Outside the Box
“You can be assured of a fairly predictable revenue stream that’s only going to grow,” Cheek says.
Because they’re typically located in high-traffic destinations, nontraditional quick serves in airports and universities can bring in more revenue than traditional units, with sales 50 to 100 percent higher than at standard street locations, says Bill Casey, vice president of the food and beverage concept portfolio at HMSHost, a concessionaire that operates foodservice outlets in airports and turnpike travel plazas. However, that doesn’t necessarily mean they’re more profitable, cautions Blair Nicol, a San Diego-based principal and franchise adviser with franchise consultancy FranNet.
Though nontraditional locations are scaled-down versions of their traditional counterparts—excluding amenities such as bathrooms and customer seating, which are typically provided by the venue—they aren’t always cheaper to develop and run. Some venues, especially airports and hospitals, require the use of union labor for buildout, which along with other factors can push costs to about $600 per square foot. Rents in nontraditional venues are often sky high, and even recruiting and labor costs can be higher if the site requires background checks and security clearance of employees or is an out-of-the-way location. Restaurants also can be responsible for group marketing and other fees.
It can also be hard to break into nontraditional locations. When a spot opens, venues will typically put out a request for proposals and take bids. There might be 20 or more applicants vying for a single open spot, and it can take up to two years to complete the process. Even if a company wins the contract, lease terms are often shorter than in traditional locations, starting the process all over again.
Still, some industry professionals say it’s worth the trouble because of the exposure nontraditional locations offer. One of those is George Naddaff, chairman and CEO of UFood Grill, an eight-unit, health-oriented concept based in Newton, Massachusetts. In early 2008, the chain opened its first nontraditional location in Terminal B of Boston Logan International Airport, one of the 20 busiest airports in the U.S. Naddaff, who also founded Boston Market, credits the location with netting the company at least one franchisee, who encountered the concept through her travels, in addition to countless customers.
“When you have 6–7 million people pass through the terminal and see the name, it becomes familiar and helps create the image of our company,” Naddaff says. “What we’re building here is a brand awareness that I couldn’t pay for.”
UFood Grill has three airport spots open with three more under construction. The concept has also moved into Roseville, California’s Westfield Galleria mall and Dallas’ Parkland Memorial Hospital, where it ousted a McDonald’s that had been there for 20 years. The company is trying for spots at more than 20 other airports, and Naddaff hopes to continue leveraging nontraditional venues to grow the brand.
Another chain that uses nontraditional units to its advantage is Subway. At time of press, the sandwich giant was rivaling McDonald’s as the world’s largest quick-service chain with more than 31,800 units, more than 7,000 of which are in nontraditional venues. Subway has shops on military bases, in retail stores, train stations, theme parks, sports venues, community centers, a church, the Pentagon, and countless other atypical locations across the world.
