Leasing has been a tough slog in 2009. Many chains have opted to close stores or slow down the pace of expansion as consumers have altered their shopping habits. So concepts that are on the move are valuable commodities. One such chain is Lakewood, Colo.-based Tucanos Brazilian Grill, which operates four locations and is expanding nationwide in middle markets, focusing on both downtown and suburban locations.
It may seem odd to find a growing restaurant chain amid the current economic landscape. After all, respondents to a recent survey conducted by ICSC and The Research Shop showed that North American shoppers have cut back drastically on dining out. Overall, 59 percent of respondents said they are spending less on fine dining and another 53 percent have cut back on casual dining. But the study also shows that as consumer sentiment improves, people may begin dining out more. Indeed, 33 percent of respondents to the survey said they want more dining options at their local malls—the second most popular category after discounters. Moreover, consumers want variety rather than another location for predominant chains.
That’s where Tucanos fits in. Brazilian grill/steakhouses are not the norm. The firm is looking to open in areas with a population in excess of 400,000 within a 20 minute drive time and an average household income of $65,000 and above.
To aid in this growth effort, Tucanos is working with Lloyd Goldstein, president at North Potomac, Md.-based site selection firm HMS Retail LLC, which functions as the chain’s exclusive tenant representative. Goldstein talked to Site Optimizer about the chain’s approach to growth, especially given the current market conditions.
Site Optimizer: How did you get involved with helping Tucanos develop their site selection and expansion strategy?
Goldstein: I was representing a movie theater tenant and I had some pretty good experience in the business and thought there was some good synergy between the theater client I represented and Tucanos. One of the things I bring to the table is I have a little bit of a unique perspective on the shopping center industry because I work for both retailer and the developer and this helps me understand the needs, the wants and the positions of both parties. The owners and I work very closely together in formulating the real estate strategy. We have open discussions on markets we think we should go into and which markets will work.
SO: Tell us a bit about the evolution of the chain's real estate strategy. Why is it expanding now?
Goldstein: The first Tucanos opened about 10 years ago and the most recent unit opened this past February. Ownership has been very, very methodical in fine-tuning their concept. I also think they were wise in not growing too quickly. They took their time and measured the success of each unit. They really strived to get things just right. After the success of the fourth unit opening, we’re kind of at a point where we can start to grow the chain. The fact is that Tucanos is a unique type of restaurant—very family friendly and very value-oriented yet it really provides a stellar dining experience. The three restaurants open longer than a year are all up year-over-year [in sales]… The Boise location that opened in February continues to beat expectations. In this economy and in this environment, it’s really a testament to the restaurant experience you get at Tucanos.
SO:Tucanos is expanding in middle markets. What makes middle markets the best for the chain's expansion strategy?
Goldstein: Many middle markets are underserved in what we call the upscale casual dining category. A lot of middle markets may have the basic chain restaurants. But they really don’t have a lot of choices in the category we represent. We like that we can be the first and preferably the only Brazilian grill in any of these markets
SO: Are there certain specific elements to the locations that you're looking for—certain design elements, a specific square footage, things like that?
Goldstein: We’ve been successful when we’ve been in proximity to a movie theater. Highway exposure is always very helpful. We know what size restaurant works for us and we stick to that size —about 7,000 to 7,500 square feet for the building and then we like to have an outdoor dining area of 700 to 1,000 square feet. Parking is important to us and either a pad, an outparcel or an end cap are the types of real estate we look for.
SO: Are you using any site selection software or any service providers to get any demographic data?
Goldstein: Both. We run demographic reports, we run reports on where movie theaters are, and where other upscale casual restaurants are. We have some mapping programs and we also have a custom-made interactive video program called tenant site-helper we use when we tour a market. We feed in a lot of information and you’re able to put it on a laptop and you’re able to see in real time demographic reports and other locations. That’s actually done by my colleague who I work on this account with. He’s developed this software program that he uses.
SO: Are you using brokers at all to help with site selection?
Goldstein: In certain markets we will employ the efforts of a local broker to kind of be our eyes and ears in that marketplace. We’re going into these middle markets and it’s hard for one person to know everything about a particular market and I’d much rather employ the help of somebody who can bring local expertise and local color to us and really give us the best understanding and the most useful information in our decision-making process.
SO: How many new restaurants do you expect Tucanos to open in 2010 and beyond?
Goldstein: There is one signed lease finished and we’re working as we speak on several new sites. I think we’re going to look to in 2010 somewhere between two and three new restaurants if things go well, if we can find the sites. Somewhere between three and four beyond that.
SO: What have the biggest challenges been for you and the chain in site selection and in implementing the chain's expansion strategy?
Goldstein: I think finding great sites at a reasonable and mutually acceptable financial deal is always a challenge. In good economic times or in tough economic times, finding great sites is a challenge. There really truly aren’t many new projects getting built now because developers are having a hard time getting capital. But we are very confident that there are numerous opportunities out there that will work for us and there will be more in the future. Frankly, we have a whole country to explore and we’re going to do that in a very well thought-out and prudent manner.