Last year, the U.S. Census Bureau reported that the
restaurant industry sales had surpassed grocery sales for the first time in
history. Accounting for approximately 15% of all retail spending in Q1 2016,
restaurants are making a strong return in both shopping centers and downtowns. A lot of this growth can be attributed to fundamental, cross-generational
consumer shifts and also macro-economic changes. About 80% of consumers today find
that dining out with family and friends is a better use of their leisure time
than cooking and cleaning up, according to an NRA
Restaurant Industry survey, and about 9 in 10 consumers say they enjoy
going to restaurants.
These consumers eating out at
restaurants are not just Millennials like you’d think. In fact, although
Millennials dine out more frequently than older generations, it is the baby
boomers that are contributing most to restaurant sales. Given their higher
disposable incomes, they are spending 14% more than those Millennials aged
between 25 and 34 years old, as reported
by CBRE.
The growth of restaurant sales is
being felt all around the world and in the US, across all markets – urban and
otherwise. Downtowns – small and big – can clearly stand to gain from this
growing cultural shift towards eating out by integrating
food services with retail and entertainment to round off the holistic
downtown experience.
It seems that restaurants may be
the key ingredient to getting even more people downtown – from young, hipster
Millennials to the families and empty nesters.
What are the possible
impacts of adding restaurants to your retail environment?
- Increased retail sales
- Increased property values
- Increased customer dwell time
If you’re still not convinced about adding restaurants to
your retail mix, a recent ULI study of a sample of eight shopping centers found
an uptick in retail sales/SF of 1.2% following food service extensions. In the
U.K., a food court extension in a shopping center in Southampton generated a
four minute increase in shopper dwell time leading to an extra $55 million of
sales per annum. In another British shopping center, a cinema and restaurant
extension of over 75,000 SF increased dwell time by more than 20%. This last
finding further illustrates the benefits to downtown of integrating
entertainment and dining options. All of these benefits to retail sales,
property sales, and dwell time are now being referred to collectively as the “halo
effect” of restaurants, according
to JLL.
The New
Categorization of Food Services
However, before increasing the restaurant and food service
offerings in your downtowns, it is important to understand the popular types of
food service categories that are already available today, what their requirements
are in terms of space and who they may be serving in your downtown. By
diversifying your food service offerings to meet the various customer segments
in your commercial districts, you will be better able to attract a larger crowd
to spend more time and money downtown.
ICSC
and JLL recently put together an extensive report on the food and beverage
industry that clearly outlines some of the food service categories popular
today. The table below aggregates some of the information presented in the report
to help you understand the various types of restaurants and food service
operators, their customer bases, trading periods and dwell times, so that you
are better equipped to assess your current food service offerings and can make
informed decisions on retaining and attracting new food operators to your
downtown.
(Zoom in here)
With a more articulate understanding of what food services
are out there –
- Which of these categories are best suited to your customer base downtown?
- Which ones are currently underrepresented?
- Do you have the appropriate spaces downtown to attract these operators?
How to integrate the
right food services within downtown
Even if your downtown currently faces space constraints and low
vacancies (congratulations), many food
service operators are getting innovative and adapting to whatever space is available.
“Pop-up” restaurants and street food vendors are appearing all over cities and
small towns in alleys, abandoned warehouses or underused buildings. These oddly-placed
or temporary food service operations are especially appealing to consumers who
are increasingly becoming more knowledgeable about food and are driving trends towards
more concept-based and experience-based restaurants focused on design, branding
and community-relationships, rather than just ingredients.
Strategically locating a range of restaurants and food
services within your downtown is also important to consider. If we follow rules
applied in many successful shopping centers, about 20% of food services can generally
be dispersed across downtown but should primarily include to-go offerings such
as coffee or juice bars and sweet treats, with the remaining 80% of food
services clustered together and focused on “fast-casual”, “casual dining” or a
combination of each.
In particular, the core of your downtown where retailers and
entertainment anchors are already located may be a key intersection or junction
to locate an accompanying cluster of restaurants, especially if evening foot
traffic is a problem that the downtown faces. Day and night time entertainment
offerings such as cinemas, bowling alleys or performance venues are opportune
locations for food service expansion.
Another approach to take in locating food services and
restaurants downtown is to align price points of food offerings with that of
entertainment offerings. As the JLL report states, “Foodservice price points
should not be much more expensive or cheaper than the other leisure and retail
brands; price synergy is clearly a prerequisite across the various use
categories.”
The importance of
food service downtown
Overall, the market indicates that the future of gastronomy –
whether downtown or in shopping centers – is certainly looking up. More and
more retail experts are pointing their fingers at restaurants and food service
as the savior of commercial districts with the rise of e-tailing. It is therefore important that downtown
organizations acknowledge the rise of the eating out culture amongst consumers
so that they can actively stay on top of gourmet trends. Keeping informed of
these trends however is not all of it! The right balance of restaurants and
food service offerings must be informed by the needs of customers within the
trade area and also by regional competition. Hopefully the table of food
service categories above allows you to easily match your district’s food
services needs to your customers and their habits.
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