Restaurants — The New Anchor
“Polished casual” restaurants attract many upper-income shoppers and upscale retailers.
Irv Siegel

Shopping center developers are always looking for an advantage — a new retailer to bring in shoppers, a unique entertainment venue to attract visitors, and in the past few years, restaurants have been a main attraction. Whether developers are building new centers or re-tenanting old centers, they focus on the restaurant offerings.

Entertainment — including food — drives retail. You can't do a deal today without a department store asking about your food program. Retailers want to know that you're going to attract a very compatible part of the public to their operations.

Today's restaurants are so powerful that they anchor centers. When opening new centers today, developers sign anchors first, then restaurants, then specialty retailers. But it is getting to the point that fashion anchors are asking about the food program before they sign. Every segment of a development that offers entertainment — including theaters and specialty retailers — ask developers about the food program at a center.

Retailers don't go just where retailers are. While restaurants can stand alone, retailers can't. And the retailers know this. They understand the new equation for success: the better the restaurants, the better the clientele. And, of course, developers understand that better retail follows better clientele.

More than being an anchor, food is a flag. Restaurants really stand out and show the public what that center is about. Restaurants help to give a center its identity. In general, restaurants attract shoppers even more than retailers. Additionally, because some 80 percent of those that go to a theater dine out before or after, a good food program is essential to attract movie patrons to a particular theater.

One might expect that competition amongst neighboring restaurants is greater than amongst neighboring retailers. After all, a patron will only visit one restaurant during a trip to any center and she will visit a handful of stores. But restaurants really have the advantage when it comes to competition. Whereas people will frequent their favorite department stores and specialty stores over and over, they want a variety of restaurants. They may want Chinese food one day, American food the next and Italian the next. People may visit only one restaurant in a day, but they'll visit the center more than one day — especially if they find a great variety of restaurants.

Nationally, the favorite cuisines are Italian, Asian and seafood. Developers rarely open centers today without these cuisines. Regionally, the favorite foods vary a little. In the West and Southwest, Mexican cuisine is the favorite. In fact, I just read in Nation's Restaurant News that 18 percent of U.S. restaurants have a Mexican food item on their menus. In the Midwest, American cuisine tops the charts, particularly steakhouses. In California, on the East Coast and in large regional cities, the tastes are more sophisticated. This is where you'll find more fusion, which is Asian combined with European or American food as well as traditional Japanese cuisine and sushi.

In terms of Italian restaurants, there are not many national players. You really have to talk regionally unless you're talking Maggiano's, Il Fornaio, or the one-of-a-kind California Italian concept California Pizza Kitchen (C.P.K.), which will go nationally.

BRAVO! and Brio Tuscan Grill, which are both owned by Columbus, Ohio-based BRAVO! Development Inc. (BDI), have 44 units in the Midwest and will soon have a national roll-out. In other regions of the country, there are numerous other small Italian restaurant chains. As in the entire restaurant industry, the Italian restaurant category has varying levels: value Italian, mid-level Italian and “polished” casual dining Italian.

Casual dining today has such a wide array that it really has lost its distinction as to what it is. Today's restaurant consumer demands more of his casual dining experience and wants an upscale environment coupled with quality food offerings at a perceived value, giving the “polished casual” restaurants their niche. On a national basis, the “polished casual” category encompasses certain brands such as The Cheesecake Factory, Grand Lux Café, P.F. Chang's, McCormick & Schmick's, and Maggiano's. These players offer familiarity, presence, quality and consistency.

Each category has what I like to call the “anchor player.” These are concepts that almost every developer puts on its merchandising wish list.

Seafood has expanding players like McCormick & Schmick's; Legal Sea Food, a restaurant based in New England, which is expanding on the East Coast; Mitchell's Fish Market, out of the Midwest; King's Fish House in Southern California; and Summer Shack, which is based in Cambridge, Massachusetts, and owned by famed seafood chef Jasper White. These players are bringing seafood restaurants to the forefront of choice offerings.

With Asian food, P.F. Chang's virtually stands alone on a national and regional basis, although there are other chains that do very well and that are expanding. With chains like Benihana and its newly acquired subsidiary, RA Sushi, this category is exploding into the marketplace.

The best Mexican restaurants are small, extremely regional companies such as Rosa Mexicano, which originated in New York City and now has branches in Washington, D.C. The company also plans to open units in Chicago and Northern New Jersey.

Fusion restaurants are not new to the scene, but are just recently gathering a larger customer base. Roy's, which is out of Hawaii, is a perfect example of a “polished casual” concept, as it utilizes the celebrity chef advantage to gain a huge and ever-growing fan base.

Steakhouses like Morton's, The Palm and Gibsons are popular nationwide and, in the past, have been considered “fine dining.” More casual players such as Fleming's, Ruth's Chris and The Capital Grille have found their place as part of “upscale center” and are now vying for the “polished casual” consumer.

American concepts have been mainly “family casual” in the past, but more recently have discovered that by upscaling their look and offering a more varied and exiting menu, they can capture both the “family casual” consumer and the “polished casual” consumer as exemplified by Darden's new concept, Seasons 52. Brew pubs are no exception; once considered neighborhood icons, restaurant companies like Yard House and Gordon Biersch have brought a wider demographic to this category.

An emerging concept, which I think will make its mark in the future, is the bistro/brasserie restaurant. Examples are Left Bank, a five-unit chain out of San Francisco and expanding into Southern California; French 75, from Newport Beach, California, with four units; and Pinot, by famed Chef Joachim Splichal, out of Los Angeles.

By far, the biggest national player today is The Cheesecake Factory, which offers a 200-item menu. The company also offers an environment that very few restaurants can afford. It is the most expensive buildout I've ever seen. Furthermore, The Cheesecake Factory can go virtually anywhere and it appeals to the widest demographic. The Cheesecake Factory is one of the few players in our business that is looked upon as being a true dominant anchor — in the genre of a Nordstrom, Bloomingdale's, Neiman Marcus or Saks. You can build a lot of other restaurants around The Cheesecake Factory.

All of these concepts, as well as many other others, are successful for all of the basic time-honored reasons: quality, consistency, value, service, appealing décor and, by all means, good real estate.

In my opinion, in order for restaurants to work together, they need to be built close together. I believe in the “wow” factor. If you're going to have a lot of restaurant choices, those choices should be in a critical mass. Whether a person is at the center to visit a restaurant or not, he can see there are a number of restaurant choices and that is what stays in his mind. If a center has 10 restaurants spread throughout, people are not necessarily going to be cognizant of the variety of cuisines and choices of restaurants. You should build restaurants collectively where you build your entertainment. That isn't to say you shouldn't have some specialty restaurants dispersed amongst your fashion tenants, but the majority of your restaurants should be grouped.

I don't believe in internal restaurants. I think all restaurants should face out. They can be attached, but they should appear to be unencumbered on three sides. They should have some individuality and prominence if they are not freestanding. If a restaurant is going to be an anchor, don't hide it. Make it visible and accessible.

I look at restaurants as being a marketing partnership — amongst themselves and with the retailers. I believe that the matrix of various cuisines and brands should be complementary, not competitive. If you are complementary in your offering to the public, you're going to get more of the public more often. And that certainly is the objective of shopping center developers.

Irv Siegel owns and operates The Siegel Company, a Santa Monica, California-based full-service commercial real estate firm whose primary focus is entertainment-related projects.