We are entering a new chapter for operators, shifting from a landlord market to a tenant-friendly market. This is going to present an opportunity for expansion for those few operators with cash and confidence. It’s been almost a decade since the market was tenant-friendly, as rents have continued to steadily increase. With the current COVID downturn, brands that have sustained performance are in an ideal position for growth with terms that will likely lead to long-term profitability. Concepts like Blue Sushi have been able to pivot from 10% pickup sales pre-COVID to their primary outlet. This has allowed them to reach nearly 95% pre-COVID sales in June.
The top-performing concepts during COVID have been anchored by their drive-thru business, have rapidly converted to delivery business, or have established a pickup service. Landlords have an easy litmus test now, how did you perform during COVID? This will translate into greater tenant improvement allowances for restaurant tenants.
Most tenants are slowing growth and redefining their business models during this downturn. But those restaurants with their models fine-tuned, have a window of opportunity for aggressive growth with favorable terms. Starbuck’s sales tumbled in the first three months of the year as COVID forced shutdowns at many locations. Today, only 30% of Starbucks US locations have drive-thrus but they are hoping to expand that number to 60% with their future expansions. Starbucks is using what they have learned through COVID to help propel them into future success.
Jim Rand, former SVP of Global Development of McDonald’s and now Strategic Advisor to Acutely Inc. During Mr. Rand’s career at McDonald’s his primary responsibility was to develop statistical and mathematical models to predict new store sales volumes. Acutely uses his learning and data science to identify the best locations in the US for these fortunate concepts that are well-positioned for growth. Mr. Rand noted that operators don’t need hundreds of units to use data science effectively to help them find their next high sales volume locations. With just 10 units operators can prioritize prospective locations based on historical performance.
By using point of sale, credit card, and mobile data, Acutely can provide a high level of confidence in determining the factors driving historical success and help an operator replicate that success in a new location. There is a tremendous opportunity today for those that can expand, but it could be squandered by picking the wrong locations.