I never thought I would be writing this blog but after years of saying that the only real way to make proper money in the restaurant business is to have a double frontage with a hundred covers, it seems that the tide is turning and actually small is beautiful. What I mean by that is that the casual dining market is being driven by millennials looking for new and exciting ways to eat and have an experience rather than just experience quality of food on the plate in front of them, so the ambiance and service is so critical to their experience that this is changing the dynamics of what makes a good restaurant site.
Typically we see that millennials are quite anti-chain and like the perception of supporting and being part of a smaller up-and-coming brand. This doesn’t mean that they are necessarily looking to be entertained by a family restaurant but certainly by tomorrow’s up-and-coming stars that really have their act together in the industry.
So what’s this got to do with size? The fight has been on for a number of years for double frontage sites with a hundred covers from the likes of Byron, Pizza Express, Côte, Bills, The Ivy, Strada, Prezzo, Wagamama, Busaba and Five Guys to name a few but it seems that these landmark sites have also come with very large rents, high rates and in some locations, it’s not been so straight forward to keep them busy. We’ve then seen a splurge, over the last six months, of operators such as Byron, Strada, Wagamama, Wildwood, Giraffe and Café Rouge putting a number of sites on the market that historically you would have thought absolutely fitted the bill but now don’t seem to be generating the levels of turnover and profit that they did previously.
On the flip side of this you have operators such as Bleecker Burger, Tommy’s, Vino, Chick’N and Bao who are actually taking small sites or “joints” and these have become hangouts for people. The fact that they are busy and vibrant makes an atmosphere that some of the millennial crowd actually want and desire rather than going in to a perceived square box.
This is going to send shock waves through the private equity and investment community as they may now look to pay some attention to this small but beautiful site market. Also what’s interesting about these locations is that as there is a casual dining market, they can turn the tables pretty quickly and therefore possibly generate some serious returns without the excessive rent and rate. If you combine this with the additional income from the likes of Deliveroo and other takeaway services, small units are actually potentially the way forward for now. We see this being a real factor in driving the sale of smaller restaurants in suburbs and we are seeing an increase in this within our agency. I believe this is a way of the operators taking a risk averse view to the market and it is interesting, especially to see operators such as Five Guys and KFC willing to take smaller units than ever before.
In an ever changing market this is yet another twist that we will watch very closely. As always CDG are very proud to be at the forefront of watching these trends and our door is firmly wide open to any operators needing support on their journey.
Have a great summer,