When the bottom dropped out on the economy, it did on your brand’s expansion efforts, too.
But now, with the U.S. climbing out of the recession and lenders more willing to supply the financing necessary to build business, the time is right to forge ahead with expansion—and QSR knows exactly which markets you should do it in.
Al Beery, retail and restaurant practice leader for Pitney Bowes Business Insight, a market research firm that helps brands with site evaluation, says a handful of measures determine whether or not a city or state is right for your brand: employment levels, income levels, disposable income, local GDP, housing prices, and population. By establishing each factor’s “growth score” market by market, where 100 is the national metro average, Pitney Bowes Business Insight determined the nation’s healthiest markets. Armed with that information, QSR uncovered half a dozen markets around the country that are ripe and ready for you to move into.
- Population: 1,801,848
- U.S. Rank: 32
- Median home price growth score: 108
- Retail sales growth score: 102
- Disposable income growth score: 101
- States: OH, MI, IN, IL, WI
The recession left the states of Illinois, Indiana, Michigan, Ohio, and Wisconsin with dismal employment and income rates—two bellwether implications of the health of a particular market.
According to the National Restaurant Association (NRA), these Midwest states are projected to lose 1.4 percent of jobs in 2010, nearly double the national projection. Meanwhile, income is expected to rise only 0.5 percent, the lowest of any region in the country and far below the national rate of 1.2 percent.
While Midwestern cities like Cleveland, Detroit, and Flint, Michigan, took the brunt of the recession, Columbus, Ohio, maintained relative stability and is positioned for strong growth.
“For us in Columbus, we have a dynamic university, which continues to grow and is one of the largest in the country,” says Kevin James, a Columbus-based broker for the commercial real estate firm Cassidy Turley, of Ohio State University. “It’s also the state capital, which means there’s always going to be a lot of state employment jobs, and that kind of stabilizes our economy.”
James says quick serves can expect to pay a little more than $20 per square foot for most good real estate sites in Columbus.
“For one of the first times I can remember in the last three or four years, there are good sites that are available,” he says. “A lot of them are existing buildings or end caps that can be converted.”
- Population: 4,588,680
- U.S. Rank: 10
- Median home price growth score: 105
- Retail sales growth score: 103
- Disposable income growth score: 103
- States: ME, NH, VT, MA, RI, CT, NY, NJ, DE, PA, MD
Boston is the 10th-largest metropolitan area in the U.S. and grew by nearly 44,000 people between July 1, 2008, and July 1, 2009.
Jim Speros, director of retail real estate for Boston Realty Advisors, says the area’s many educational institutes create highly educated consumers who settle in the Boston area and have high disposable incomes.
“Boston is always a good place,” Speros says. “Property values are always high because it’s very desirable to live here.”
Speros says today’s low real estate rents—which he says are around $18–$25 per square foot for suburbs and $30–$80 per square foot for downtown—make Boston an attractive city for quick-service expansion.
“There have been a lot of businesses going out, and with the economy bouncing back now, and with a lot of availabilities and landlords who are motivated, you have a lot of new tenants coming out of the woodwork, especially food businesses,” Speros says.
- Population: 9,380,884
- Projected population increase: 1.6%
- Employment change: -0.4%
- Real disposable personal income: +1.4%
- 2010 restaurant sales: +2.7%
- Real estate sales volume: -19%
- Real estate sales prices: -18%
- Real estate availability: +10%
- States: WV, VA, KY, TN, NC, SC, GA, FL, AL, MS
Between July 1, 2008, and July 1, 2009, the population of North Carolina grew by 133,750, the third-highest amount in the country behind Texas and California.
Marty Kotis, president and CEO of Greensboro, North Carolina–based Kotis Properties, says the continued growth potential of the state is what makes it such a hot market.
“A lot of people are moving to the area because they like the quality of life here,” Kotis says. “Cost of living is another factor, and the fact that we’re a right-to-work state, our labor is plentiful and it’s priced appropriately.”
Kotis calls North Carolina a “market that you prioritize” because real estate and construction costs are still low, while sales are going up. The fact that the state has the second-largest state-maintained road system, he says, is also beneficial for quick serves.
“That’s a key factor for quick service, because it’s all about traffic count and good roads and access,” he says. “North Carolina is still moving forward with all of its outer-loop projects around various cities, people are able to get around pretty easily.”
Kotis says the Raleigh and Greensboro metropolitan areas are two markets that are ripe for expansion.
Expansion in Charlotte, Kotis says, “got a little overheated,” and is a good example of why quick serves should invest in smaller, outlying areas of North Carolina with less competition and more potential for profit.
“If you go to a small market you might be looking at $10 a square foot or less for land, so $400,000 for a site,” he says. “For a hot market you might pay $1 million an acre for a site.”