out there while the timing is good. There's probably not been in modern history a better time to get [sites] than now, with so many vacant spaces across the country," said Flaherty. According to CoStar Tenant, the typical Huddle House is 2,500 square feet.
Source: http://www.costar.com/news/Article.aspx?id=63C622B615E3299AFC383D82343E2EF9
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