Dallas is being celebrated as Bon Appétit’s Food City of 2019! That’s quite a turnaround for the city that was, for so long, the least talked-about major Texas city when it came to dining. But somewhere along the way, in Dallas’ recent past it underwent big changes in its food service market. This evolution included the development of Quick Serve Restaurants (QSR) innovations in Dallas, which mirrors the spill-over effects we’ve seen infused in the American retail sector.
The news of Dallas’ achievement got us thinking about how, beyond Texas, in major US and global consumer markets, world-class retailers like Macy’s, Ralph Lauren, Nordstrom’s, Walmart, Brooks Brothers, Saks, and many others have added food service in their retail stores.
American retail is incorporating food service to simply increase the customer social-experience, but also to create a destination retail/3rd space hybrid that very few have been able to successfully pull off.
Global patterns in consumer spending over recent years have led to the reallocation of commercial space from retail goods to food service. In various U.S., Canadian, and U.K. regions, the amount of total space retail property developments allocated for F&B is expected to be 20 percent or more by 2025, and to exceed 30 percent in the Asian market as a whole.
So clearly there’s a shift in the trend.
Dallas Transforms into a National Dining Destination
In the case of the Texas submarkets, until recent years, there had reportedly long been a real lack of recognition of the great culinary diversity in Dallas. But with an influx of unique new eateries, including an abundance of fast-casual dining options, Dallas has now altogether arrived on the national food scene as an acknowledged dining destination city. Additionally, there are more than 50 micro-breweries focusing on specialty beers in and around the metroplex, with even more new brewers entering the market. Some Dallas shopping malls and retail stores are also adding QSRs and other food services within retail spaces.
By adding so many mid-priced dining options to the mass incursion of new, unique eateries and its rediscovered group of great casual ethnic restaurants throughout the city, Dallas has a new look and feel. In response, consumers have been infusing cash into the Dallas restaurant economy. A notable part of the success is in new QSR development, which is typically either retail-adjacent or, increasingly is being combined with retail operations, to create a much more robust destination shopping experience.
It’s interesting because reportedly the total space historically dedicated to food service business on retail properties has tripled from only 5 percent around the start of this decade, to about 10-15 percent in various European markets. The percentages can run a little lower in the U.S., where the national average has reportedly been at around 8 to 9 percent. However, again, that number is predicted to increase to more than double in some U.S. markets by 2025.
What’s the Dallas QSR Market Got That American Retail Needs?
When it comes to the QSR or fast-casual dining experience/retail hybrid, it appears that variety, vibrancy, and service is key. Here are a few ideas of what’s working in Dallas:
Bellagreen — Rebranded in 2017, the brand is 100% focused on being “green” and sustainable sourcing and cooking of its food. Its fast-casual model features eco-consciousness and allows customers to customize their meals to meet their dietary needs. (https://bellagreen.com/)
East Hampton Sandwich Co. — This high-end sandwich shop features choice of varieties including tenderloin, lobster grilled cheese, and other delicacies. Created to fill a void the owner, Hunter Pond, says he discovered in the Dallas market, what he calls “middle class dining”. He plans to expand his sandwich chain to other major Texas markets. (https://www.ehsandwich.com/)
Dillas Quesadillas — Inspired by Napoleon Dynamite’s line, including the made-up term “dill-uhs,” the Dillas QSR concept was born. The menu focuses on new spinoffs of classic quesadillas to include unexpected ingredients like brisket, blue cheese, bacon, and others. (http://www.dillas.com/)
Eatzi’s Market & Bakery — The gourmet grocery market features multiple food preparation stations, where chefs prepare dishes fresh from the food ingredients that customers buy at the market. This unusual business model has sustained Eatzi’s profitability for 23 years in the Dallas QSR subsector. (https://eatzis.com/)
Twisted Root Burger Co. — While markets across Texas are all characterized by burger places and BBQ, Twisted Root’s leadership focused on distinguishing the chain with its unique décor and build-your-own burger twist, and frankley, some of the burgers look pretty nuts. (https://www.twistedrootburgerco.com/)
THE TAKEAWAY: From casual dining, to grocery-eatery, to QSR, the destination/social aspect that eateries and QSR provides could be scaled to be incorporated into any destination retail space.
How American Retail is Currently Leveraging a QSR and Retail-Restaurant Mix?
For our American retail and entrepreneur readers who are looking to convert one or more spaces into a popular food/retail destination, the plan should include offering unique, enticing food, an inspiring interior design, a fun customer experience, and promoting this whole package effectively to locals and travelers alike.
Around the country, other retailers have been jumping on board, not just located near popular fast casual dining spots, but adding their own food service component within their own store spaces.
