After COVID, Rethinking the “Hot” Market for Restaurant Growth

November 24, 2021 by No Comments

Delores Tronco was not a bright-eyed, novice restaurant owner when she moved to New York City. Instead, she arrived in New York City as a successful businesswoman cofounded and managed the acclaimed Denver restaurant Work & Class. Despite her success in her hometown, she was drawn to the Big Apple. New York is an ideal place to test your skills. It’s a testing ground for many people in the food industry and beyond. Tronco was determined to succeed in what is arguably the most competitive place in the world.

She says that she decided to sell Work & Class shares and pursue a more difficult market. “I wanted my restaurant but also wanted to learn the market. I worked as a waitress, managed another restaurant and went to wine school at Midtown’s International Wine Center. I tried to see where my weaknesses were and what I could improve.

Tronco was following a dream, just like many others who visit the city. However, she was able to transform hers into reality quite quickly. Tronco opened The Banty Rooster in West Village, three years after she left Work & Class. The restaurant was a huge success specializing in Southwestern cuisine, which is a rare New York specialty.

The Banty Rooster was closed 96 days after its grand opening. It reopened in summer for al-fresco dining, but it was only for a brief interlude. Tronco was not able to negotiate with the landlord regarding rent. The restaurant closed permanently in August 2020.

“We gave a farewell tour. I wanted to leave on my terms and to say goodbye to the neighborhood. She says it was as emotional as she could imagine.

Tronco got in her car and drove home to Denver. She would still be in New York City if it weren’t for the pandemic.

PARKER HOSPITALITY

Nashville has a young, growing population. This makes it a hot market to start new concepts such as the Hampton Social, specializing in coastal cuisine.

From the big city

Restaurant owners have always been attracted to major metropolitan areas because of their cheap real estate, high rents, and overcrowded dining scene. Over the past two decades, many chefs and restaurateurs have moved to greener pastures.

Their exits were not always to the suburbs. At least, not in the traditional sense. Instead, they sought out smaller cities that were growing fast to shape the emerging restaurant scene.

COVID may have accelerated this migration while also leading to business owners rethinking their growth plans or their headquarters in the case of Parker Hospitality Group.

The group is currently based in Chicago and operates The Hampton Social multiunit restaurant, The Bassment speakeasy lounge, and Nisos Mediterranean concept. It will open its doors in spring. The Hampton Social has eight locations, with outposts in Orlando, Naples, Florida and Nashville, Tennessee. Brad Parker, the owner of the company, is looking into moving its base to the Sunshine State. He cites Chicago’s strict COVID-era regulations as well as an increase in crime.

Parker states that the pandemic “threw fuel on fire” in terms of people wanting to move out of the city for a new lifestyle. “There was an overwhelming feeling that people needed to leave, and these factors led to people leaving earlier than they planned.”

Parker says that people who leave cities fall into two categories: those who choose to settle down in the city’s suburbs and those who travel further afield.

He says, “While there were many people that didn’t want to leave Chicagoland,” he adds. “We are very lucky to have multiple restaurants. We are witnessing the city migration in other markets.

Parker has also been able to see how attitudes can differ across states and cities by visiting outposts. It’s a difference of a day between Florida and Chicago stores, he says. The former is where people don’t want to talk openly or shake hands, but the latter are more cautious about covering up.

This ideological divide has permeated every aspect of society and business. While restaurants in tighter cities may be more supportive of these policies, many restaurants in those areas are financially less successful than those in markets with looser regulations. When picking a new city or region for a growing chain, it will likely choose places where business is flourishing. Many are looking to expand into Texas and Florida and newer cities such as Nashville, Tennessee, and Cincinnati.

Parker states that Nashville is booming and has been for the last couple of years. Nashville is a place where you feel free to do whatever you wish. It offers live music, incredible concerts, and an amazing standard of living.

According to recent data, OpenTable data shows that the prospects for restaurants in Music City are looking bright. August saw a half-point increase in reservations at local restaurants (online, phone and walk-in) compared to August 2019. This is still a small improvement over markets like Naples, which saw reservations go up by more than 25%, but it’s better than Chicago (down 27%) and New York City (51%). Nashville has a popular reputation, which attracts young professionals from all over the country.

Although not as hot as its southern neighbor, Cincinnati has also been on the road to recovery, though differently. MoneyGeek, a consumer finance resource, tracked more than 300 hospitality jobs in the United States. Cincinnati was one of the top performers. Since June, the city has recovered 90% of its jobs in the entertainment, food service, and lodging sectors.

This is good news for restaurants such as Another Broken Egg. The breakfast concept has already opened two locations in Cincinnati over the past 18 months and is now looking to expand across the river to Northern Kentucky.

According to Jeff Sturgis (chief development officer at Another Broken Egg), “Cincinnati has seen a revival as people move back into the city, from the suburbs, and are looking for restaurants other than the usual chains they’re used to seeing.” Sturgis states that Hyde Park is being revitalized and attracted new concepts to bring energy and vitality back to the older neighborhoods. Hyde Park is the home of one of Another Broken Egg’s two Cincinnati locations. The second is located in a suburb north of the metropolitan interstate loop.

While transplants from large cities contribute to Cincinnati’s growth and development, suburbanites may play a greater role in returning to smaller downtowns. It is also beneficial that smaller cities are working to revitalize their downtowns and city centers. People may leave New York, Chicago, L.A. and other metropolitan areas. However, second-and third-tier cities might offer the best of both: large city amenities with smaller city prices.

The Hampton Social can adapt to changing consumer migration trends by having restaurants in different states.

