Gallelli Gazette_May 17, 2023

THE GALLELLI GAZETTE Retail Roundup

QUOTE OF THE WEEK:

According to the Census Bureau, retail sales for restaurants in March 2023 were up 12.5% annually from 2022 levels (which were even stronger at 19.4%). Of course, annual comparisons have been somewhat wonky since the pandemic due to the whiplash of extremes we have seen over the course of just a few years. Here is a telling statistic; In February 2020 (the last month before CoVid-19 fully impacted the US), Americans spent $68.7 billion eating out. In March 2023, Americans spent $87.6 billion eating out. That is a 27.6% increase in the span of just over three years (37 months).

This is why we continue to see strong growth in the restaurant industry, particularly QSRs though the pace of dealmaking has certainly slowed over the past few months as the market has grappled with greater economic uncertainty. But I am still tracking growth plans across all restaurant types that could add as many as 6,000 units nationwide this year.

TOP TEN RETAIL STORIES OF THE WEEK

Welcome to the Gallelli Gazette’s Retail Roundup.

As for this week’s quote of the week… there are 27 articles dealing with restaurant expansion in this week’s issue. Nine are chicken concepts—most of which are new QSR or fast casual concepts (on a related note, QSR Magazine had a great article this week; “Quick Service Versus Fast Casual; Have the Category Lines Blurred Beyond Distinction?”.

I track the planned growth of over 7,000 retail and restaurant chains and I update this data via a multitude of sources ranging from what concepts are willing to share with me directly, information gleaned from the brokerage community, from quarterly earnings reports/calls, and of course, the kind of media reports you see here in the Gallelli Gazette.

If the major players in the chicken game can achieve their stated growth goals for this year, the US will have somewhere near 1,500 new chicken-focused chain restaurant units to open in the US this year. To put in perspective, this would be the equivalent of about two entire Raising Cane’s chains opening all at once. Of course, Cane’s is one of the strongest growing and performing concepts, having averaged about 100 new units annually for the last couple of years.

Only coffee concepts are planning even greater levels of growth this year, despite the economic headwinds at play. Which there obviously are—both Burger King and Hardee’s have seen some major franchisees file for bankruptcy in the last few weeks and will be closing stores. However, even with the headwinds that the restaurant industry has faced since 2020 (from the pandemic to labor shortages and inflation, etc.), restaurant sales have simply not slowed even as economic uncertainty has climbed.

As for the rise in popularity of chicken, in 2022 the most consumed meat in the United States was broiler chicken, with the entire population eating an estimated 98.8 pounds per capita. By 2032, Tyson Foods estimates that number to grow to 106 pounds per capita. Data from the National Chicken Council indicates that between 1970 and 1979, the average American ate between 36 and 40 pounds a week of chicken. By 1985, that number had climbed to 50.5 pounds annually. What happened during those six years to begin the chicken trajectory?

In 1979, McDonald’s launched the Chicken McNugget (for a fascinating listen on the history of the McNugget, check out this Retroist podcast), making Gen X the first generation of children raised on the McNugget—which increasingly became the go-to for satisfying the appetites of finicky children from that time onward. Since then, America has gone from eating roughly four billion chickens per year to over eight. And not surprisingly, Gen-Z (the 11- to 26-year-old demographic that are mostly the children of Gen-Xers) consistently rank Chick Fil-A as their favorite restaurant in consumer polling

Will American’s obsession with chicken nuggets, strips, wings, and good, old fashioned fried chicken continue to grow at a pace that can support this many new and varied chicken concepts? Or will many of these concepts simply cannibalize each other, as German film director Werner Herzog (our quote of the week!) would assume? My take is that chicken chains that can differentiate themselves based on quality, price, ethnicity, and uniqueness will fly. Those that seem indistinguishable from others will lay an egg.

If this was shared with you and you would like to receive the Gallelli Gazette Retail Roundup weekly in your email, email me directly at gbrown@gallellire.com and get on my mailing list.

