Austin Business Journal – by Francisco Vara-Orta ABJ Staff
While the commercial real estate market in Austin is still weathering the recession’s lingering effects, with few new major deals signed or projects under construction, there is one area where business has remained bustling: fast-casual restaurants.
In recent weeks, nine restaurant chains, five of which are Austin-based, have announced expansion plans that project at least 600 new locations in the next few years, with a few dozen in Austin. Austin-based chains such as Schlotzsky’s, Mama Fu’s, Freebirds World Burrito, How Do You Roll and Snap Kitchen plan to add more locations locally and beyond, while national chains such as Marco’s Pizza, Elevation Burger, Newk’s Express Cafe and My Fit Foods plan to expand further into Austin.
“Thankfully for real estate brokers, the restaurant leasing business has definitely stayed hot during all of the recession and doesn’t seem to be slowing down,” said Austin McWilliams, an associate with SRS Real Estate Partners who handles restaurant leasing for chains such as Five Guys Burgers and Fries, which has plans for more locations in Central Texas during the next couple of years. “Austin is a foodie town. And besides, people have to eat, and not everyone wants to cook at home or has the time or the money for an expensive sit-down place.”
Fast-casual chains, which are also known as quick-service restaurants, have situated themselves nicely for growth between fast-food chains and full-service restaurants. Most diners see them as a cost-effective, desirable option for eating out, according to Melissa Wilson, a principal at Chicago-based food industry research firm Technomic.
“So for people on a budget or wanting to eat fast and go, they are looking more at a fast-casual place like a Pei Wei rather than a P.F. Chang’s,” Wilson said.
Few restaurant chains release sales by month, but data from market research firm NPD Group showed that sales increased for five of the past eight weeks at nearly four dozen fast-food and family-style restaurant chains. Factors behind the March upswing include an influx in cash from tax refunds, warm weather that drew people from their homes and increasing confidence in the economic recovery, the report said.
The hottest trends in restaurants are evident in what chains are expanding in Austin and taking local real estate spots from 800 to 4,000 square feet. They include gourmet burger restaurants such as Elevation Burger, which serves free-range, organic beef; Asian cuisines with the How Do You Roll sushi chain and pan-Asian Mama Fu’s; and fast healthful food such as Snap Kitchen and My Fit Foods.
“Austin is just a great place for trying out new concepts and trendy menu choices because the city is progressive even with its cuisine and health-consciousness, so they like the foods made fresh,” said Martin Berson, owner of Snap Kitchen, which recently opened its first two locations in Austin – one downtown and the other in the Triangle on North Lamar Boulevard. “The companies based here want to be here, and that bodes well for not only the foodies but business.”
Right now, real estate is still easy to come by for restaurant chains aiming to set up quickly, but brokers said there are unique challenges at hand that may work against that in the short-term as the economy recovers. For example, quick-service restaurants need good ventilation, which is hard to find in office buildings downtown where many chains would like to expand. Also, chains traditionally like to locate in or near shopping centers, but with many proposed malls stalled, short-term options are becoming more limited, said Eric DeJernett, a senior vice president in retail brokerage with CB Richard Ellis’ Austin office.
“It is still a good market for tenants, but that is slowly changing and rates will have to go up. And we’ll see more soft goods retail places that went under be converted into spaces for restaurants, I think,” DeJernett said. “Restaurants and chains always come and go, but they have been a saving grace in real estate more than usual lately.”
Room for food
Austin-based fast-casual chains expanding locally and beyond:
Schlotzsky’s: 350 more locations in five years
Mama Fu’s Asian House: 150 more locations in five years
Freebirds World Burrito: 20 locations in one year
How Do You Roll: 10 locations in one year, 25 annually for following four years
Snap Kitchen: six to 10 locations within a year
Other fast-casual chains expanding in Austin:
Five Guys Burgers and Fries: an unspecified number of locations in five years in Central Texas
My Fit Foods: six locations within a year
Marco’s Pizza: 30 locations in five years in Central Texas
Elevation Burger: five locations within next few years in Texas, at least two in Austin
Newk’s Express Cafe: seven in Austin in five years
Source: Staff research
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