Restaurants have persevered through pandemic shutdowns, high inflation and a shortage of workers, and many operators are coming off a big year of sales. However, advance, seasonally adjusted data from the U.S. Census Bureau shows that January sales from restaurants and drinking establishments increased only 6.3% year over year, slower growth than in any month the previous year. It’s too soon, of course, to say whether that’s a blip or the start of a trend.
“There’s a cautious optimism, but I don’t think it’s exuberance,” said John Few, SRS Real Estate Partners managing principal in Newport Beach, California. “We’re all dealing with the same headwinds still coming out of the COVID shutdown and how that’s affecting different aspects of restaurant operations from labor to construction costs and interest rates.” Macro headwinds related to higher costs and economic growth also are creating a bigger gap between larger, sophisticated operations and smaller, mom and pop owners. Highly capitalized, well-defined brands that have great operations and great cash flow are the ones in a good place to grow, added Few.
A notable trend fueling growth is a proliferation of entertainment and competitive socializing concepts that have strong F&B programs. Though there are some signs that the economy is slowing, noted Few, people still value experience and want to go out with friends. He represents U.K.-based, high-tech shuffleboard concept Electric Shuffle, which recently opened a location in each Austin and Dallas and has one under construction in Manhattan. The company is considering cities like Chicago; Nashville, Tennessee; Charlotte, North Carolina; Boston; and Atlanta. Then there are the mini golf concepts like Puttery, Swingers and Popstroke, which boasts 18-hole outdoor putting courses designed by Tiger Woods. People can have fun at to these places without swinging a club, whether they’re dining, watching sports on TV or just socializing, said Few.
Landlords Aren’t Just Filling Restaurant Holes but Rather Are Picking and Choosing
Landlords can be selective when it comes to F&B tenants these days. “Landlords see their food-and-beverage and their entertainment choices as really making their projects distinctive,” said Few. Their decisions don’t focus just on which tenant can pay the most rent. It really comes down to who will be there the longest and what type of customers they will attract, he said. “Landlords are looking at concepts in terms of: ‘What will this brand bring to my project and how will it differentiate my project?’”
For the full story, click here.