How Rising Rent Rates Will Affect Your Fast Casual

Note: This article was initially published on the fast casual restaurant trade site The Chipotle Effect on 7/6/16.

Link: http://www.chipotleeffect.com/blog/2016/7/6/how-rising-rent-rates-will-affect-your-fast-casual

downloadThe fast casual restaurant industry is booming. With big names such as Chipotle and Panera paving the way, it seems that a new fast casual chain is emerging every day. However, with the rising popularity of this trend comes a problem: realtors want to cash in, too.

A report by Nation’s Restaurant News revealed that rent prices for fast casual franchises are rising. This increase is mainly occurring with leasable spaces in strip malls, the most common location for fast casual.

According to NRN, Sahar Sander, the founder of the fast casual chain Naf Naf Grill, experienced this trend firsthand.

“When his chain first started growing, it paid about $30 per square foot. Now he can expect $70 to $80 per square foot and even higher,” the NRN report stated.

This issue has caused many chains to seek smaller spaces, hoping for equal efficiency and profits in such a compact location.

Naf Naf Grill itself is attempting to open its first location less than 2,000 square feet in size.

However, according to CNBC, this rent increase hasn’t dramatically deterred fast casual entrepreneurs. You can now expect to face the fiercest competition for space the industry has ever seen.

CNBC cites Vice President of Urban Works Kia Hartley’s advice to aspiring fast casual entrepreneurs. Despite the competition and expense, Kia said she believes opening a new restaurant is worth the risk.

She encourages a soft opening in a less popular neighborhood to test the waters before expanding. She also said some landlords will gamble for strong concepts.

CNBC wrote, “It’s the big landlords — the corporations, the ones you might expect to care more about money given how much they’ve made — who are most likely to take a chance on the independent restaurant.” Read More

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