Restaurant Real Estate: Can You See It?

Bright lights, bright colors. The place is abuzz, and it’s packed. Everywhere you look are tables smothered by scrumptious Tex-Mex and tangy drinks in salty-rimmed glasses. Outside it seems just as many wait happily for their tables. It’s a wonderful way to spend dinnertime for lots of happy people.
 
Unbeknownst to everyone here at Chuy’s newest restaurant in College Station, Texas, however, this night came close to never happening. Fact is this restaurant almost never happened. Why? In the world of restaurant real estate, nothing about this deal was easy.
 
But that’s how it goes, really. There are infinitely more restaurants than great real estate sites — and even fewer great trade areas! Think about it… What do you do? Restaurant companies have to grow, they have to add units, and site demand dwarfs site supply. So if you’re looking for the perfect site waiting just for you, you’re in trouble. In fact, start every site search with this in mind: In the beginning, as you confirm site criteria and get buy-in from management, as you set out to find the site, assume that many of the great sites for restaurants probably look nothing like great sites for restaurants. Get it? I’ll even go this far – I say that any restaurant real estate team who isn’t moving big rocks, so to speak, or worse, isn’t experienced at identifying the less-than-obvious sites, is at a huge disadvantage.
 
Behind the Chuy’s in College Station is a bunch of anecdotal evidence of this, the truth behind how a restaurant resulted in a place it might well never have been. Here are some top line points about this site selection and deal that clarify my position:
 
- College markets are tricky. Easy as that. Too close to campus, you ensure lower profitability and parking capacity issues and, moreover, jeopardize sales opportunities with families and professional crowds. Too far from campus, students won’t go. Period. But, students drive most college town economies, you need them, and, yet, most college towns have considerable non-student populations that try their best to avoid the campus congestion. To make matters more interesting, our client Chuy’s appeals to an eclectic mix; we need a critical mix of students and non-students, young and old.
 
- We spent two years looking for the site, a site we believed was the best site. Two years! Could we have gotten one in less time? Of course — more than a year earlier, even. In fact, during that two-year search period, we passed on several decent, suitable sites, ones that satisfied a lot of our criteria. We passed on seemingly great sites in a new, sexy retail area. We passed on sites that offered appreciable highway visibility, located at busy intersections. Here’s more: During our search period, more than one nationally known casual dining concept — competitors! — entered the market. (Right, they took sites we passed on.)
 
- We loved one location, there were just no sites available there. What we did find — and liked a lot — was a big, empty parking lot at a 1980’s mall without a significant remodel during its life. At a casual glimpse this had become the former “place to be” as a newer retail and restaurant cluster had developed at another intersection. But the thirty year-old center did have a lot of positive attributes, such as freeway visibility, strong traffic generation and the strategic proximity to both college and community we were seeking. The key would be to convince the mall ownership of an idea Bryant Siragusa, National Director of Restaurant Leasing for CBL and Associates, and representative for the mall ownership, had collaborated on. We believed Chuy’s, because of its popularity in the state (remember lots of Texas A&M students in College Station are from cities in Texas where Chuy’s has great brand awareness and loyal patrons), could be placed in the mall parking lot and, in due time, help invigorate Post Oak Mall, and that it was worth the time and expense involved in creating an opportunity where none existed.
 
- So – two years later, our best prospective site is a parking lot, literally, at a  mall in need of rejuvenation. But, here’s what we really saw. We approached mall ownership with our position that the mall retail area was in decline and that if no action was taken, the decline would continue. We proposed that our restaurant could go on an outparcel on the edge of the parking lot, and the energy Chuy’s would bring, because of its popularity and the visibility of the restaurant from busy roads, would drive consumer traffic and revitalize the area, providing the boost it desperately needed. Besides that, a parking lot would become revenue-generating real estate. Sounds great, right? Nope. There was still the issue of economics.
 
- $750,000. That’s the figure the ownership claimed was necessary to make the pad ready for a restaurant. Plus, they didn’t believe the restaurant could achieve the non-financial benefits we promised. In their opinion, they’d be investing a lot of money and it was only about achieving adequate financial returns.
 
- We thought ‘Tennessee developer, Texas trade area.’ That’s how we saw it; that was the issue, we believed. Of course a developer in Tennessee didn’t understand the power of an Austin-based restaurant, but we could ultimately convince them that it was more than just about the dollars, and we did. Some might say we negotiated well, but it was really that we believed the restaurant addition could impact the retail center. It was a creative deal, sure, but to us, it was clear. We believed it could happen, and we were convinced it was good for everyone — the developer, the mall retailers and the restaurant company.
 
- There is one advantage we had that’s worth mentioning. Besides the good fortune of experience and capability to think creatively, which enabled this deal to happen, we, that’s Foremark, are fortunate to be in good stead with the most reputable national developers. Because of our work history across the nation with best-in-class restaurant clients, developers generally respect our opinions and treat us with the dignity that enables less-than-sure-thing ideas and deals to be discussed. I think it’s fair to say that had we lacked restaurant real estate experience or if we didn’t have a respectable record of hundreds of real estate deals for growing restaurant companies, we could never have gotten someone to listen to us, let alone agree. (We have clout, and it’s a great advantage. We’ve earned it. It took a decade, but now we have it, and I’d be lying if I said it didn’t benefit us.)
 
This is a good example of unconventional restaurant real estate work and an even better example of why when we identify a promising, but obvious site for a restaurant, we can’t help but wonder if we need to roll up our sleeves and work a little harder.