Beau Soleil Kitchen & Bar — (Huntington Beach, CA) Beau Soleil takes the hybrid retail-restaurant to a different level. Customers can purchase the tables and chairs they’re sitting on for lunch, and the colorful tile selection on the restaurant floor. Dining and shopping are done simultaneously.
Starbucks — One of the early marriages of retail with F&B was Barnes & Noble with Starbucks in 1993. That trend-setting model has inspired a new generation of kiosks with coffees and pastries, snacks, and even full-service restaurants in bookstores everywhere. (https://www.starbucks.ca/)
Ikea — Another early-adopter of the food with retail sales concept was Ikea, with its famed Swedish meatballs, and cake. Other delectables include shrimp sandwiches and salmon lasagna. In Burbank, Ca, shoppers reportedly wait in line inside the store for seating in Ikea’s restaurant.
Eataly — In 2007, the shopping market began giving customers a choice of either buying ingredients for cooking at home or eating at one of several onsite restaurants. The company has taken its concept global, with now 13 shopping markets around the world. Eataly’s LA mall location serves an average of about 3,600 customers daily during its November opening weekend. (https://www.eataly.com/us_en)
Whole Foods — From its beginning, the market has offered hot foods and seating for customers who want to enjoy eating during their shopping experience. Recently the company has raised its game by opening full-service restaurants in its markets. (https://www.wholefoodsmarket.com/)
Tommy Bahama — Shoppers are immersed in an island lifestyle experience at the retail-restaurant locations. The company has reportedly announced that the 14 stores featuring restaurants have produced 2.5 times the revenues than its other 97 locations. (https://www.tommybahama.com/)
Urban Outfitters — In Austin TX, Urban Outfitters’ two Terrain stores have reportedly doubled customers’ dwell time, which is credited to the adding restaurants. (https://www.urbanoutfitters.com/en-ca/)
Macy’s — The company’s Herald Square store added an expansive Italian restaurant, complete with a bar. The restaurant features, brunch, gelato, and pizza baked it its own wood-burning ovens. (https://www.macys.com/)
Nordstrom — Restaurant and retail is not new to Nordstrom. The company has been performing beautifully with the combination business model for many years. Today Nordstrom’s 200 retail & restaurant operations range from cafés to full-service restaurants. (https://shop.nordstrom.com/c/canada-department-stores)
Ralph’s Coffee — Even Ralph Lauren has recognized the value in offering customers a F&B experience option. The company has now opened a coffee shop adjacent to one of its retail clothing stores. (https://www.ralphlauren.com/ralphs-coffee-cg)
Precautions When Integrating Food Service with Retail
Today’s retailers are eager to incorporate F&B concepts, but it’s an inherently demanding undertaking. Launching a QSR startup in a mixed-use development or retail mall, or adding food service to a retail store operation doesn’t ensure success. There are excellent opportunities in food service. But, there are also risks, and retail-restaurant market entrants should proceed with care.
Adding food service requires a sound QSR business development strategy and effective execution. Poor planning and implementation are more likely to distract customers, decrease dwell time, and have little positive impact on overall sales. Restaurants are challenging to operate. American Retail businesses are well advised to partner with a proven restaurant professional who knows how to run a food service operation.
American Retail businesses looking to add F&B need to be aware of food service market trends and ensure that menu selections are fresh and exciting. You should get to know other restaurant operators, to learn about their methods and the industry. You’ll also need a highly visible, walkable location, not an obscure spot.
American retail property landlords need to understand the nature of landlord support restaurant operators need from them, and how it is different from the support they’re responsible for providing other retail tenants. Their knowledge must include asset management, lease provisions, rental rates, tenant mix, restaurant operations, restaurant business strategies, foot traffic flow, environmental and safety considerations, and more.
To do this, and to do it well, requires an understanding of food service trends, creating a winning design and incorporating unique and popular cuisines, which, together amount to a cutting-edge customer experience.
Whether you’re incorporating digital, specialty menu selections, personalization, or novel environmental features into the dining experience, the key is to prioritize food-service nuances much more than in the past, and to embrace and optimize the dining experience, whether you’re offering a QSR or fine dining option.
Here’s where we land.
The growth of food service in and/or adjacent to retail businesses has done much to help retailers meet evolving consumer demands as shoppers continue to gravitate towards social experiences.
As Dallas reflects, a vibrant and evolving foodservice market, enriched by an integrated retail/QSR culture can add a highly appealing experience dimension to your retail offer, which can increase shopper dwell time, love for your brand, people, and space, as well as offer shoppers more reasons to return again and again.
But of course like all great endeavours, integrating QSR or food services within your space starts with an idea that has to be developed. And if it’s one your considering, we’d love to continue the conversation. Give us a call at 905-264-0917 or contact us.