Brands that survived the pandemic are ready to grow again, but what those sites look like and where they’re located is still up for debate.

Even in the worst days of COVID when tens of thousands of restaurants were permanently closing each month, there was a quiet understanding that eventually such a loss would breed opportunity. That’s not to say operators were unfeeling to the plight of their peers, but those who weathered the storm knew that once the dust settled, a bevy of new spaces would be available for the taking.

At the same time, the pandemic led some brands to rethink what their individual store footprints would look like. Even before 2020, several growing full-service chains were experimenting with smaller spaces amid steep real estate prices. Others, particularly concepts with an entertainment slant, were leaning into larger footprints.

COVID-19 has forced a reckoning of sorts, with restaurants taking a hard look at their expansion plans and what spaces work best for their brand. A surplus of empty storefronts might signal a bullish market, but Mark Zygmontowicz, senior vice president of analytics and client advocacy for real estate consultancy Tango, urges caution.

“There are a lot of available opportunities out there to be scooped up quickly and inexpensively by operators that have survived, but … those spaces might not play well in 2–3 years,” he says. “I’ve told several of my clients, ‘I wouldn’t want to be in your shoes right now.’”

For as much as the pandemic transformed foodservice—how it operates, how consumers engage with it, how it’s perceived—Zygmontowicz thinks some of those changes could ebb in the coming years. For example, he says that in 2019, casual dining did about 10 percent in off-premises sales; because of the pandemic, it jumped to around a third. Following this logic, some chains might pursue new stores with smaller footprints and a layout that’s more conducive with takeout and delivery. But again, Zygmontowicz says restaurants must look further ahead.

“As each restaurant starts grappling with the increase in carryout and delivery, how does that play into stress on the current kitchen?” he says. “They’re dealing with a lot of complexity and uncertainty and also questioning whether that movement to 35 percent takeout is going to sustain itself for 5–10 years.”

Agave & Rye

Agave & Rye has come across fewer empty spaces because of the brand’s own high standards.

The post-COVID market

For restaurants that performed well—and even managed to grow—during COVID, the path forward is clearer. Agave & Rye, a Midwest-based NextGen Casual that plans to open 10 units this year, isn’t shrinking its stores. If anything, it’s going after larger spaces to accommodate more on-site activities like pickle ball and arcade games.

The original store in Covington, Kentucky, was a mere 2,500 square feet and regularly had two-hour wait times. Footprints have since increased and even reached 7,100 at a Cincinnati location that opened in September 2020. Its forthcoming  Columbus, Ohio, location (slated to open in February) will be 7,600.

The brand has reason to feel confident in sizing up. Tripling the footprint has done little to curb the bustle.

“We typically have a wait every evening, and on the weekends, it will be a couple hours wait at all of our locations,” says Agave & Rye founder and CEO Yavonne Sarber. “So we gradually upped the space, but we found it didn’t matter how big we were—we were still on a two-hour wait.”

Even when the pandemic was at its worst and guests couldn’t play group sports or arcade games, the brand still turned a profit. Sarber credits this to Agave & Rye’s quality fare, which applies traditional French culinary techniques to a crowd-pleasing carrier: tacos. For Sarber, the business’s consistency through a tumultuous period signalled a greenlight for future prospects.

“For us, when the pandemic happened, we really did get put in a position where [we decided], ‘OK, this is the time we’re going to take to get better and what do we need to do?’ Our growth through the pandemic has allowed us to make these other opportunities work,” she says.

In the past, the now 10-unit brand expanded primarily through second-generation spaces that it could retrofit. Sarber says this strategy allowed Agave & Rye to self-fund and expand at a faster rate. But now that it’s gained some brand recognition, more opportunities are cropping up. It even has two new builds in the works, one in Indianapolis and the other in Hamilton, Ohio, a suburb north of Cincinnati.

Sarber hasn’t encountered a surge in the number of vacancies since the pandemic began. But rather than take this as a challenge, she views it as a clean bill of health for the Midwestern and Southern regions it’s targeting.

