As restaurant chains go out of business or prune their store counts in the tough economy, competitors are jumping on the opportunity to move into the vacated locations as a way to expand quickly and cheaply.
Restaurants can convert their competitors’ closed sites to their own brands at a lower cost than building new restaurants from scratch, industry executives note. Incoming businesses also have the upper hand in negotiating rents with landlords stuck with empty restaurant space.
“You definitely have the bargaining power because you have all the vacancies, and landlords are aware of that,” says Navin Nagrani, vice president of Hilco Real Estate LLC, which specializes in real-estate restructuring.
While the restaurant industry has been hammered over the past couple of years by a consumer-spending pullback, lower real-estate and development costs and lower rents have emerged as a tailwind for those chains still in expansion mode.
Photo by Buffalo Wild Wings.