Why restaurants are becoming smaller

Don Fox, the CEO of Firehouse of America LLC, noticed something strange a couple of years ago: during the midday lunch rush, his sandwich shops were relatively empty, but sales were better than ever. “I’d be thinking, ‘Boy, business must be pretty bad.’ But the numbers were telling me a different story.”

People are still eating restaurant food— they’re just not doing it at restaurants as much. Delivery apps have made ordering in easier, and have changed the way food chains think about their business. Research firm Cowen and Co predicts that US restaurant delivery sales will rise an average of 12 per cent a year to $76 billion in the next four years.

“The impact from delivery is the greatest shift we’ve seen yet,” said Fox, who has been at Firehouse for 15 years. “We’re investing in where the business is going, which is off site.”

In July, all 1,102 Firehouse locations replaced some of their tables and chairs with shelves where delivery orders can be stacked. About 10 sq ft that used to be seating is now a place for couriers to grab orders. In the 25 years the Florida-based chain has been around, it had traditionally rented spaces between 2,000 and 2,200 sq ft for each of its restaurants. Now, Fox said he doesn’t consider a lease over 1,800 sq ft. “In some cities, where people are really ordering online and rents are higher, just 1,400 sq ft is enough,” Fox said.

David Orkin, who runs the US restaurant division of real estate advisory firm CBRE, said other restaurants are also adjusting to fewer visitors. Big fast-casual brands like Outback, Carraba’s and Buffalo Wild Wings come to Orkin to find and negotiate restaurant leases and renovations. Orkin declined to provide specifics of these leases, but said there is an overall downsizing of restaurant seating space as chains experience less foot traffic and more online and mobile-ordered pickups.

Orkin said the change is especially noticeable at the front of the house. “In many cases, chains want a whole separate area for delivery workers to come and go,” he said. Restaurants also want doors specifically for delivery workers as well as designated areas for them to wait for pickups, so they’re not hovering around the hostess stand.

Some new restaurant owners are skipping tables and chairs altogether and just leasing kitchen space to prepare food for couriers. Those are called cloud kitchens or virtual restaurants.

Mark Chase, the founder of Restaurant Real Estate Advisors, said the majority of his clients are interested in the kitchen-only business model. “There is a general scaling down on seating space and scaling up on kitchen space, as people just want to eat at home, on the couch,” Chase said.

Even the biggest fast-food chains are embracing the opportunity. In August, McDonalds Corp, the world’s largest fast-food chain, announced that it would spend $6 billion to redesign its US restaurants. As part of the upgrade, many outlets will have designated parking spots for curbside pickups made through mobile orders.

The development was reported by retail.economictimes.indiatimes.com

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