real estate

What’s new in restaurant real estate?

As the foodservice industry continues on its road to recovery, many restaurants and chains are looking at expanding, but what are the possible pitfalls in today’s restaurant real estate? Experts are seeing a significant rise in real estate demand, many looking for multiple drive-thru lanes as part of their expansion.

According to Emily Durham, senior vice president brokerage, food and beverage advisory at JLL, “the restaurant real estate is through the roof,” with only a four per cent vacancy rate in places like Houston. With the decrease in restaurant traffic, experts are perplexed by the increased expansion plans, however they note that it makes more sense when you break the buyers into segments. For example, the coffee segment is still growing, so it stands to reason that there is real estate growth in that segment.

Studies show that drive-thrus make up about 70 per cent of QSR and coffee shop traffic. The shift to mobile ordering and pickup may well behind the surge in restaurants looking for better suited locations, as restaurants seek to expand their drive-thrus to double, triple, and even quadruple lanes. And because many consumers are skipping in-person dining, choosing instead to pick up their orders, some fast casual restaurants are also adding drive-thrus or dedicated pick up areas for a faster and simpler guest experience.

Some QSRs, like Chipotle, have begun moving into less-populated areas with less than 100,000 people, to up their guest counts and save on labour. Often this also saves on operating costs. According to the Economic Innovation Group, two million people moved out of large cities and into the suburbs between 2020 and 2022. So, restaurants expanding to these areas may be able to stand out as a new brand available to this market.

If you are thinking about expanding your real estate, here’s a reminder of just some of the factors to consider before you move forward:

  • Verify the square footage to ensure that the agreement is accurate, and you will have the space you need.
  • Explore the possibility of a lease extension. This may not be something you are interested in when the time comes, but it is best to know whether it’s available from the start.
  • Look at the clauses relating to renovations and emergency work to make sure that they are in line with your needs.
  • There are never any guarantees of success, so in case things don’t go as planned, knowing whether you are able to sublet could make a difference.

As the foodservice industry continues to change and evolve, restaurants need to look at whether their current operations are serving their needs and whether there might be an opportunity to expand or change locations to better serve their customers and their business.