Fast-casual dining advances on suburbia: is it the end of the era of Applebee’s?

Amidst the bleak outlook of American retail, the restaurant and hospitality industry has fared pretty well. Sure, in many respects, restaurants are a subcategory within retail, but compared to a clothing boutique or a bookstore, the business model uses different benchmarks for success, a widely different employment structure, and a different means of handling its merchandise, much of which remains an unfinished product when the wholesalers haul it in through the restaurants’ back doors. These considerations help explain in large part why the emergence of online shopping has scarcely put a dent in the restaurant biz, while annihilating traditional bricks-and-mortar retail.

Compared to most other retail, restaurants are booming. And this confers an added social benefit beyond just the wallets of people working in hospitality. The emergence of the restaurant as a prime leisure activity has indisputably helped revitalize old, walkable urban corridors across the country. This trend is visible in cities large and small.

But sometimes it’s the subtler, mostly unheralded transformations that speak most powerfully on the broader cultural shift. Like the average, auto-oriented suburban strip mall.IMG_9922Considering its size, Alexandria, Virginia has surprisingly few of these stand-bys from the American consumer landscape. And, as I noted with a similar shopping center a few weeks ago, Alexandria’s few auto-oriented commercial notes generally seem to thrive, with low vacancies, full and well-maintained parking lots, and mostly middle or upper-middle-income oriented tenants. I believe this is largely due in part to the unusually high concentration of population in Alexandria—much of the housing stock dates from the 19th century and is eminently walkable, while even the auto-oriented areas feature numerous multi-story apartment buildings. The income density is high; most people in Alexandria are well off. And, no doubt as an immediate consequence, the land values are far to the right of the bell curve as well—high enough that underperforming strip malls easily get transformed into better uses, such as more multifamily residential buildings, often with retail on the first floor.

These real estate conditions push everything upward and close together, leaving comparatively few strip malls (and their affiliated parking chasms) within the Alexandria city limits, and most of them look something like the Potomac Yard Center, in the far northeast corner of the city.IMG_9921At the time of this post, this strip mall has enough anchor tenants to accommodate a regional market—not just folks living in Alexandria, but the next few towns over. Target, Staples, PetsMart, a new Michael’s, T.J. Maxx, Best Buy, Barnes & Noble, Pier 1. It’s probable that some car-owners in Washington DC take the bridge across the Potomac and do their weekend shopping here, since it’s the most accessible mega-center with a reliably large parking lot.IMG_9928And, as indicated earlier, middle and high density residential continues to encroach on Potomac Yard Center. Look at what stands across busy U.S. Highway 1 from the scene in the above photos. Just a half mile to the north, in Arlington County, we encounter sizable residential developments with full-service grocery stores on the lower level.

Customary to the configuration of most strip malls, the row of big-box and category-killer chain remains considerably set back from the highway, with a huge parking lot in the foreground. And interspersed throughout the parking lot are multiple small outparcel buildings, like the one below:IMG_9923And this is where it gets interesting from the perspective of the restaurant industry. While the bulky row of big boxes in the background hosts mostly nationally known retailers of durable goods like the aforementioned (Michael’s, Target, Stables, etc.), the outparcels also feature primarily national names that require much smaller floorplates. And while this includes a Men’s Wearhouse, an AT&T, a credit union, and a barber shop, the majority of these outparcel tenants are restaurants: IHOP, Dunkin Donuts, Subway, Starbucks.

These outparcels might serve as a microcosm for niche-level transformations within the restaurant scene. Take this example:fast-casual trioIt’s an older building, newly tenanted. But it remained vacant for over a year—the one real lagging piece of real estate in all of Potomac Yard Center. Within the last two months, it has become fully tenanted. One of these brands is probably familiar.

IMG_9926

Five Guys (burgers and fries) has swept the nation in recent years, transforming how people regard America’s quintessential meal. In terms of pricing and the wait time, it falls squarely between McDonald’s and a more expensive restaurant with table service. Fundamentally, Five Guys is an archetype of the fast-casual restaurant, in which the consumer still orders at a counter and cash register, but then waits a reasonably short time (usually no more than ten minutes) for the food’s quick preparation. Usually either a runner delivers it to the table or a cashier calls the customer’s name. No dedicated wait staff, but the food isn’t ready-made, sitting under a heat lamp the way it would at McDonald’s or Wendy’s.

