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Shopping Centers Today -> June 2002
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HEALTHFUL FAST-FOOD CHAINS SEEK MALLS, CENTERS
By Kimberly Pfaff
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| Evos is achieving sales figures of up to $750,000 at its strip center locations. |
Where’s the beef? No, these days health-conscious shoppers are more likely to ask, “Where’s the veggie burger?” And they can find it, along with soy burgers, salads, baked “fries” and fruit smoothies, at a handful of small restaurant chains establishing themselves in shopping centers across the United States.
In Falmouth, Maine, there’s O’Naturals, an all-organic concept featuring grass-fed, hormone-free beef and free-range chicken. Portland, Ore.-based Andrew Smash serves up meatless burgers, sandwiches and fruit drinks. In Florida there’s Fort Lauderdale-based Healthy Bites Grill and Tampa-based Evos, two chains offering healthful burgers, fries, sandwiches and salads. And Southern California has Topz, where soy, turkey and lean-beef burgers are on the menu.
These companies may be small now, but they all have the same goal: to become major chains and occupy spaces in enclosed malls, lifestyle centers, strip centers and other locations. With the overall health and natural foods market at just over $30 billion annually and growing, some industry observers say their moment has come.
“There’s a clear trend toward people eating better,” said Scott Van Winkle, a principal at Boston-based investment bank Adams, Harkness & Hill. “They’re spending $15 billion a year on vitamins and supplements alone.”
These healthful fast-food concepts “are a force for further change in the fast-food market,” agreed Steven Hoffman, publisher of Natural Business Communications, a Boulder, Colo.-based company that provides market research on the natural-foods industry. “Consumers of natural products, as busy as they are, don’t really feel that the current fast-food environment really serves them.”
This is encouraging some restaurant chains to begin or continue offering more healthful and vegetarian menu items, he said.
“We’re already seeing McDonald’s offering a meatless alternative in select markets,” he said.
O’Naturals might have only one store for now, but it has some big names behind it: Gary Hirshberg, founder of organic yogurt company Stonyfield Farm, is chairman, and board members include Roger Berkowitz, CEO of Legal Sea Foods, and Peter Roy, former head of Whole Foods Market. The company considers itself a combination of McDonald’s, Starbucks and Whole Foods.
The company is negotiating two new units this year and plans three additional restaurants in 2003. The focus for now is on lifestyle centers in the New England region. “From there our intention is absolutely to roll across the Northeast and nationally,” said Mac McCabe, O’Naturals’ president and CEO. “Ultimately, we feel there could be several hundred.”
Evos (for evolution) has two strip center locations in the Tampa metro area, and a third, stand-alone unit that opened this spring in St. Petersburg, Fla. The company’s fourth store (its first drive-through) should be up by the end of this year, and two to four more units are slated for 2003. The chain does about $600,000 to $750,000 in sales per year in each of its current restaurants, which are about 2,000 square feet.
Healthy Bites is focusing on stand-alone, drive-through units. Popular menu items include a chicken and sun-dried-tomato pocket. Sales at the first store are in the $400,000 to $500,000 range; the company expects its new Boca Raton, Fla., store to top $1 million.
Topz has six units in the greater Los Angeles market. Franchising will add 10 to 12 stores in the next year; in the longer term it plans 100 to 200 more in lifestyle centers, enclosed malls and stand-alone locations. Andrew Smash has three Oregon stores, including one at the Gateway Mall in Springfield. Sales are approaching $700,000 per unit, and the company plans eight to 10 additional area units in the next two years.
Even McDonald’s entered the category in 2001, when it purchased a minority stake in London-based Pret a Manger, a 16-year-old chain specializing in fresh, handmade wraps, salads and sandwiches that are free of additives and preservatives. The company will have 20 Manhattan units by the end of the year and plans 40 New York City shops before expanding into other markets.
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Of course, simply offering healthy fare is not enough. To keep customers coming back, the food must first and foremost be flavorful. Ignoring that advice proved the downfall of McDonald’s McLean burger and of D’Lites, a vegetarian chain that closed its 86 units in the 1980s, industry observers say.
That appears to be a lesson the latest crop of healthy concepts takes seriously.
“If we don’t win the consumer when he or she takes the first bite, it’s over,” McCabe said.
It also explains why some chains appear to downplay the “health” aspect of their low-fat offerings and instead focus on the taste.
“We’re not really a health food restaurant per se,” said Dino Lambridis, Evos’ co-owner. “We’re a fast-food restaurant that happens to serve great-tasting food that’s healthy.”
Topz, for its part, changed its tag line from “Fresher, healthier fast food” to “Leanest burgers in America.”
Probably the greatest hurdle these smaller concepts face as they expand is competition, said Adams, Harkness & Hill’s Van Winkle.
“You’re facing an environment of quick-service competitors that have built up significant brand equity and that are ubiquitous,” he said.
O’Naturals has experienced this.
“As soon as we zero in on a terrific facility, some national chain comes in and displaces us before we even get a chance,” Hirshberg noted. “It’s hard enough to get on the map and get credibility with real estate developers when you’re a startup. Add to that the fact that most developers are not necessarily health-food junkies, and we now have two strikes against us.”
Topsfield, Mass.-based regional developer Topsfield Associates, however, has made O’Naturals’ organic, all-natural positioning a selling point.
“We felt that it was a unique concept,” said Chris Gove, property manager of The Shops at Falmouth Village.
Other developers, too, seem open to adding more healthful food concepts.
“Something like that would appeal to our customers,” said Terry McEwen, president of Memphis, Tenn.-based lifestyle center developer Poag & McEwen.
Such concepts have potential in malls, too, executives say.
“We haven’t done a lot of leasing in that area, although I think we should,” said Ed Taylor, assistant director of retail leasing at The Rouse Co., Columbia, Md. “It’s a wonderful idea, and it’s just common sense. People are looking for that kind of food.”
The question, he added, is how well a natural-foods restaurant might do in sales. Each unit would need to do about $700,000 to $800,000 a year in a mall, he opined. Those doing less than that might have a tough time.
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