Restaurant Development & Design

JAN-FEB 2018

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J A N U A R Y / F E B R U A R Y 2 0 1 8 • 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 • 4 5 Messenger notes that Pie Five's development team is also in the process of determining the sweet spot for unit foot- prints, with smaller sites and more flexible footprints being the order of the day. "I'm a big believer in going small," she says. "It takes a ton of pressure off the franchisee to not have to do those big numbers just to pay rent. And with so much growth in delivery and takeout, I don't worry too much about having a lot of seating and square footage. I'd rather have a really good product that's served quickly and an efficient site that accommodates takeout and delivery. We're experimenting right now to see just how small we can go." At Taco John's, a 400-unit QSR Mexican chain headquartered in Chey- enne, Wyo., smaller footprints are also now a bigger part of the site-selection equation. Over the past four years, the company has signed roughly 110 commit- ments for new franchised locations, most of which will be traditional freestanding res- taurants but also those that will be endcaps with drive-thrus and nontraditional locations in airports, c-stores and travel plazas. The latter are newer targets for development. Vice President of Development Van Ingram, whose background is in the petroleum industry, believes strong opportunities exist for c-stores, travel plazas and restaurants to leverage each other's traffic. "We're also using those venues to go into tertiary markets, where perhaps we don't have the population base to justify a freestanding investment," Ingram says. "We can bring a benefit to those operators by bringing more people onto the property and vice versa. We get to leverage their customers when people pull in for gas and convenience items." Taco John's recent expansion is also taking it into new markets beyond its core upper Midwest territory, including Kentucky, Tennessee and North Carolina. In all markets, real estate and construction costs have the development team work- ing to secure locations with significantly smaller footprints. "We used to build 2,100- to 2,300-square-foot facilities, and we're now down to 1,600 square feet with 250 square feet of freezer/cooler out the back wherever we can. We've also moved to- ward endcaps of 1,500 to 1,800 square feet with drive-thrus as a key component of our strategy," Ingram says. While Ingram concedes competition for such endcap sites is fierce, he says developers are beginning to respond to growing demand for them and that they're more affordable options compared with freestanding buildings with drive-thrus, which remain essential to the concept. Taco John's now generates 63 percent of its volume via the drive-thru, and that number is growing. Another 15 percent of sales comes from takeout. "Only 20 to 25 percent of our business ever sits down in the dining room," Ingram says. "At other QSRs, that percentage is even smaller. So we're starting to see everyone reduce the size of their footprints, shrink their seating capacity and work hard to maximize their drive-thru capabilities." Ingram adds that wherever possible, Taco John's looks for second-generation site opportunities as another way to reduce up-front costs. The company has recently converted former Jiffy Lube, Arby's, KFC and Wendy's locations, for instance. "In addition to cutting development costs, those sites have the advantage of typically being grandfa- thered in with a drive-thru, which overcomes that possible objection," he notes. Culver Franchising System Inc., based in Sauk City, Wis., has grown to more than 500 units, expanding outward from its Midwestern base to enter Southeastern and Western states over the past few years. Development activity is at record levels, with more new franchisee applicants in the pipeline than ever before, and the challenge of finding real estate on which to develop the chain's prototypic freestanding restaurants with drive-thrus is intense. Dave O'Brien, Culver's director of real estate, says the chain is seeking more diverse real estate opportunities than in the past for its traditional restaurants, which av- erage between 4,100 and 4,300 square feet. Unlike many competitors, Culver's isn't shaving much off its footprint as a cost- For Fazoli's Franchise System, Inc., the search for sites increasingly means going up against emerging competitive brands for prime retail-draw sites. Image courtesy of Fazoli's Franchise System, Inc.

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