 

Five Guys is a DC original, founded in the region thirty years ago and, while serving a slightly more upmarket clientele than McDonald’s, it has proven a formidable competitor one of the country’s most enduring restaurant brands. The other two restaurants in this outparcel building—

IMG_9925IMG_9927–follow the same standard: both are fast-casual and from the DC area. And while Cava and &pizza have enough locations to make them broadly familiar among Washingtonians, they have not expanded significantly outside the metro. What’s particularly interesting is that, within this unremarkable, long-vacant building, three restaurants have replaced a single predecessor: Don Pablo’s, a Mexican chain that peaked in the early 2000s with about 120 sites and is now reduced to just five locations—a restaurant that was not fast-casual but featured conventional table service.

These days, across the entirety of the expansive Potomac Yard Center, only one traditional sit-down restaurant remains within its own outparcel building:IMG_9929While Hops Grill and Brewery (what appears to be the last location of a chain that was never large) seems to boast a respectably full parking lot on weekend nights, it represents the last survivor of a fading business approach: one that expects customers to linger an hour or more to enjoy their meal. (The only other sit-down restaurant in this strip mall that I’m aware of is IHOP, but it shares its outparcel building with other tenants.) By no means am I suggesting that the conventional waiter-oriented restaurant is facing extinction, but I’m confident that most of these outparcels at Potomac Yard Center (constructed over 20 years ago) intended to accommodate larger restaurants with table service—not the fast-casual alternative, because, 20 years ago, fast-casual didn’t really exist at any large scale. The transformation of the single-tenant Mexican restaurant into a trio of fast-casual tenants is almost certainly a boon for the company that owns and manages this shopping center. If Hops Restaurant closes, I wouldn’t be surprised if the owner repurposes the building to accommodate a few more small outlets: maybe Nando’s Peri-Peri, Chopt Creative Salad Co, TaKorean, Honeygrow, or one of the other countless fast-casual chains with a strong DC presence. Maybe even Panera Bread, another chain ranking up there with Five Guys for its persistent success. (But not Chipotle: Potomac Yard Center’s already got one of those.)

Restaurants are a major contributor to Potomac Yard Center’s prosperity. After all, the fiscal fortunes of Barnes & Noble, Staples, Best Buy, and Men’s Wearhouse are murky at best, so it’s reasonable to question how much longer they’ll be around. In the meantime, such conventional sit-down chains as Applebee’s, TGI Friday’s, Ruby Tuesday—the sort of restaurants we’d expect to see at a place like Potomac Yard Center—are facing some of the same struggles as the national purveyors of clothing and electronics. The DC region in particular may experience an amplified strain on conventional table service in the wake of the ballot Initiative 77 from earlier this summer, in which residents of the District opted to replace conventional tip-based wages (a rate in DC of $3.33 an hour, well below federal minimum wage) with a significantly higher flat wage for all restaurant staff (up to $15 an hour by 2020). This initiative, not yet approved by District Council and without a clear plan for implementation, was highly contentious: unpopular with restaurant owners and especially wait staff, who routinely exceed $15 an hour in earnings through tips. But Initiative 77 was generally preferred among moderate-income DC residents and the back-of-the-house staff (cooks, bussers, runners). Profit margins in the restaurant biz are notoriously slim, and many in the District who opposed the initiative suspect that, if passed according to the electorate’s wishes, it will force many of the less capitalized restaurant owners to pursue one of three options: 1) raise food prices; 2) lay off many wait staff (those who don’t quit); or 3) close.

Needless to say, the DC ballot initiative will not affect Alexandria, and, if passed, it may make the District’s adjacent suburbs much more desirable for expansion or complete relocation. It’s also possible that the populist sentiment that favored Initiative 77 in DC will expand across the country, weakening cultural attitudes that have long favored the timeworn American tradition of tipping. If this happens, and owners have to hedge the future of their restaurants against a sudden spike in labor costs, fast-casual may continue to grow in popularity, eventually outpacing sit-down restaurant options.

By no means is fast-casual a surefire guarantor of success: within the last few weeks, one DC’s most established and successful fast-caz enterprises, Taylor Gourmet, announced it was closing after a decade in operation, with nearly two dozen locations. Taylor Gourmet’s eclectic hoagies faced increasing competition from other niche fast-casual concepts (Cava and &pizza among them), it may have expanded too much and too quickly (opening and closing a Chicago location within a year), and—most provocatively—many customers found a glitch in their loyalty smart phone app that they exploited quite legally, resulting in a potential loss of thousands of dollars for Taylor Gourmet. Regardless of what the future holds for these trendy restaurants in Potomac Yard Center, the future of hospitality is likely to morph quite rapidly in the years ahead, as technological advances continue to shape how we consume products. And by “consume”, I mean just about every possible definition of the word.

 

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19 thoughts on “Fast-casual dining advances on suburbia: is it the end of the era of Applebee’s?

