Continued Adaptive Conversions Likely in 2011

For a long while we’ve predicted restaurant expansion would cause a sharp increase in adaptive conversions. The reason was simple: The downturned economy means less new development, and less new development means less opportunities for new restaurant construction. (Obviously the dynamics causing this situation include lots of reasons — finance, lending, opportunities from foreclosure, unaggressive developers, even restaurant companies whose expansion objectives can’t be halted because of economic slowdown, on and on — but you get it.)
 
We believe a key growth solution for restaurant companies that need to expand is largely in adaptive conversion, that is, capturing existing vacant real estate and re-purposing it for restaurant use.
 
Successful adaptive conversion is more challenging than new construction. It’s a trickier process, no doubt. The problem is mainly in our comfort zones with the work with which we are most acquainted, though: Most restaurant companies are more accustomed to and experienced at expansion by building prototype restaurants via new construction, not identifying existing buildings in established retail centers, negotiating conversion agreements of existing buildings, navigating the ensuing conversion logistics, then changing long-held consumer awareness and perception about — a building that’s ‘been there and was that.’ Still, no matter how you slice it, starting with a clean slate, as they say, and doing something the 25th time is generally more conventional and trouble free than an adaptive conversion. It’s like doing anything else you don’t do regularly: It feels awkward, it takes more time, and you make more mistakes. For restaurant company leaders, this, the reality of doing something new, less than effectively, isn’t easy to shake off. The slower process and the mistakes are costly, and, as is in all expansion, less than best sites rob companies of sales and profit revenue for years to come.