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Investors Would be Wise to Heed Lessons of ‘Retail Apocalypse” as Office Values Reset CNBC 5/14

America’s Surprise Revival: The Suburbs Axios 5/13

Bankruptcies and Retail Expansion Expected to Take Center Stage at ICSC Event Globe Street 5/12

Here’s Why Commercial Real Estate Could be Banking’s Next Big Worry CNBC 5/12

Warren Buffett: It’s Time for CRE Investors to Feel the Pain Globe Street 5/12

Jamie Dimon Warns US Default Would be Potentially Catastrophic Business Insider 5/11

When the Mall is the Target: The State of Retail and Mass Shootings Retail Dive 5/11

Christmas Tree Shops Files Chapter 11; Will Close 10 Stores for Now Retail Dive 5/9

RIP Metaverse Business Insider 5/8

The Return of Malls Heralds Better Third Places for Teens San Diego Magazine 5/8

789-3324

“Look into the eyes of a chicken and you will see real stupidity. It is a kind of bottomless stupidity, a fiendish stupidity. They are the most horrifying, cannibalistic, and nightmarish creatures in the world.”

–Werner Herzog

IS THE CHICKEN COOP GETTING TOO FULL?

THE GALLELLI GAZETTE Retail Roundup

Issue No. 1 | May 17th, 2023

RETAIL AND CONSUMER TRENDS

The Real Reasons Stores Such as Nordstrom, CVS and Starbucks are Closing in Big Cities ABC 13 5/14

US Consumer Sentiment Plunges to 6-Month Low on Debt Ceiling Debate Debacle Reuters 5/12

Why Mother’s Day is the Most Hated Day in the Restaurant Industry CNN 5/12

Spring Retail Outlook: Cautiously Confident Consumers Fuel a Complex Market Globe Street 5/11

Alcohol Purchasing Trends Are Changing—What the Numbers Say Grocery Dive 5/10

TOP ECONOMIC STORIES

Business Inflation Expectations Remain Relatively Unchanged at 2.9% for Year Ahead Federal Reserve Bank of Atlanta 5/14

US Bank Deposits Rise in Early May

Reuters 5/12

Wage Growth Tracker for April 2023: 6.1% Y-o-Y

Federal Reserve Bank of Atlanta 5/11

Inflation Eases Again in April to 4.9% Grocery Dive 5/10

Commercial Real Estate Lending Plunged 56% Last Quarter as Logjam of Uncertainty Clogged Market

Business Insider 5/10

TOP RETAIL REAL ESTATE TREND NEWS

Where the Highest Levels of CRE Distress Are: Minneapolis and Chicago Lead Globe Street 5/11

Making Heads AND Tails Over CAM and Taxes

Shopping Centers 5/10

The Decline of the Five-Day Commute is a Boon to Suburban Retail Wall Street Journal 5/9

Can Actual Mall Rats Save the Mall?

New York Times 5/9

Master Planning to Rescue Malls

WWD 5/9

BUILDERS & BUYERS NEWS

Take a Sneak Peek at Plans to Remake Former Foothills Mall in Tucson into Mixed Use “Uptown”

Tucson 5/14

17 Must Reads for Real Estate Investors Week of 5/12

Wealth Management 5/12

Struggling Minneapolis Area Mall, Burnsville Center Under Contract for Sale; Likely to be Redeveloped

Minneapolis Star Tribune 5/12

How Lending for Retail Assets Has Changed in Today’s Environment Globe Street 5/10

Redevelopment of CityPlace Mall in Long Beach CA as Mixed-Use Project “Mosaic” Moves Forward

Globe Street 5/10

SUPPLY CHAIN/ECOMMERCE/OMNICHANNEL/TECH

After Last Year’s Inventory Tidal Wave, where do Retailers Go from Here Supply Chain Dive 5/14

eCommerce & Packaging Dips Linked but Don’t Necessarily Signal Wider Downturn Retail Dive 5/12

Adobe: Online Prices Continue to Drop Retail Dive 5/12

As Supply Chains Return to Normal and Supply Leveling Off; the Off-Price Party May be Over Retail Dive 5/12

Bed Bath & Beyond’s Spillover Effect on Industrial Real Estate

Globe Street 5/11

ARE YOU EXPERIENCED?