  1. Jeffrey Jakucyk

    I didn’t realize Don Pablo’s had collapsed to the extent that it did. The Rookwood Pavilion location in Cincinnati closed in July. That was a 1990s adaptive reuse of the LeBlond Machine Tools power plant. Most of the industrial facility was demolished to build the shopping center, but a few bits and pieces were kept, this being the centerpiece. https://goo.gl/maps/Pdof6Woott72 They used this location as the design template for a lot of their other restaurants. The Alexandria location is certainly one of them, though not one of the better executed examples. It does appear however that some architectural details were stripped off after Don Pablo’s left, specifically those keystones, or whatever you want to call them, at the corners atop the white brick accents. https://goo.gl/maps/Egs9Ja2Jpwm

    Reply
    1. AmericanDirt

      Very interesting. Who knew that, amongst Don Pablo’s leadership, someone had a fondness for turn-of-the-century industrial architecture? I checked to see if the old, long-vacant Don Pablo’s (now a Portillo’s apparently) in the south side of Indy used that typology. Nope. Much more of the Applebee’s appearance.

      As for the Alexandria building, it appears they repurposed the uniform façade from the Don Pablo’s era into something more variegated, perhaps to signal to customers that there are three restaurants here instead of just one. That jaunty angle of stucco (or whatever it is) at the &pizza location is not likely to age well, in my opinion.

      I’m impelled now to research more on Rookwood Commons, which, after scanning it through your Google Street View invitation, seems likely to be among the higher-income strip malls left in the region. A prime area for middle-upper suburban shopping, not far from some well-maintained old walkable neighborhood centers, like Hyde Park. Too bad it’s suburban Norwood and not Cincinnati that’s reaping the economic benefit of that substantive investment–and one that seems to continue well into the 2010s, judging from all the changes that have taken place on that northern triangle parcel at the intersection of Williams and Edwards. Was that a brownfield or even a Superfund site until recently?

      Beyond that, the redevelopment approach at Rookwood/LeBlond appears very similar to another 90s-era brownfield reclamation that I wrote about: Brass Mill Commons in Waterbury, CT. https://dirtamericana.com/2015/05/dethroning-top-brass-mill/ Like your example, the developers took down 90% of the old industrial buildings to transform to suburban shopping and parking lots, while keeping a few iconic structures as a tribute. It no doubt seemed like a good idea at the time, though developers today would almost definitely pursue a path of more concentrated historic preservation to achieve a higher internal rate of return. Fortunately Cincinnati (and Norwood) can claim far more great architectural fabric beyond what was lost through the mallification. in Waterbury, the project took down almost all of the city’s industrial heritage for a conventional mall right next to their downtown, and now the mall is starting to falter. It’s hard to see any credible back-up plan for Waterbury, which is already very economically depressed.

      Reply
        1. AmericanDirt

          Interesting. If I recall correctly from growing up nearby, the Don Pablo’s was the original tenant, so the building was probably about 25 years old when it was demolished. I have a hard time believing that a Portillo’s would demand a much larger (or smaller) floorplate.

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          1. Chris B

            Portillos has a long narrow kitchen at the side rather than a big square one at the back. It’s more like a fast food kitchen (grill/fryer plus 50 feet of counter).

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          2. Chris B

            And as you know, 25 years is about the outside limit for chain specific suburban outlot buildings…”cheaper” to start over when the new franchise has a specific operating system embodied in the floor plan.

            (Mickey Ds has been tearing down and rebuilding its own sites for years when the plate will no longer accommodate the newest OS.)

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      1. Jeffrey Jakucyk

        The history of Rookwood Pavilion, Rookwood Commons, and Rookwood Exchange is extensive and quite fascinating. It’s one in a series of stories about Norwood’s industrial collapse and the concomitant loss of tax revenue, leading to them going all-in on several very suburban commercial developments. I’d be happy to go over it in detail with you offline.

        In brief however, Rookwood Pavilion was the former LeBlond Machine Tools factory at the corner of Madison and Edwards and was built in the early 1990s. Rookwood Commons was the Hyde Park Lumber Company and some other lesser industrial facilities behind it to the west, and it was built in 2000, with very poor connectivity to Rookwood Pavilion. Rookwood Exchange to the north across Edmondson was a decent little residential neighborhood and was the subject of a long eminent domain battle that went to the Ohio Supreme Court: Norwood, Ohio v. Horney. Most of the houses were demolished in 2005, but the court case and recession left the site as an urban prairie until 2012. Construction is only now wrapping up due to the mix of hotels, office, retail, restaurant, and apartments being constructed in sequence rather than in parallel.

