In online Q&A, restaurant experts from CapitalSpring and A&G explore emerging imperatives in site-selection, portfolio-optimization, M&A and capital investment

CHICAGO, March 1, 2024 /PRNewswire/ — Many restaurant franchisees could take better advantage of the trend toward off-premises dining by using their real estate to drive higher throughput, said a veteran operator and investor during an online Q&A for Restaurant Finance Monitor.

Some operators might even consider foregoing cheaper, second-generation space to build new stores that are better suited to things like next-generation equipment, double drive-thrus, or dedicated entrances for third-party delivery orders, said Jim Balis, Partner and head of the Strategic Operations Group for CapitalSpring.

“Much has changed since Covid with the rapid growth of off-premises dining,” Balis said. “Restaurant brands need to look carefully at their revenue channels and build their sites to optimize performance. For example, if you’re a drive-thru concept, throughput will be critical to your success. Harvard studies have shown how accommodating just one extra car can translate into higher sales and EBITDA.”

The Feb. 29 webinar (“VIDEO: Restaurant Real Estate: Insights from a Veteran Investor and Operator“) offered a deep dive into real estate as an essential part of any restaurant chain’s road to success, whether a multi-unit franchisee or an independent operator.

During the 45-minute conversation, Joe McKeska, a Chicago-based Principal at A&G Real Estate Partners and leader of the firm’s restaurant industry practice, interviewed Balis on topics that included:

• challenges and opportunities for new restaurant growth
• the role of real estate in mergers and acquisitions
• capital-investment planning and prioritization
• strategies for restaurant closures, lease terminations and lease restructurings
• new formats and technologies

Restaurant-focused CapitalSpring boasts $3.8 billion of invested capital; more than 100 portfolio partners; more than 70 foodservice and retail brands, and 6,500-plus operating locations globally. A partner in the institutional investment firm, Balis is CEO of CapitalSpring’s eight-brand Sizzling Platter multi-unit franchise company. He also owns and operates his own fast-casual brand in Idaho.

“Jim has an incredible track record in the foodservice industry, with broad experience in running companies, supporting due diligence, managing portfolios and executing turnaround strategies,” McKeska said.

The two executives kicked off the discussion by reviewing questions related to growth, both through expansions of existing portfolios and M&A. However, making “defensive” real estate investments can be just as important as organic growth, Balis said. “You have to stay new to the consumer,” he explained. “You don’t want to look like the only aged building on a particular street or relative to the competition.”

But refreshes need not be merely aesthetic. “Sometimes you’re making an investment on the interior that is not even visible to the guest, but it might enable you to have certain equipment that improves throughput times on your menu, or allows you to have greater menu variety,” Balis explained.

McKeska, who routinely renegotiates and terminates leases on behalf of restaurant clients, closed out the discussion by quizzing Balis on portfolio-optimization—including the potential to balance store volumes through strategic openings and closures.

“One of our brands has a very high-volume store,” Balis said. “As crazy as it might sound, we’re intentionally opening a store nearby to relieve that location of some of that volume. We call that an ‘infill’ site. It’s a good problem to have, right?”

But strategic closures can play a similar role. “You might close a store that had cannibalized some sales from another location,” Balis said. “By closing it, you pick up business at that other store nearby.”

New tech platforms that track diners’ anonymous, always-on cellphone signals can help restaurateurs determine how to achieve such a balance, Balis added.

“The other piece that we always consider now is the role of off-premises dining and third-party delivery, because different channels have different levels of profitability,” the executive said. “You want to understand whether that’s going to be a high third-party delivery or high dine-in location.”

The full Q&A is available at:
https://www.restfinance.com/restaurant-real-estate-series/day4/

Media Contacts: At Jaffe Communications, Elisa Krantz, (908) 789-0700, [email protected]

SOURCE A&G Real Estate Partners