EXPERIENTIAL RETAIL NEWS

Indoor Pickleball Concept Opens in Former Burlington Space at Shore Mall (Philadelphia Metro) CBS News Philadelphia 5/14

Experiential Concept F1 Arcade to Open in Boston

Retail & Leisure International 5/12

Experiential Concept Puttshack Opens in Pittsburgh’s Historic Strip District PR Newswire 5/12

Food Hall to Open in Vacant Bank Building in Downtown Hickory NC Hickory Record 5/11

Food Hall Topanga Social Opens in LA

QSR Magazine 5/11

Citizens Market Atlanta is Buckhead’s New Chef Driven Food Hall Buckhead 5/11

The Park at RVA Gives Washington DC Food Halls a Run for Their Money Eater DC 5/11

A Chef Driven Food Market and More Coming to DC DC Modern Luxury 5/11

Redevelopment of Suburban Atlanta Mall (Formerly Stonecrest Mall) to Get New Food Hall & Other Luxury Amenities

Urbanize Atlanta 5/11

Food Courts and Food Halls are Not the Same Experience

Mashed 5/9

THE GALLELLI GAZETTE Retail Roundup

Issue No. 1 | May 17th, 2023

RETAIL CHAIN STORE OPENINGS AND GROWTH

Brazilian Luxury Jewelry Brand Ara Vartanian Opens Miami Flagship

Fashion United 5/14

Regional 213-Unit Shoe Sensation Opens in Detroit Lakes; Seeking Small Market Growth Lakes Radio 5/13

Floor & Décor Opens 200th Unit in Metairie LA; Will Open up to 35 Units in Total in 2023

Chain Store Age 5/12

Barcelona-Based Mango Ramping Up US Growth; 15 New Stores This Year

Fashion Network 5/12

Von Maur’s 71-Unit Junior Women’s Concept Dry Goods to Open 11 Stores in 2023

Chain Store Age 5/12

Take 5 Car Wash Opens 2 Greater New Orleans Units

New Orleans Biz 5/12

As Shoppers Look for Discounts, Nordstrom Hopes Rack Stores Can Fuel Revival, Opening 20 Stores This Year CNBC 5/12

Nike Live Retail Lab Concept Store Opens in Tigard’s (Portland Suburb) Bridgeport Village

Oregon Live 5/11

Southeast C-Store Chain Enmarket Opens 130th Unit in Richmond Hill, GA

Savannah Business Journal 5/11

Backstage Blooms as Macy’s Plans More Off-Price Openings—Opening Seven Store-WithinStore Mall Locations

Home Textiles Today 5/11

Parachute Opens 26th US Store (in NYC’s Flatiron District)

Retail Dive 5/11

This is What a Luxury Cannabis Lifestyle Store Looks Like Retail Brew 5/11

204-Unit Warby Parker to Open 40 Stores in 2023

Chain Store Age 5/10

PGA Superstore Inks Deal at Boise Area’s Gateway Marketplace Commercial Search 5/9

Irish Off-Price Giant Primark (Currently w/15 USA Units) to Open in Charlotte Area’s Concord Mills as Part of Plan to Open 60 Stores in Next Five Years

Axios Charlotte 5/9

Cincinnati-Based Home Furnishings Retailer Watson’s Opens Five Detroit Area Stores as Unit Count Grows to 29

Home Furnishings Business 5/9

700+ Unit Canadian Retailer Pet Valu to Open as Many as 50 Units in 2023 North of the Border CityNews Everywhere 5/9

Dallas-Based Luxury Retailer Saint Bernard Opens in Austin TX

Austin Culturemap 5/9

Miniso to Open Times Square Flagship

Chain Store Age 5/8

Timberland Opens NYC SoHo Flagship

Chain Store Age 5/8

RETAIL CHAIN STORE CLOSINGS AND CONTRACTION

Target Closes One if Its Urban Stores in Philadelphia WPG 5/14

Scotch & Soda Closes Nine Stores; Now at 30-Units Following BK and Purchase by New Owners Retail Dive 5/13

