Photo by Ringo Chiu.
The Culver City-based salad chain, one of several restaurant businesses looking to meet the demand for drive-thru in the pandemic era, plans to open its first drive-thru outpost later this year .
Sweetgreen joins chains like Shake Shack Inc., Chipotle Mexican Grill Inc., Starbucks Corp. and Raising Cane’s Chicken Fingers, all of which have announced plans to increase their drive-thru presence across the country.
Once largely the province of fast food brands, drive-thru has been embraced by fast food restaurants over the past year as consumers seek out contactless and socially distant food options.
For local developers and property management companies building and renting locations at these chains, the rush is on to create stand-alone drive-through restaurants or to increase the drive-thru capabilities of their existing properties.
âDemand was already accelerating for drive-thru, even before Covid, as many of these tenants – whether Starbucks, Chipotle or Habit Burger Grill – their drive-thru restaurants were already doing significantly higher volumes than their restaurants. without drive-thru, âsaid Terrison Quinn, Managing Director of SRS Real Estate Partners.
Brian McDonald, senior vice president at CBRE Group Inc., said activity in restaurants before the pandemic was typically 70% in restaurants and 30% at drive-thru. Now that has reversed and restaurant chains are eager to take advantage of the trend.
Tabassum Zalotrawala, director of development at Chipotle, said in an email that 70% of the company’s new locations in 2021 will have a Chipotlane, the company’s version of a drive-thru. In places where drive-thru is not possible, the business will instead have walk-in windows.
Todd Graves, founder and CEO of Louisiana-based Raising Cane’s, said the drive-thru gave the company a sales boost.
âThroughout the pandemic, our drive-thru allowed us not only to maintain our activities, but also to increase our sales, because it was a sure way to continue to serve our customers,â he said. declared in an e-mail. “We continue to develop our drive-thru restaurants, as well as our online establishments that serve only food service.”
In June, Starbucks shared plans to develop vans and curbside vans.
Chris Maling, a director at Avison Young Inc., said the coffeehouse chain was “way ahead of the game with its drive-only stores.”
âIt’s a home run,â he added. âStarbucks says we don’t want to make coffee anymore; people just hang out, use our free wifi and don’t order anything. It is not a profitable business model. “
In October alone, drive-thru sales increased 24%, according to NPD Group Inc.
âDrive-thru was always part of the business plan along with fast food concepts. They kind of moved away from that because they were saying we could make a smaller footprint on college campuses and food courts without having to have drive-thru, âsaid Maling.
âFast forward to the Covid pandemic, and rules have been crafted that have completely shaken the restaurant industry. As a result, the concepts that had the drive-thrus were absolutely Covid-compliant and thrived. The sales they were making were phenomenal. All of these companies started to think, “Why do we need stores that offer sit-down or alfresco dining when we make a lot of money from our drive-thru?”
Barbara Armendariz, president and founder of SharpLine Commercial Partners, said fast food restaurants tackling drive-thru only are not âgoing to be a short-lived trend. I think this will continue. You can handle a lot more people through these lines. The small footprint also reduces expenses. “
Drive-thru-only locations have a much smaller storefront than a dining restaurant. They also have lower expenses, with less paper products needed, no refills, and less table cleaning.
Quinn of SRS Real Estate Partners said drive-thru is “pandemic-proof” and some restaurants are now only interested in places where they can have drive-thru. He added that he had seen more offers behind the wheel in the past 12 months than in the previous three years.
David Greensfelder of Greensfelder Commercial Real Estate said drive-thru outperforms all other retail categories when it comes to both rental and sale.
âFrom a retailer’s perspective, that makes perfect sense. Retailers really need to keep showing unit growth and sales growth on Wall Street in order to get favorable ratings for growth, for growth in stocks, for credit ratings, to be able to attract capital, âsaid Greensfelder.
Shauna Mattis, executive vice president of Jones Lang LaSalle Inc., said that before the pandemic, drive-thrus moratoria made them difficult to build, and existing ones “had very good rental rates.” These moratoria exist for a multitude of reasons, including people who don’t want drive-thru traffic in their neighborhoods, environmental concerns associated with idling cars, and complaints that fast food drive-thru is contributing. to the obesity epidemic.
But Covid-19, she said, has pressured cities to approve drive-thru. She expects to see more of the future besides things like curbside pickup options and temperature-controlled lockers where people can collect their food using a code.
âThese lockers and the curbside pick-up allow a much greater turnover. People don’t sit on their property that long, âshe said.
Most drive-thru are not conversions of other buildings, but basic developments.
Jim Kruse, managing director of DPI Retail, based in El Segundo, said his company wants more drive-thru on its properties and is even looking to get one now.
âThere is no lack of desire,â he says.
DPI has eight drive-thru properties in its portfolio and is looking to double that number over the next five years.
Experts say the rental and development structures of many drive-through services make them desirable for investors.
Pitches are often rented on a triple net basis. In this case, the tenant can be responsible for everything from utilities to roof repairs to taxes. The tenant can use the location without having to buy it, and a landlord can collect the rent without having to do a lot of work.
Other drive-thru properties are made like a land lease, in which different entities own land and land improvements. Again the landlord gets a regular monthly income without doing any work and at the end of the land lease gets the land improvements.
Quinn said some brands might want to buy the property or build under the traditional lease, or reverse build depending on where the tenant is doing the work, and the landlord reimburses them for the construction costs.
Most landlords, he said, want drive-thru land leases.
Armendariz added that tenants can get better rates with a ground lease than other rental options. She estimated that 65% to 70% of drive-thru services operate under a land lease.
Greensfelder added that regardless of the type of lease, most drive-through services are built for the tenant who will initially occupy it.
âDue to the increased demand and increased activity and capital involved in building these drive-through services, tenants are now looking to landlords to take on this capital cost and then pay more for depreciation. of that extra cost that the property is taking, âSpragg said.
If a tenant leaves the house, the property usually collects interest.
âYou regularly find old drive-thru services which are then taken over by other tenants looking for a second-hand space with drive-thru. It certainly makes a building more rental, âsaid Greensfelder.
Experts see demand for drive-thru properties continuing.
âWe are now seeing cities being more receptive to driveways, whereas in the years and decades before they may not have been as receptive,â said McDonald. “They understand the shift the consumer has gone through to this safer, contactless, and more convenient option for picking up their food.”
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