A permanent vacation

Many growing restaurants are focusing on Florida as a market area. The state is known for its pro-business tax policies. While the COVID response has caused controversy, the state’s restaurants have done relatively well during the pandemic.

The state is home to many full-service giants such as Bloomin’ Brands and Darden, but it also appeals to the next generation of casual-dining chefs. Florida is also home to First Watch and Keke’s Breakfast Cafe, which are both breakfast brands. While Parker Hospitality might not be interested in moving their headquarters, other growing companies are doing so.

It is also a good thing that areas of Florida, which were once primarily vacation destinations, are now home to a higher number of permanent residents.

It’s still not the same off-season as in 2019, but it’s less than it used to be. According to Tony Montero (CEO of Hai Hospitality Group in Texas), more people are moving to South Florida now than ever before. This makes South Florida a hot market.

Montero claims he cannot base this observation on its numbers because its first Florida Uchi, an Uchi in Miami, opened only earlier this year. Restaurant friends who have been in Florida for a long time confirm this. Montero, who grew up in South Florida, has a keen understanding of how foot traffic fluctuates with the seasons.

“The end of off-season” doesn’t just apply to Florida. Abuelo’s is another Texas-based business. It has been operating a Myrtle Beach location in South Carolina for 16 years. However, the business has not declined at the end of tourist seasons.

Brian Bell, vice-president of marketing and merchandise for Abuelo’s, says that Myrtle Beach’s annual population increases, and more people are discovering us. This means more people are eating out during the week. “We anticipate tremendous restaurant growth as well as the addition of other businesses to our restaurant sector.” 

He also said that there are other factors. Southwest Airlines flies to Myrtle Beach now, for one. More people choose to travel and work there because South Carolina’s COVID restrictions have been looser than in other parts of the United States. MoneyGeek reports that Myrtle Beach has seen a 126 percent increase in leisure and hospitality jobs since June 2021, compared to the prior year.

Montero attributes the steady business flow to relocation and believes that consumers’ general desire to be active is a key factor.

He believes there is a combination of people moving to cities where they can be outside and not get cold. “And then there’s the pent-up demand with guests who are just like, “It’s been about a year now, and I’m ready for some great food and to get out into the world a bit.”

A sense of place

Miami is one of only two Hai Hospitality locations that are not located in Texas. Although Denver may not seem to share much with Miami, Montero says that they both have a mix of urban and outdoor activities. The outdoors is just beaches for one and mountains the other.

This is an important factor to consider when choosing a market for expansion. However, proximity does not necessarily mean similarity. Often, factors such as population demographics, industry, or overall energy are more important than proximity. Hai Hospitality believes that Miami and Denver share more in common than Miami, Tampa, or Orlando. Although the company remains a Texas-based operation, it is now looking to expand beyond Texas. Hai Hospitality is more interested in finding new markets than trying to saturate a new market.

Taffer’s Tavern is a growing company that shuns regional expansion in favor of market opportunism. Last autumn, the restaurant opened its first Georgia location in Alpharetta (about half an hour north of Atlanta) last autumn. It already has deals lined up for Savannah, Washington D.C., Boston, Las Vegas and northern Florida. Taffer’s Tavern is actively pursuing Michigan.

The brand was founded by Jon Taffer, a restaurant consultant and entrepreneur. It is now in an exceptional position for expansion. The restaurant looks first at the brand power of a market before exploring real estate possibilities.

Taffer’s Tavern branding differs from traditional restaurants because it doesn’t require us to establish the brand in every market. We have a 10-year TV branding history,” Taffer explains about his Paramount Network program, “Bar Rescue.” “So, we look at which markets have heavy penetration markets for our brand on television. That’s an indicator other restaurant companies don’t get to use.”

Taffer also adds that additional elements like demographics, market economics and tourism are in play. However, they don’t supersede the first criterion. Marketing is another advantage of Taffer’s star power. Local news outlets will likely seek Taffer out for interviews instead of spending money on media campaigns.

These factors, combined with lower labor costs (Taffer uses automated and computerized cooking systems and server tablets), make the brand more bullish than others. Taffer’s is more confident than most other chains in major cities like D.C., Boston and Las Vegas.

This all shows that the definition of “hot market” can be subjective. Taffer states that it is important to think about “what kinda impact that brand will make in that market.” While restaurants of similar ilk may focus on popular cities, the most successful ones choose these cities for more than just popularity.

Denver was Denver for Tronco. Tronco was familiar with the area and had built a successful restaurant. She did it again upon her return. After only one year in Denver, she launched The Greenwich in Denver’s bustling River North Art District.

The concept pays homage in many ways to The Banty Rooster, starting with the name. Her New York City restaurant was on Greenwich Avenue. It celebrates local produce and serves “pies”, New York’s favorite term for pizza. The Greenwich has 130 seats, with a third on the outdoor patio. The bohemian interior is reminiscent of the Big Apple. Tronco states that the two garage doors open up the dining room to the outside. This appealed to him, particularly post-pandemic.

Toronto hopes to see old faces back East, even though she did leave New York earlier than she intended. Traveling Coloradans from Colorado who had eaten at Work & Class before she moved to New York would stop by The Banty Rooster to see her. She shared the news with New Yorkers last year, and she thinks that the same phenomenon could happen again.

These two worlds exist in different places, but they don’t seem as distinct as we think. “It’s been very interesting to do business in two cities, and then to be back in Denver,” she said.

Restaurants are, in the end, not dependent on their location.

“I believe that great restaurants give you a feeling of soul and place as soon as you enter them. Tronco believes that it is very important. These are the places we love to spend our free time.

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