5 Chain Restaurants Target Nontraditional Retail

Five restaurant chains owned by private investment firm Sun Capital Partners, Inc. -- Bruegger's Bagels, Fazoli's Restaurants, Friendly's Ice Cream, Smokey Bones Bar & Fire Grill and Timothy's Coffees of the World Inc. -- are joining forces to target nontraditional concession opportunities around the country, including food courts at airports, universities and hospitals.

The joint strategic development initiative will enable the chains to bundle and leverage their brands and key personnel to efficiently expand into these nontraditional locations, which are estimated to attract three to five times the traffic seen in traditional locations such as shopping malls, shopping centers and strip malls.

The program's concept is to create a competitive value proposition by making it possible to offer nontraditional retail operators a diversified choice of restaurant formats from a single point of contact.

Unlike traditional retail -- where the process is essentially one of finding a desirable retail location in a targeted market and negotiating a lease -- nontraditional retail location concessions are typically already designated for a particular type of format, such as deli or fast-casual bakery, and chains compete to win a location when an opportunity opens up, explains Chris Cheek, VP, franchise development at Bruegger's. In the case of airports, which are all government-owned, a governmental bidding process is involved, he notes.

Combined, the five chains currently operate nearly 1,300 restaurants and outlets in 28 states, and each has strong brand recognition within its respective market and a format that does not overlap with the others, Cheek says. (Bruegger's announcement last week that it is acquiring the retail restaurant holdings of Timothy's adds the important coffee format to the mix.)

Cheek says that while it is likely that in most cases a single chain would seek to occupy an available retail location, in part to preserve clear brand identity for the consumer, the companies may in some cases (based on space availability or preference for certain brands) offer a combination of two, three, four or five nameplates.

Having agreed to make nontraditional expansion one of their strategic goals, with the backing of Sun Capital, the chains will now prepare to meet nontraditional retail concession requirements, including the smaller space of these formats (about 700 square feet, on average), selective menus and volume and traffic demands, Cheek says.

In addition, all of the chains will benefit from the learning and business relationship network established through three years of nontraditional retail development efforts for Bruegger's. Nontraditional retail involves "a steep learning curve," both in terms of identifying the right opportunities and maximizing success once in operation, Cheek points out.

Bruegger's successfully expanded into four airports in 2008 (Boston's Logan Airport, Cincinnati/Northern Kentucky International Airport, Raleigh-Durham International Airport and Cleveland Hopkins), and Bruegger's Bakery-Café was recently nominated for five of Airport Revenue News' 2010 Best Airports & Concessionaire Awards.

Sun Capital Partners' portfolio of restaurant affiliates also includes Boston Market, Sweet Tomatoes, Souplantation, Real Mex, Souper Salad and Restaurants Unlimited.
By: Karlene Lukovitz