What You Always Wanted To Know About Restaurant Leasing (but were afraid to ask)!

By Guest Columnist Paul G. W. Fetscher CCIM, SCLS
President Great American Brokerage, New York, USA

A restaurant is a food warehouse, storage, preparation, cooking, assembly, sales, consumption and disposal facility. Consider the complexity of fitting such a manufacturing plant into structures with another function.

Assume a 300 square meter restaurant as compared to a 300 square meter dress shop. The comparable sized restaurant will require 250% of the air conditioning, 10 times the electrical service 100 time the water consumption, plus gas service and black iron venting and exhaust. It will also require an internal 3-hour rated fire wall and a fire suppression system over any open flames.

These requirements make restaurants the most expensive per square meter investment in any retail or hospitality property. Such capital investment requires a concomitant long term lease to amortize such a large investment. Therefore it is extremely important to assure that the right concept is in the right place.

Some restaurants are destinations; and others are parasites. It’s important to have the right fit!

Drawing Radius

Destination restaurants will draw from the greatest drawing radius; have the highest check averages, but the lowest frequency of customer visit. Examples in Dubai would be the Aquara Restaurant, the Al Mahara Seafood Restaurant at Burj Al Arab or Benihana.

Impulse restaurants are usually found within an arm’s reach of desire. Dunkin’ Donuts, Sbarro’s and Starbucks are good examples. These have a high frequency of customer visit, low prices, and are very convenient to a patron’s existing traffic patterns. That might be a cup of coffee on the way to work, or a noon break not far from work or convenient to a shopping trip.

Casual theme restaurants are somewhere in-between. These are moderate priced restaurants such as TGI Friday’s or Chili’s. This is a convenient place to stop for a hamburger or a salad. Typical visits would be a couple of times a month.

A larger project needs a healthy mixture of these three general categories. In an enclosed regional mall, the destination restaurants would face the exterior and be accessible at later dining hours when the main mall would be slack in activity. The casual theme restaurants can be spread out throughout such a project. Shoppers would have the opportunity to stop during their shopping journey to have a meal and restore their energy.
A World Onto Itself

A Food Court can be a world onto itself. The vast majority of shoppers will visit a food court, and THEN decide which of the vendors will be their selection of the day. This is known as the “Restaurant Row” effect. Restaurant Rows became popular in California in the 1970’s. A large number of popular restaurants were aggregated together. Diners would typically go to the area and subsequently decide where to eat.

Modern Food Courts started in shopping centers such as Sherway Gardens and Bramalea Square around Toronto Canada in the mid 1970’s, then migrated to the United States. A number of successful examples now can be found in the Gulf States.

Food Courts benefit from certain economies of scale. While one unit may have strong breakfast traffic, another sandwich operation may peak at lunch while a third operation may be strongest at dinner. Each of these, with different peak hours of operation, will use the same common dining seats; but just use them at different hours. Such efficiencies accrue to the benefit of all the operators in a food court.

Hotels in the Gulf States have strong foodservice representation. The Las Vegas Hilton was once the largest hotel in the world. It boasted 3,500 rooms. That hotel needed a number of restaurants to serve the needs of the resident population. Those facilities range from a coffee bar to a steakhouse to a diner style operation to a Benihana to two showrooms for a total of 11 foodservice operations. The showrooms would serve from 1,000 - 2,500 patrons for dinner and a Broadway style show.

Cinderella's Slipper

The Dubai Marriott Hotel has but 10% as many rooms, a mere 350 keys. However that hotel also boasts 11 foodservice operations. It’s not Las Vegas, but it is a collection of foodservice operations, appropriate for the market, and serving not only the residents of the hotel, but the influx of patrons form other hotels or from the indigenous population.

Restaurant leasing comes down to finding Cinderella’s slipper. Know your market, and deliver what is appropriate for that customer and that retail or hospitality environment.


(Paul Fetscher, president of Great American Brokerage in New York, was the consultant in the restaurant merchandizing for Dubai Festival City. He has worked on projects from Thailand to Alaska and from London and Paris to Shanghai and Beijing. Needless to say, he has worked on projects throughout the United States.
He will be teaching a course in Restaurant Leasing for the Mid East Council of Shopping Centers on May 3rd in Dubai.)