David’s Bridal May Have Lost to the Experiential Economy Retail Brew 5/12

Australian Luxury Furniture Retailer Coco Republic is Latest Retailer to Leave Downtown San Francisco Chain Store Age 5/11

Hundreds of Bed Bath & Beyond Leases Prepped for the Auction Block Chain Store Age 5/8

THE GROCERY AISLE

Amazon’s Uphill Battle in the Grocery Sector Supermarket News 5/11

Fareway Stores to Open 135th Unit This Month in Des Moines Suburb, Has Another Iowa Unit Planned for 2024 Winsight Grocery Business 5/11

1,339-Unit Publix Adds New Store in Stuart FL to Growing List of Store Openings Winsight Grocery Business 5/11

446-Unit Grocery Outlet Post Strong Q1; Will Open 25 – 28 Stores This Year Grocery Dive 5/11

El Super to Open 2 Units; Smart & Final to Open 3 as Parent Company Announces Growth Chain Store Age 5/11

Sav-A-Lot Backfills Former Whole Foods Store in Chicago Suburb Englewood Crain’s Chicago Business 5/11

Amazon Fresh Pulls Plug on Six Minneapolis Stores Before They Open Grocery Dive 5/10

Sprouts Opening New Stores in FL and VA Winsight Grocery News 5/10

Natural Grocers Closing Two DFW Stores; But on Track to Open Four to Six New Units This Year Grocery Dive 5/8

Lidl to Open Second Grocery Store in NYC (Chelsea) Supermarket News 5/8

FOOD & BEVERAGE & ENTERTAINMENT

Hardee’s Franchisee Files BK; 14 ATL Area Restaurants to Close Original Newsbreak 5/12

80-Unit Taziki’s Mediterranean Café Expanding to New Orleans Fast Casual 5/12

461-Unit Noodles & Company to Close Midyear w/as Many as 10 New Units; Despite Fallout in Delivery Sales QSR Magazine 5/12

14-Unit Detroit-Style Pizza Chain Via 313 Adds New Restaurant in Bee Hive, TX Pizza Marketplace 5/12

92-Unit Salata Salad Kitchen Opens New Dallas Fort Worth Store; Continues Texas Push Fast Casual 5/11

FAT Brands Switches Leadership; Plans to Open 175 New Stores in 2023 Across its Concepts

QSR Magazine 5/11

THE GALLELLI GAZETTE Retail Roundup

Issue No. 1 | May 17th, 2023

Houston-based Clutch City Cluckers to Open Ninth Unit (this one in Cypress TX)

QSR Magazine 5/11

Buffalo Wild Wings Abruptly Closes Six of their 11 Ontario Canada Units

CP24 5/10

20-Unit Fast Casual Chain Wing Snob Expands in Michigan; Has 13 More Stores About to Open

QSR Magazine 5/10

716-Unit Dutch Bros CEO: ‘Early Innings of Long-Term Plan’ That Includes Opening 150 Units

This Year and Hitting 4,000 Stores Nationally Over Next 10-15 Years

Yahoo Finance 5/10

Burger King Closing 400 Restaurants Globe Street 5/10

225-Unit Slim Chickens Opens in Clarksville TN; Has Sold Franchise Rights to As Many as 1,100 More Units

QSR Magazine 5/10

200+ Unit Chicken Salad Chick Expands to Bloomington IL

QSR Magazine 5/10

490-Unit El Pollo Loco Investing in Automation While Growing; Will Open as Many as 14 Units in 2023

QSR Magazine 5/10

75-Unit Parker’s Kitchen Opens New Restaurant in North Charleston, SC Savannah Business Journal 5/9

Shaquille O’Neal’s 18-Unit Big Chicken Signs 45 Unit Franchisee Deal; Will be in South Florida by End of Year

QSR Magazine 5/9

Wingstop Opens 2,000 Restaurant (this one in Pittsburgh PA)

QSR Magazine 5/9

SUPER CHIX Opens 25th Location (Williamsburg, VA); Will Close 2023 With 15 New Stores in Total

QSR Magazine 5/9

490-Unit El Pollo Loco Inks Deals in Colorado, New Mexico, and El Paso Fast Casual 5/9

Texas Roadhouse ‘All In’ on Growing 46-Unit Bubba’s 33 Concept—Wants to Open at Least 10 Per Year

FSR 5/8

LOCAL MARKET RETAIL NEWS

What’s Driving Dallas Retail?

