By Paul G. W. Fetscher CCIM, SCLS – President, Great American Brokerage Inc.
Broadway theaters have a nice revenue model. There’s going to be a show and they rent their seats. The better the seat, the higher the price. Restaurants are, as Rocky Aoki the founder of Benihana observed, “Theater of the Stomach”. Unfortunately they don’t get to charge according to how good the location is within the restaurant.
Retail sales are tracked by “Sales per square foot per year”. A regional mall’s productivity is usually expressed in the sales per square foot of small store space (excluding the department stores). That might be one way to evaluate restaurant sales and productivity as well.
Another metric of productivity can be expressed as “Sales per Dining Seat per year”
Let’s look at how that relates to several levels of operations.
A visit to McDonalds can give a lunch of a Big Mac, fries and a large drink (a Diet Coke of course). Cost is about $8. The meal is delivered at the counter and it’s time to turn around and find a seat. From being seated, the meal is typically consumed within 15 minutes. Therefore the productivity is $8/15 minutes = $32 per hour.
Instead let’s go to TGI Fridays and have a burger and a beer. The cost for that experience is about $20 and takes about 40 minutes since he guest was first seated. Therefore the productivity is $20/40 minutes = $30 per hour.
Let’s go for a fine dining, white tablecloth experience. Really treating ourselves, we can go to a top line restaurant such as the fines in Italian Dining, Il Mulino. The meal starts with a wonderful sampling of chunks of Italian Parmesan cheese, imported olives along with well cured soppressata. Some dishes are prepared tableside. The waiters in tuxedos make sure this is a memorable dining experience in line with the $100 per person check average. Therefore the productivity is $100/3 hours = $33 per hour.
So despite the price of the meal, the productivity in sales per seat per hour remains relatively constant. You would think that charging more would raise the productivity. But when people spend more, they tend to relax more. Eating becomes dining, and the dwell time increases.
The price / time relationship is a generalization but, using a broad brush, holds true. Yet, some operators have been able to accelerate the process in the sit down experience.
Wagamama, a concept from London, is a sit down, full service operation. Seating is at large picnic tables, increasing the density of patrons. The more patrons per 1,000 SF of dining room, theoretically the greater the sales per square foot. Their ordering is done by handheld devices. Therefore the order is sent to the POS system and prints out on the cooking line, before the server even leaves the table.
Many of their dishes are noodle based. With anticipatory management, proper amounts of ingredients can be par cooked and be ready to be finished off at a moment?s notice. By shortening the ordering and fulfillment process, they have a check average of $18 and a turn time of 24 minutes. Therefore productivity of $18/24 minutes = $40 per hour. Put that in the “Win” column.
About Paul G. W. Fetscher CCIM, SCLS
President at Great American Brokerage Inc.
Paul G. W. Fetscher is President at Great American Brockerage Inc., a New York based firm specializing in Restaurants and Retail. His restaurant experience dates back to 1963, and as a principal since 1968. He started in commercial real estate in 1969 and was the top retail producer nationwide for Cushman and Wakefield Real Estate during the 1970s. Since founding Great American in 1980, he has been responsible for more restaurants throughout the Greater New York metropolitan area, than any other broker. Great American Brokerage Inc. does consulting in retail concept, design and development and has performed that function in lifestyle centers, downtown redevelopment, urban renewal, regional malls, specialty and entertainment centers, factory outlet centers and airports. The firm will work on developing ideal tenant mixes.
For more information on Paul, view his complete bio here