“We anticipated having a lot more vacancies in the second-generation restaurants, but within the states that we’re in so far, they’ve actually been difficult to find,” Sarber says. “I look at it as ‘thank goodness.’ It shows that at least in the areas we’re in so far—Ohio, Kentucky, Tennessee, Alabama, Indiana—we haven’t seen the massive closures that some other communities in the country have experienced.”

It’s also possible that Agave & Rye has come across fewer empty spaces because of the brand’s own high standards. It homes in on Class-A sites, which are generally in newer, mixed-use properties that feature a combination of commercial and residential buildings with high-income tenants.

As an example, Sarber points to the Chattanooga store, which she anticipates will overtake the Huntsville, Alabama, location as the top-performing store. She has good reason for this prognostication; the newly opened property is across the street from the Tennessee Aquarium in the city’s Riverfront District. The forthcoming Hamilton location will also be well-situated near the newly opened Spooky Nook Sports Complex, which has been cited as the largest indoor sports complex in North America.

Although Sarber hasn’t observed an uptick in available spaces, it’s a very different situation for David Birzon, CEO of Snooze an A.m. Eatery. Based in Denver, the chain’s footprint runs from coast to coast, though none of its locations overlap with Agave & Rye. From Birzon’s vantage point, the market has been flooded with available real estate.

“I think we’re going through this unprecedented time of growth in our industry that we probably haven’t seen since the early 2000s. Competition for space right now is unlike anything I’ve seen before. Even restaurant chains that haven’t necessarily been growing the last few years are getting back into some growth,” he says.

What helps Snooze ride the real estate swell is its ability to fit in a variety of modalities, Birzon adds. Restaurants that follow rigid guidelines might not be able to seize as many opportunities.

“We work everywhere. We’ve opened on college campuses. We have urban locations. We have what I would call ‘deep’ suburban locations. We work in uptown areas. We work in areas that have limited to no parking,” Birzon says. “We can typically be competitive in spaces that other people might not consider. … You’ll never see a Cheesecake Factory in anything but a [Class] A shopping center. We can take a B location in an A trade area and be just fine because brunch activates as somewhat of a destination for people.”

As an industry vet, Birzon has watched the evolution of what is considered prime real estate for restaurants. From the mid-1980s through the ’90s, malls were the place to be. In the early 2000s, these gave way to lifestyle centers that expanded vertically—think apartments, hotels, and offices with restaurants and retailers on the ground floor.

Sometimes, Birzon says, it can work against Snooze to be in retail-driven shopping centers where the majority of foot traffic comes in the afternoons and evenings, but Snooze opens at 6:30 a.m. and closes by 2:30 p.m.

Other commercial areas, however, can be a boon to the breakfast concept, which recently hit the 50-unit mark. Birzon says the brand has many sites that are anchored by a Whole Foods, Trader Joe’s, and other daily-use retailers, like nail salons, dry cleaners, and banks, that also bring in morning business. And for landlords with fewer early-in-the-day destinations, Snooze can provide a complementary business.

“We kind of refer to ourselves as the ‘a.m. anchor,’ meaning we can bring some activation and energy to their shopping centers in the early morning and by doing that, then they’re able to go out and get other morning-centric businesses,” Birzon says.

Snooze Considers Itself An ‘A.M. Anchor

Snooze considers itself an ‘A.M. anchor.’

Finding the right site

As for the size and layout of future Snooze locations, the jury is still out. The brand typically aims for 3,800–4,200 square feet to allow for a little bit of flexibility. Birzon doesn’t see that range shrinking, despite calls early in the pandemic for restaurants to cut their footprints by as much as 1,000 square feet.

Snooze’s indoor sales were stronger in 2021 than 2019, but the restaurant still had to balance dine-in business with increased off-premises orders. It did this by increasing the production space for to-go orders and staging.