Commercial Property Executive 5/11

New Retail and Restaurant Openings in Detroit Hour Detroit 5/11

Retail Availability Near Record Lows in St. Louis

Costar 5/11

Big Leases Set to Expire at San Francisco’s Westfield Centre After Nordstrom Exit The Real Deal 5/10

Creating an Epicenter of Luxury in Washington DC: How CityCenterDC Transformed a Once Desolate Downtown Area

WWD 5/9

M&A MANIA

Vitamin Shoppe Parent Going Private in $2.6B Deal

Retail Dive 5/12

Bluestar Alliance Acquires Scotch & Soda US Assets Out of BK Footwear News 5/11

Kroger CEO Ready to Fight Hard for Merger Approval Supermarket News 5/11

Tempur Sealy to Acquire Mattress Firm in $4 Billion Deal Retail & Leisure International 5/11

Charleston C-Store Chain Refuel to Grow to 215-Units with Acquisitions in TX and SC Post & Courier 5/8

CULTURE CORNER: PAVED PARADISEHOW PARKING EXPLAINS THE WORLD

Welcome to the Culture Corner. Each week look here for something interesting, cool, thought provoking, funny, moving, culturally relevant (or not). Whether it may be a fascinating new book, some amazing music for your next dinner party or just some quirky overlooked person from history, hopefully you’ll enjoy this section of the Retail Roundup as much as I enjoy putting it together.

One would assume that a book entitled “Paved Paradise: How Parking Explains the World,” would probably be essential reading for urban planners, developers, zoning officials and a smattering of real estate-focused professionals. But that this book would be as enjoyable as reading zoning code and would be drier than a mouthful of Saltines on a hot desert day. But Henry Grabar’s new examination of the hidden costs of parking, its history, and its impacts isn’t just critical reading for everyone in real estate… it’s just deeply enjoyable important reading for everyone that wants to better understand the hidden history of something that profoundly shapes the world we live in. From covering how the costs of “free parking” profoundly impact all commercial and residential development (and how those costs end up being passed on to businesses and consumers), to the role it has played in significantly worsening our housing affordability and homelessness problems, this is not a mind-numbingly dull industry white paper.

Instead, Grabar weaves a compelling narrative of analysis, statistics, history, culture, and fascinating anecdotes that include everything from the rise of the American Mall to the often-seedy history of the popularity of the parking business with mobsters, money launderers, fraudsters, swindlers, and now, hedge funds. It also details the role of parking (as well as NIMBYs) in paralyzing efforts to build affordable housing and its crippling impact on development, as well as inspiring road rage and violence.

Check out this clip from a recent appearance author Henry Grabar had on NPR’s Fresh Air program. Additionally, I have included some recent book reviews. This is worth a read—I couldn’t put it down. And, did I mention, it’s “just” a book about parking?!

Have a great week…

Fresh Air Podcast: ‘Paved Parking’ Examines how Parking has Changed the American Landscape

Wall Street Journal: ‘Paved Paradise’ Review; Why Downtown is All Parked Up

New York Times: America, Land of Free Parking— ‘Paved Parking’ Examines the Country’s Obsession with Parking, from its Effects on Urban Sprawl to the Violence it Sometimes Provokes

Exasperated Infrastructures: Henry Grabar’s ‘Paved Paradise’ is a Masterpiece (and Spiritual Successor to ‘The Death and Life of American Cities’ and ‘The High Cost of Free Parking’