How Chick-fil-A Is Changing The Pad Site Game
A Chick-fil-A during the lunch rush is an orchestration of efficiency. With two or three drive-thru lanes and eight or more indoor registers, hundreds of customers are able to quickly get their fried-chicken fix six days a week. Chick-fil-A’s finely tuned business model and increasing need for space is causing retail landlords to think about retail pad sites differently.
“If you look at the fast food business, it's shocking what they can do now. Their pad sites are getting much bigger,” Whitestone REIT Chairman Jim Mastandrea told the crowd at Bisnow’s Houston Multifamily Mixed-Use Conference Tuesday.
In addition to the extra space needed for multiple drive-thru lanes, popular restaurants like Chick-fil-A and In-N-Out need increased parking, expanding the restaurant's footprint. Serving more customers means more foot traffic through the center. A popular fast-food restaurant is on par with a grocery anchor.
“I have a client who only wants to be shown sites with a grocery store and Chick-fil-A. That’s what they’re looking for,” Evergreen Commercial Realty principal Lilly Golden said.
The company generates more revenue per restaurant than any other fast-food chain in the U.S., and it is only open six days a week. Chick-fil-A's average sales per restaurant in 2016 were $4.4M, according to a new report from QSR magazine. Its fried-chicken competitor KFC sold $1.1M per restaurant that year.
The first Chick-fil-A restaurant arrived in 1967, and today the fast-chicken giant has more than 2,200 locations in 46 states generating revenue in excess of $8B.
Mastandrea knows just how valuable chicken sandwiches can be. The Chick-fil-A in his East Side development is one of the top in the country. The operators told him the location is doing roughly $9.5M a year. “It’s shocking that these restaurants do these kinds of numbers,” he said.
That can mean long lines, especially at the drive-thru, where the chain makes a majority of its money. They are the kind of lines that attract the attention of zoning commissioners when site plans are submitted and require police to direct cars when a new store opens. On average, a Chick-fil-A drive-thru will serve 95 cars between noon and 1 p.m.
Chick-fil-A is known for having strong franchised restaurant operators, and maintains a franchisee turnover rate of less than 5% per year. The company only accepts about 0.4% of the applicants who apply every year, according to Net Lease Advisor. For net lease investors, it is reassuring to know Chick-fil-A NNN leases have a corporate guarantee by Chick-fil-A.
These ground-leased properties provide additional investment security because Chick-fil-A's real estate team generally pays for the design, construction and equipment for all new stores. Each new location is chosen based on corporate goals for target markets.
Retail investors, landlords and developers are also keeping a close eye on Chick-fil-A's innovation. The company has built full-scale store mock-ups at its headquarters in Atlanta, where it runs cars through its experimental 35K SF indoor drive-thru test lab.
"Every foot does matter. If we eat up three feet here, we have to find three feet somewhere else. That could be a row of parking spaces that just got sacrificed," Chick-fil-A manager of kitchen design Eric Stogner told BuzzFeed.
To speed up service, the chain is proposing two main changes: The first is to have a team of four to six servers walk up to cars in the drive-thru to take both orders and payments via tablet, rather than having drivers wait to reach the usual pair of speakers and the cashier. This has already been launched at many locations.
The second is to have another set of servers walk to cars with their orders when they are ready.
"The idea is to deliver food to cars even before they get to the window," Stogner said.
As it experiments with new ways to boost capacity, Chick-fil-A is also looking at food trucks, perhaps the most space-efficient businesses. The chain already has two giant trucks for promotional events and just launched its first food truck in Houston.
"Through our prototype process, our designers and developers can push things farther than they might otherwise be comfortable with," Chick-fil-A Senior Director of Design Dwain Cox said.
Chick-fil-A is also pushing drive-thru possibilities in urban markets going through densification, where larger pad sites are not a feasible option. Cox said restaurants without parking places and drive-thru windows are becoming more of the norm.
"[The challenges] require us to design and innovate restaurants like never before," Cox said.