For Kura Sushi, the pandemic has proved that it can still turn strong profits in smaller spaces. Nevertheless, the brand has no intention of shrinking its average footprints, especially in busy suburban markets where heavy weekend foot traffic is the norm.

With a little more than 30 units in the U.S., the Japanese-founded concept had long chosen sites under the assumption that patrons come for the full dining experience. Now, if a potential space includes short-term parking or even a drive-up window for pickup, it’s a plus for the brand, per an email from Kura Sushi USA investor relations director Ben Porten and chief development officer Robert Kluger.

Porten and Kluger also point out that the sushi category has suffered a disproportionate number of closures since the vast majority of those restaurants are independents, not chains. As sad as it is to have lost so many concepts, it does mean increased growth potential for Kura Sushi, they say.

Firebirds Wood Fired Grill is also betting on the in-person experience while still adapting to better manage the mix of on- and off-premises dining.

In November, the brand, which is on track to reach 60 units in 2022, opened a new store north of its Charlotte, North Carolina, headquarters. The Huntersville location features the ambiance of the brand’s latest prototype (lighter tones, floor-to-ceiling windows, exposed steel), which it unveiled in Jacksonville, Florida, in 2017. But, clocking in at 5,600 square feet, the location is about 1,000 square feet smaller than the company average.

“We already had in the queue a smaller footprint,” says vice president of marketing Stephen Loftis. “We’re also looking into developing an even smaller footprint under 5,000 just because there were some spaces in downtown areas where we didn’t have the opportunity to drop in a 6,500-square-foot unit.”

The reduced square footage has the greatest impact on the number of seats in the dining room, though the kitchen is a bit smaller, too. Still, staging areas for off-premises orders remain a priority; they just might have a different orientation within the restaurant, depending on the space.

At Agave & Rye, rethinking the layout means focusing on how guest-facing areas, like the host stand, are set up to facilitate pickups. To-go orders used to be placed at the bar, but now the brand is building 8-foot-long counters with shelving behind it specifically for that purpose.

Redesigns aren’t limited to the restaurant’s four walls. With operators now prioritizing patios, many are looking at ways to optimize outdoor spaces. Firebirds’ new builds feature accordion windows while a few older models have been retrofitted to include overhead covers and even walls. But within all iterations, airflow is paramount.

“For Firebirds, the patio is an opportunity to lean into. The majority of our locations have pretty nice, all-season patios. But how do you step back and look at that and maybe enhance it?” Loftis says, “That is a focus of ours. We’ve actually gone back and remodeled three patios to date to better accommodate some of those needs.”

Patio seating may no longer be an outright necessity the way it was at the height of the pandemic, but such options can go a long way in quelling lingering guest concerns.

“Everybody realized that their patios are not just for socializing anymore. Patios are almost a risk-mitigation factor for your business at this point,” Snooze’s Birzon says. “Businesses that had not just large patios but really well-built, comfortable patios, where people wanted to hang out, thrived during COVID and the recovery.”

The brand used to aim for 500–700-square-foot patios, but it has since upped that minimum to 700–900. “We always focused design on the interior, but now we’re spending a lot of time on patios,” he says. Snooze even tapped some consultants to further optimize its patios through touches like soft seating, patio tables, and mature trees and plants.

Although Kura Sushi Has Found Success In A Smaller Model, The Brand Doesn’t Plan To Shrink Its Standard Store Size, But Rather Take Growth On A Case By Case Basis

Although Kura Sushi has found success in a smaller model, the brand doesn’t plan to shrink its standard store size, but rather take growth on a case-by-case basis.

Proceed with caution

In some ways, NextGen Casual concepts have a leg-up on their competitors. Unlike larger chains with more saturated markets, they have plenty of blank space to fill. And whereas independents were especially vulnerable to closure, NextGen operators were more likely to make it through the crisis.

All that said, the stakes are higher for these restaurants. If an up-and-coming brand leased a few new sites that underperformed and then shuttered, the repercussions would be more acutely felt than for a brand like Applebee’s or Outback. Smaller systems mean smaller margins of error.

