Food is the new fashion at outlet centers

The trend follows on the heels of a worldwide restaurant renaissance, and also on the outlet sector transition from remote roadside locales to heavily populated metro markets, says shopping center adviser Karen E. Fluharty, founding partner and chief strategist of New Jersey–based Strategy & Style Marketing Group. “Food is the new fashion — outlet centers included,” said Fluharty. “It’s part of the evolution of all retail.”

At the quarter-century-old Tanger Outlets in San Marcos, Texas, the restaurant roster has grown to 13 tenants in recent years, among them such national players as Chipotle, Cracker Barrel and Outback Steakhouse, well up from just a few nondescript food tenants earlier on. At Craig Realty Group’s 3-year-old Outlets at San Clemente (Calif.), roughly a dozen new restaurants, some of them offering panoramic ocean views, are being brought in to help cater to the new breed of experiential diner.

Until recent years, outlet malls tended to sign on with one master concessionaire that would often fill food courts with undistinguished mom-and-pops, says Fluharty. But as trendy and authentic food options started resonating more with mall shoppers, the outlet industry began aggressively courting stronger tenants, including national and regional favorites, she says. Among those is BJ’s Restaurant & Brewhouse, which now operates eateries at such centers as OKC Outlets, in Oklahoma City; Palm Beach (Fla.) Outlets; Tampa (Fla.) Premium Outlets; The Outlets at Orange (Calif.); and at a pad site near San Francisco Premium Outlets. LongHorn Steakhouse has also expanded to numerous outlet centers, including Simon’s Tampa Premium Outlets and Hagerstown (Md.) Premium Outlets.

The evolution of the outlet restaurant has been somewhat deliberate, says John Klein, the principal of Red Bank, N.J.–based International Outlet Consultants. As outlet shopping caught fire and centers added on tenants, customers tended to dwell longer. “And that brought in higher food quality, which helped extend the shopping experience,” Klein said. As visitors from South America, Europe and Asia began flocking to U.S. outlet centers, they came to expect food options that were unavailable, which spurred the creation of even more outlet restaurants, he says. Meanwhile, the Mills Corp. (now part of Simon) helped redefine the outlet industry with its sit-down food components.

To compete, other developers upgraded the dining mix at their outlet concepts. “In the past few years, those owners have been able to attract more-exciting options,” Klein said. Among those are Blaze Pizza, Chipotle Mexican Grill, Five Guys, Le Pain Quotidien, Olive Garden, Ruby Tuesday, Shake Shack and The Cheesecake Factory, observers say. Avison Young entered the third-party outlet mall management business three years ago and now counts among its clients the OKC Outlets, in Oklahoma City; and the Sanibel Outlets, in Fort Myers, Fla. In the industry’s infancy, when outlet centers were located an hour or more outside urban areas, patrons were interested chiefly in off-price retail, not eateries, observes John Schupp, Avison Young’s senior vice president of retail development. “The food was incidental,” Schupp said. “Shoppers went for the perceived discounts. But now that outlets have moved to metro areas, food is more important, and we are starting to see fewer and fewer mom-and-pops and more national chains.”

Even today some of the more isolated outlet malls have only a few eateries, while others — such as Legends Outlets Kansas City (Kan.) — are practically dominated by them. Partially as a holdover from its days as The Legends at Village West superregional mall, Legends Outlets Kansas City has more than 30 eating places. 

Other established centers have launched vigorous restaurant-recruiting efforts, says Schupp. Last year the Simon-owned Colonnade Outlets at Sawgrass Mills, in Sunrise, Fla., added three eateries to the existing 10: a 14,300-square-foot Matchbox American Kitchen & Spirit; the Mojito Bar & Plates by Douglas Rodriguez; and a 6,500-square-foot Texas de Brazil Churrascaria Steakhouse. Avison Young is fielding a growing number of inquiries from outlet center owners interested in accommodating more restaurants, says Schupp.

None of this is any easy retrofit, however. As Klein points out, older centers may face logistical issues. “Restaurants have certain unique operational needs, including frequent deliveries, later hours, visibility, adjacent parking and good access,” Klein said. “So it’s important for the outlet center owner to resolve these challenges appropriately.” Owners of some of the older outlet centers have lived to regret their decisions to parcel off peripheral pad sites to outside restaurant developers now that food is in greater demand, Klein says.

Some outlet centers besides the Mills were ahead of the curve in their inclusion of food tenants. When Simon started buying up outlet centers and also developing its own, “they understood the importance of dining from their experience with malls, and they brought this focus to the outlets,” said Klein, who was CEO of Simon’s Premium Outlet division before assuming his present post. “In addition, they have extensive relationships with restaurants which they brought to the outlets.”

As is happening also at conventional malls, the developers of outlet centers are replacing some of their struggling apparel tenants with restaurants, rather than building new outlet space, sources say. Tanger Factory Outlet Centers, which owns the Tanger Outlets chain and is considered a bellwether for the sector, has no outlet openings planned for this year. Instead, it is in the process of finishing the remerchandising and retenanting of six outlet centers, making way for more restaurants in most cases.

For some expanding and repositioning restaurant chains, the costs of entering an outlet mall can be lower than at a traditional mall. “There are growth opportunities for outlet centers, because they can be more nimble and don’t require common-area heating, cooling and lighting, plus they have fewer landscaping and security expenses,” Schupp said. “They can get in there at lower operating costs.”

Today many of the outlet malls getting built are making room for sit-down restaurants early in the design phase and also thinking innovatively about other types of food-service opportunities — such as the new, six-space Curbside Food Truck Pavilion at the Outlets at Corpus Christi Bay, Texas, Fluharty says. 

At the Outlets at San Clemente, which opened in 2015, the developers left space for restaurants to be phased in. Among the recent additions there are Bowlology, Ruby’s Diner and Starbucks. And set to open there later this year is local favorite Rockwell’s Cafe & Bakery. At least two fine-dining restaurants and a Mexican concept are planned as well, and they join Panera and Blaze Pizza. “There’s a really big appetite for more food,” Steve Craig, CEO of the mall’s owner company, Craig Realty Group, told the Orange County Register in 2016.

With all the new development and expansion in the outlet mall industry, “food is now far more forward,” said Fluharty. “We have to continue to modify, improve and innovate to fill that appetite.”