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        1. AmericanDirt

          Thanks for the details. Were the homes at Rookwood Exchange perceived as being too close to the brownfields and no longer habitable, or was it more a matter of securing a bigger parcel for site control and redevelopment into the mixed-use node currently at this site?

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          1. Jeffrey Jakucyk

            This wasn’t a brownfield situation. LeBlond was a machine tools factory that made industrial milling machines (mainly lathes) etc., and HP Lumber was just a lumberyard, wood shop, and showroom. The houses were viewed as an easy target for expansion in a location with good highway access and visibility. Several houses, especially along Edwards and Edmondson, had been turned into offices for dentists, accountants, realtors, etc. Most of the properties were bought privately by the developer, but Norwood attempted to use eminent domain on the few holdouts per the US Supreme Court’s then recent Kelo v. City of New London ruling. That allowed eminent domain to be used for economic development purposes, for instance by taking houses and giving the property to a developer.

            The crux of the Norwood Supreme Court case was twofold. First, it established that economic development by itself does not satisfy the public use requirement of Ohio’s Constitution, thus eminent domain could not be used in such situations. Second, the city declared the neighborhood to be “deteriorating,” which the court determined to be too vague. It also assumed that the neighborhood would become blighted or a public nuisance, but eminent domain could not be based on something might happen in the future, only what’s actually happened. So they ruled in favor of the homeowners, and the final holdout got $1.25 million for a house that was probably only worth $75K even before all this started.

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        2. AmericanDirt

          Interesting turn of events. The idea of using the term “deteriorating” to describe a neighborhood has vague evocations of the sort of classification used during mortgage redlining a half-century ago. And it seems that the interpretation of the public use requirement at Ohio’s constitution allowed for a sort of “anti-Kelo” decision that many other states have embraced in various forms…if I’m interpreting this judgment correctly.

          Reply
  2. Brian M

    The question in MY outer suburban Bay Area working classish town is: How many hamburger joints are enough? We already have a couple of excellent locals (one really old school, one better one), a Five Guys and Fuddruckers, etc. Now opening are a Mel’s Diner and a Habit Burger. That is a lot of fast casual burger joints!

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    1. AmericanDirt

      I think that’s a national trend. Everyone wants to be the next Five Guys (or its much smaller West Coast counterpart, In-N-Out Burger, which I assume is also fast-casual, but correct me if I’m wrong). It really was a novel concept when it began. My suspicion is that most of the competitors will be gone within 5-10 years, and Five Guys will remain. Do they have Steak and Shake out that far west yet, or is the market cornered?

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      1. Brian M

        One Steak and Shake just opened in San Francisco.

        I would classify In N Out as standard fast food. They really emphasize drive-through service, for one thing.

        It’s fans claim it is obviously superior, but I am not that enamored by them. rather pay a buck or two more at Five Guys.

        Reply
    1. AmericanDirt

      My irritating blogging platform does not explicitly inform me when comments go under moderation…and I set the posting regulations to the most liberal possible (i.e., practically no moderation whatsoever). Sorry about that.

      Reply
  3. Chris B

    Some failing chain locations could be reworked.

    Most Applebees look like they could be repurposed as a MacAllisters-type place.

    Bob Evans have counters already and a QSR-ready footprint. (The one at 31/465 just bit the dust last month. That’s two of three on the south side of Indy in recent years.)

    Cracker Barrel, by sticking to the interstates, may dodge the bullet for a while longer.

    Reply
    1. AmericanDirt

      Yeah, I’m kind of surprised the Bob Evans couldn’t make it on the south side. Unfortunately, that intersection (U.S. 31/465) has a reputation of being a less-than-safe area, due largely to the presence of hotels that have degraded into permanent residences for a largely transient population. Considering Bob Evans’s appeal to the older crowd, I’d think it could do quite well among the expanding senior population in the years ahead, unless boomers prefer something with a fresher, hipper image.

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      1. Chris B

        My younger Boomer wife and I definitely prefer something fresher and hipper, although our daughter will readily go with me if mom’s out of town and we’re on our own. The guests I remember seeing the last couple of visits (3 over the past 12-18 months) were on average people my age…and their parents…along with a handful of little ones. 20-somethings like our daughter were much more likely to be servers than customers. So I think the appeal is limited to the “now-older” crowd, and as Boomers age ungracefully into the Senior Menu, there will be fewer Bob E’s customers than there are today.

        Bob E’s in particular has an issue…it’s now owned by a private equity fund, the kiss of death for an operating business. Food and service quality have been declining, though the latter could simply be near-full employment at work.

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    2. Brian M

      Nooooo. One of my few fond memories of The Monsanto Plains (the Midwest) is the Bob Evans Biscuits and Gravy plate.

      Reply

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