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Fast-food chains hungry for core locations

Hospitality

Fast-casual food chains hungry for core locations

Restaurants increasingly are opening smaller, central outlets to attract busy urban dwellers, especially the millennials

A&W opened its 900th restaurant late last year on Bloor Street West in Toronto.

More than 60 years after it first opened its doors to Canada, A&W has celebrated another milestone with the unveiling of its 900th restaurant.

More importantly for the country's second-biggest quick-service burger chain in terms of stores, after McDonald's, the recently-opened restaurant on Toronto's Bloor Street West also marked the company's 50th urban location. A&W, whose origins were in suburban drive-in restaurants, went on the record early in 2017 to announce that building a stronger presence in urban centres such as Toronto, Montreal and Vancouver is central to the company's stated expansion target of reaching 1,100 stores by 2020.

And whether it's converting an older restaurant space in a rapidly gentrifying neighbourhood or fitting out a new build on the street level of a high-rise condominium, the end game is still the same: attracting the next generation of A&W devotees.

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"People are moving into big, urban cities and a lot of people are now choosing to live in condos," says Patti Parente, vice-president of real estate and franchising for A&W Food Services of Canada. "… So when we saw that kind of thing happening, we started in 2010 to build some of these restaurants and in fact that was the time that we really began to say, 'Wow, we can get millennials into our restaurants,' because up until then our guests had been baby boomers."

The North Vancouver, B.C.-based company opened more than 40 stores in 2017, building on the 30 it opened in 2016 and currently has 918 locations nationwide. In the eyes of the outgoing A&W Canada chairman and chief executive officer, Paul Hollands, one of the keys to building on the annual revenue of $1-billion nationwide is make the chain highly convenient.

"If you're not convenient you're not going to be in the decision set for our guest," Mr. Hollands says.

A&W opened its 900th restaurant on Bloor Street West in Toronto, part of a campaign to locate its eateries in convenient places and attract customers beyond its traditional baby boomer crowd.

That mantra is echoed by rival Canadian chain South St. Burger Co. With more than 40 restaurants across the country, mainly in Ontario and Alberta, the Toronto-based company is selective about where it positions itself in each market.

"Location, location, location has never been more truer than it is now," says Thomas McNaughtan, South St.'s vice-president. "As the cities are getting bigger and the traffic is getting heavier, being on the wrong side of the street can make or break your location."

One of the key things that South St. Burger considers when opening a store is who its neighbours are going to be. As a company that considers itself a gourmet burger chain, South St. wants to be close to well-known retailers such as Golf Town, Best Buy, Starbucks and Winners, Mr. McNaughtan says

"They draw the same type of customer that we're looking for, someone that will pay for quality," he says.

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Like many other casual dining restaurant companies, South St. Burger is also increasingly considering smaller footprints to get into the right locations. In large urban markets such as Toronto, the prevalence of high-rise towers is providing greater options in retail spaces, with a built-in clientele to boot.

As a result, South St. is planning for its first store south of the Gardiner Expressway in Toronto, looking to capitalize on the emerging residential areas that are springing up along the waterfront. While Mr. McNaughtan says the company generally wouldn't go bigger than 2,200 square feet in designing a restaurant's footprint, the space the company is looking at, near the Corus Quay Building, will be much smaller than that.

But with the rise of third-party delivery companies such as Foodora and UberEats changing the way customers get their food, that's not something that worries Mr. McNaughtan.

"We will take a smaller space there because we'll rely more heavily on the UberEats, the takeout and the pickup business," he says. "That's something that's really changed in our world. So we'll take a smaller space there and hopefully do just as well with it."

A&W wants to build a stronger presence in urban centres such as Toronto, Montreal and Vancouver as it shoots for its goal of reaching 1,100 stores by 2020.

Food delivery companies are also having an impact on how a restaurant is laid out. At another planned South St. Burger location on Toronto's John Street, Mr. McNaughtan says that when customers enter that restaurant, they can either go straight ahead for takeout, or go left to come into the restaurant's dining room, which is to have an emphasis on communal eating.

"I'm sure you've been to New York City and seen how they'll jam people into a restaurant and everyone's communal and you're sitting next to strangers and nobody cares," he says. "Well, we're getting more and more like New York, I think we have to act a little bit more like it as well."

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Like South St. Burger, B. Good Canada, a health-conscious, fast-casual restaurant with five locations in the Greater Toronto Area, is also paying strict consideration to restaurant size. Chief operating officer Mark Murphy says the company is going to a smaller footprint wherever possible.

It's a common theme in the restaurant industry.

"One of the broader trends that I think impacts the real estate market, and this is across the span of the next 10 years as opposed to the next year, is an overall shrinking in the footprint of restaurants," says Erik Thoresen, principal of Technomics Inc., a Chicago-based food services industry consultant.

He adds that while an increasing reliance on third-party delivery companies will help drive this, another is the sheer number of restaurants available to consumers, with that level of competition meaning that having large seating areas to accommodate foot traffic isn't quite the necessity that it once was.

Jean Seguin, former restaurateur and founder of Restaurant Business Broker, a Vancouver-based full-service restaurant real estate firm, says another reason behind shrinking spaces is that people just don't have the time to sit and have lunch any more.

In Vancouver's business district, for example, he says there has been a recent surge in restaurants that are designed for customers in a hurry.

"They have 20-25 seats and you're meant to sit, eat quickly and get out," he says. "A lot of them don't have a liquor licence."

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