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.
For more information, read “The Successful Integration of Food & Beverage Within Retail Real Estate” by ICSC and JLL here and “Now Serving Retail Growth” by CBRE here.