Restaurant Development & Design

FALL 2014

restaurant development + design is a user-driven resource for restaurant professionals charged with building new locations and remodeling existing units.

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6 0 • R E S T A U R A N T D E V E L O P M E N T + D E S I G N • F A L L 2 0 1 4 How To Mendocino Farms Sandwich Market • Headquarters: Los Angeles • Concept: Premium sandwiches and salads • Chain size: 8 units • Development schedule: 4 new units by July 2015 • Average unit size: 2,700 to 3,300 square feet • Vice President, Development: Reid Tussing Reid Tussing signed on as Mendocino Farms' vice president of development after years of brokering deals in downtown Los Angeles' Central Business District. He frst met founder and CEO Mario Del Pero in 1998, while representing Del Pero's frst eatery, Skews. Today, Tussing sits on other side of the table as he looks for sites for the private equity-backed Mendocino Farms. rd+d: It's no secret that fnding good sites is becoming diffcult in southern California. What's been the impact on Mendocino Farms? RT: Los Angeles is probably similar to other major metropolitan areas where it's diffcult to fnd quality restaurant space that's 2,500 to 3,500 square feet. There has been an uptick in brands in LA, and other premium fast-casual operators that we'd like to be around often end up competing with us for space. You just don't have a lot of land here. Also, Russo [Development] led the way that people view malls or retail centers, getting away from traditional strip centers with walkup stores. Now, it's about green space, play- grounds and water features where people spend multiple hours whether shopping or relaxing. It's diffcult to reposition a lot of existing [shopping] centers so you have to fnd new land, which is harder to come by. rd+d: So when it comes to grabbing share-of-stomach you have no problem with centers that are restaurant dense? RT: The "we want to control everything" approach is an old-school mentality. We actually prefer to be around synergistic brands like Tender Greens, Chipotle and Starbucks. We want to be in lifestyle centers where people shop or just live their lives. But we want to protect our ground on premium sandwiches. rd+d: Do you employ an exclusivity clause on your LOI? RT: Yes. We can co-exist with other sand- wich chains that target another customer, like Subway or Jimmy John's. We know that customer is two different people on different days. So the type of center we are looking at determines how far we need to negotiate that point. Consider a large center like the one in Irvine, Calif., next to a university. There's a strong population of younger kids. You can see how [the developers] want a lower price sandwich offering. We think exclusivity really depends on the center and demo- graphics. We want the center as a whole to be successful. Being the only shining star in it doesn't help us. rd+d: Permitting, especially in California, is a major factor in slowing down restau- rant openings. How do you stay on track and on time? RT: We try to negotiate as much time as possible to do our due diligence, construction and design. Several cit- ies are becoming more challenging in terms of turnaround as construction ramps up. Landlords are strict and there's usually a four- to six-month period before rent commences. You really have to kick off design and start spending money before you have the lease done to make sure you hit the ground running. Yet it really depends on quality of space. Is it new develop- ment, a second-generation restaurant, retail space converting to a restaurant? Does the landlord have to do work? From the landlords' perspective, they want to make sure they have a tenant that's invested in the property and wants to get the doors open. That's why they fght for parameters. rd+d: Speaking of how much work the landlord will do, what condition do you want your space to be in? RT: Nowadays we're getting a warm shell. We want new HVAC and all utili- ties brought to the premises. We want the landlord to provide the storefront or credit our own storefront. The slab we get a credit for. As for impact or change-of-use fees, which can run into the hundreds of thousands of dollars, if you don't negotiate them with the landlord before going to the city for per- mits, you will have to pay. We had an example in Santa Monica with changing a hair salon to a restaurant. There, the plumbing and sewer fees were based off existing fxtures that could have cost us tens of thousands if we hadn't negotiat- ed them. What brands need to focus on is the condition of the space the land- lord is bringing to them. If they don't do proper due diligence before signing the LOI they are opening themselves up to a whole set of issues. + California-based Mendocino Farms Sandwich Market likes spaces in lifestyle centers where synergistic brands operate, but protects its ground against other premium sandwich concepts. Reid Tussing

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