What's in Store for Restaurant Growth

The store-in-store restaurant concept isn't exactly new, as fast food and fast casual chains have staked out the fourth wall of just about every local superstore, but it remains fairly fertile ground for casual and family dining eateries and represents what could be their next big expansion opportunity.

We're probably all familiar with the Subway shops and McDonald's inside Wal-Mart, and the Starbucks stores that have taken over Target counters, but we really haven't seen the broader dining concepts in the space, because their menus and style may not be able to meet the needs of the customer on the go.

That might be changing though. Last year, Bob Evans Farms  (NASDAQ: BOBE  ) announced that it will experiment with a new, non-traditional restaurant concept to open licensed locations in hospitals, universities, airports, malls, and corporate cafeterias under a new Bob Evans Express banner. The first one actually opened inside a BMW manufacturing plant in South Carolina serving a combination of self-serve and prepared-to-order menu items, along with selections from all three of its day-parts menu, a fancy industry term that refers to breakfast, lunch, and dinner. A second one opened a short time later in its own corporate campus to serve as a learning center to expand the idea further.

The lines between restaurant, grocery store, and retail outlet are blurring as companies seek meaningful ways to capture greater amounts of the strained consumer's spending. The market watchers at NPD Group say restaurant traffic remained flat throughout 2013, although the average check was slightly higher than the year-ago period. It's looking a little better for this year, however, as traffic estimates run about 1% higher in 2014 with a 3% gain in spending.

Quick-serve restaurants, a category that covers both fast-food and fast-casual, fared the best with an 8% jump in traffic for the 12-month period ending in September, while categories like casual dining, midscale, and family dining haven't had any gains at all over the past few years despite a heavy promotional environment. 

Supermarkets like Kings Food Markets are developing restaurant-style dining experiences similar to Whole Foods Market, where you can shop for your groceries and also grab a bite to eat, and Tops Friendly Markets has had a Tim Hortons in some of its stores for years. 

Even pharmacy giant Walgreen  (NASDAQ: WBA  )  began developing a line of fresh-food counters in its stores several years ago, showing there's greater acceptance of non-traditional stores. That means restaurants can reach more customers wherever they are while allowing them to expand their footprint at lower cost. Jamba (NASDAQ: JMBA  ) , for example, is already a pretty minimalist concept when it comes to floor space, but it's adding JambaGo kiosks in schools and in Target stores in a bid to keep growing. Burger King Worldwide (NYSE: BKW  ) may be experimenting with perhaps the most non-traditional format: home delivery.

Restaurants that already face steep cost pressures find it hard to justify building new stores in the face of slow traffic numbers, while the store-in-store concept should allow them to meet their needs for expansion while letting someone else foot most of the bill for the building. That could be reason enough to pull a chair up to the buffet of restaurant stocks that undertake this initiative.

The future of retail
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they’re planning to ride the waves of retail's changing tide. You can access it by clicking here.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2785286, ~/Articles/ArticleHandler.aspx, 9/2/2015 2:40:25 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


Today's Market

updated 5 hours ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 4:06 PM
BBY $35.44 Down -1.30 -3.54%
Best Buy CAPS Rating: *
BKW $0.00 Down +0.00 +0.00%
Burger King Worldw… CAPS Rating: *
BOBE $44.78 Down -0.41 -0.91%
Bob Evans Farms CAPS Rating: ***
JMBA $13.89 Up +0.07 +0.51%
Jamba, Inc. CAPS Rating: **
WBA $86.04 Down -0.51 -0.59%
Walgreen Boots All… CAPS Rating: ****