“Chains that are in the early stages of growth can’t afford to make more than a couple mistakes. It’s critically important for them to understand what drives success,” Tango’s Zygmontowicz says.

He advises brands not to overextend themselves. Even in instances of more measured growth, he recommends restaurants mine customer data and let those numbers inform their decisions.

“It’s really important that you constantly monitor and get as much information on customers’ visit patterns as possible,” he says.

It’s a strategy Kura Sushi is following. The majority of its restaurants are in the suburbs, but some of its most lucrative units are in urban areas. Those stores, Porten and Kluger say, have felt the effects of the pandemic more acutely than their suburban counterparts.

Still, the daily movements of consumers could have more bearing on quick service than full. Before COVID, fast food concepts and fast casuals benefited from what Zygmontowicz calls “multipurpose trips.” These occasions could be anything from running errands to commuting to shopping or some combination therein. While out and about, consumers might swing by a quick serve for a quick bite or to pick up takeout. Now people are more intentional in their outings, meaning there are fewer instances to capture customers in the spur of the moment.

By contrast, full-service restaurants have traditionally been destinations unto themselves rather than convenient stops along the way home from work or while running errands.

“We have seen data that suggests there’s a significant reduction in visits to these quick-service restaurants from people out shopping. There’s a nervousness about the consumers opening themselves up to significant exposure to COVID and that is impacting how the customer interacts with the restaurant,” Zygmontowicz says.

These behavioral shifts may have a more direct impact on limited service, but there are lessons to be learned for full-service operators, too. The places consumers go and the frequency with which they go there have changed. Restaurants that keep this perspective in mind when adjusting their expansion strategy will have an easier time bringing in foot traffic.

But just as with off-premises business, the future of consumers’ away-from-home habits is hazy at best. Already the conversation around long-term telecommuting has heated up.

“The question remains: As the pandemic wanes, will we go back in two to three years to more of an office environment? How does that shift the priority for us?” Zygmontowicz says. “If restaurants made the decision to go suburban right now, they’d be paying a price.”

He adds that even some of the biggest, most influential companies in the U.S. are deeply divided on this issue. In October, Amazon announced that corporate employees would be able to work from home indefinitely. On the opposite side, JPMorgan Chase CEO Jamie Dimon has been quoted as saying that telecommuting “doesn’t work for those who want to hustle.”

The debate is unlikely to be resolved anytime soon, but restaurants needn’t sit on their hands until then. Zygmontowicz suggests operators consult with third-party vendors who can analyze geolocation data from customers’ cellphones. These insights can reveal where consumers go before and after their restaurant visits. Duration of stay can also help distinguish dine-in guests from takeaway orders.

In the face of so many closures and ongoing difficulties, it’s hard to see much of an upside to the shifting dynamics brought about by COVID. But that doesn’t mean there aren’t benefits to be had in this new landscape. What might first appear as a wholly negative situation could prove to be a boon for some.

At Snooze, widespread work-from-home policies have actually had a positive impact on business. That might not be the case for all brands, but it offers an example of how the new dynamics might yet bring positive outcomes.

“We actually feel the change has been a benefit for us,” Birzon says. “People now have flexibility in their schedule where they can grab an hour and go out for breakfast. They might not be going to the office, but they’re meeting colleagues and then they’re going back to their home workspaces.”

And even if more workers telecommute and off-premises orders remain a robust part of restaurant profits, full-service concepts are still destinations for reasons that go beyond food and beverage. It’s an experience that, despite the sometimes insurmountable odds, holds value for many restaurant patrons.

In the toughest periods of the pandemic, the knowledge that Agave & Rye provided its guests with something special, even when they couldn’t dine in, was fuel to keep them going.

“I think what definitely helped us propel is that people did think of [Agave & Rye] as an escape,” Sarber says. “We were able to say, OK, there’s a light at the end, and … we’re starting to see glimpses of that now, which is wonderful.” 

Casual Dining, Feature, NextGen Casual