Why your franchise should explore skyways, underground retail
Photo by Nicholas Upton
In some cities there’s a whole world hidden from view. Like the secret passages of an ant colony, urban skyway or tunnel systems are bustling hives of activity where professionals, hospital workers, tourists or college students scoot from building to building below grade or one level above the street. These webs of life are an often-overlooked non-traditional real estate opportunity worth your attention.
Underground, the most notable example is Houston, where a network of tunnels links nearly 100 blocks in a town that’s hot and sticky at least half of the year. Similar tunnel systems can be found in Chicago, Dallas, Oklahoma City, Montreal, Toronto and Rochester, Minnesota. Above ground, skyway cities include Atlanta, Calgary, Cincinnati, Des Moines, Detroit, Milwaukee and Franchise Times’ hometown of Minneapolis, which leads the pack with 11 continuous miles of glassy tubes allowing office and service workers to get the job done and grab lunch or coffee without having to brave the rainy days or winter’s endless fury.
In urbanist circles, these networks are contemptible city-killers that suck pedestrians off the street and make otherwise happening cities look as dull as Dallas on a Monday night, no offense. Pedestrians beget more pedestrians, as they say. There’s logic to these arguments, but tunnels and skyways are significant (often privately owned) infrastructure that was built for a reason—and nobody’s predicting less intense weather in the years ahead. Cities with these systems can almost all do a better job highlighting connections between the street level and these secondary passageways, which tend to be the busiest hubs of urban foot traffic.
From my own time traversing many of these systems, the retail scene is great for those who take advantage, but there are countless brands that should be operating in these tubular environs but are nowhere to be found. If your brand wants to go where the people are and outfox the competition, add these tubes to your real estate strategy. The key, as always in real estate, is knowing your audience.
Even on nice days, pedestrian systems capture attractive white-collar demographics.
Located on the second floor of the IDS Center in the center of downtown Minneapolis, Potbelly Sandwich Shop has the very best skyway space in the city—a confluence where grand escalators in a soaring atrium shuttle walkers up and down from the ground level to the skyways. On most weekday afternoons, the restaurant’s line extends far beyond the door.
Julie Younglove-Webb, Potbelly’s senior vice president and chief restaurant operations officer, said the location is one of three units in tunnel networks, another in Minneapolis and one in Houston’s tunnels.
“Just like there’s a Main on Main on a surface street, there really is such a thing as Main on Main in a tunnel system or any other type of walkway system,” she said, adding that 70 percent of the brand’s sales come during lunch. “Central business district locations perform better because of our focus on lunch.”
She likened the locations to airports, where challenges with storage space, labor, parking and accessibility are often overshadowed by the potential.
Asked what’s unique about such locations, Younglove-Webb said “they’re just different animals,” calling out the intense lunchtime volume that requires a tighter ship in terms of labor. The brand’s three walkway stores are all company owned, and some have used low-cost carts to boost catering in nearby office properties that tend to have enviable demographics.
Skyways hurt street activity, but the glassy tubes are alive with retail catering to workers.
Catching the rush
A quick walk southwest from Potbelly in the IDS Center, Which Wich had a successful location in the skyway-connected US Bancorp Center tower until a franchisee-specific issue resulted in the closure of its entire Twin Cities portfolio. It’s a frustrating setback given that it was the Dallas-based brand’s top market for sales volume.
While some franchisors might have stepped in to purchase and operate high-performing locations while seeking a new franchisee, Which Wich only has two corporate stores and, therefore, lacks the infrastructure to run a larger number of company stores.
Jeff Vickers, senior vice president of franchise development, said the Which Wich locations in Minneapolis and the Houston tunnel system were both extremely profitable. In the basement of Houston’s Pennzoil Place, its subterranean store struggles with employee attraction, because the high cost of parking means most workers are transit-dependent in a city where public transit is still a work in progress.
The rockstar Houston location has a high-dollar, captive audience that helps boost brand awareness in the metro area. Traffic patterns can be tricky to calculate, he said, but most tunnel-connected workers don’t venture too far from their offices during lunch. That limited range means it’s possible to add multiple stores in the same network, and also makes it easier to guess who will be the most regular customers—just look up. Calculating traffic flow can be as easy as standing nearby with a counter during the breakfast and lunch rushes. Commercial brokers in each market should also have hard numbers to help brands size up such opportunities.
Because the Houston location closes at 2:30 p.m., managing that hard-to-find labor tends to be easier than traditional streetfront locations—less hours means less scheduling headaches. The high concentration of office buildings in the area has prompted Which Wich to bolster its catering program, focusing on lunch and afternoon meetings that provide a notable sales boost compared with more typical suburban units.
“Our best operators typically have money in their till before they wake up in the morning—it’s a great business model,” Vickers said. “You’re open five days a week and typically the rent tends to be in line as far as what the expectations are of the business and its performance, so it also takes the right operator with that mindset because it is such an unusual employee traffic pattern.”
Follow the bodies
Back in Minneapolis, David Daly is senior vice president of CBRE Group’s retail brokerage. He and his team work throughout the Midwest, including in other cities with their own walkways. He noted some newer parts of the skyway system are struggling for traffic—especially near the Vikings’ NFL stadium—but businesses in busier portions of the network are doing incredible numbers. Naf Naf Grill, for example, has multiple locations that are jam-packed during lunch.
Nearly all restaurants and retailers in these kinds of environments lease their space rather than own, and they can be hugely profitable if they can keep up with the intense lunchtime volume. As the city has grown throughout the current economic expansion, rental rates have ticked up and are typically 30 percent higher than street-fronting stores.
It’s not just food and c-stores seeing the potential. Daly noted that healthcare providers, insurance offices, banks, drug stores and big-box retailers such as Target, Marshalls and Nordstrom Rack all enjoy high traffic counts. He added there are additional opportunities for healthcare providers and other categories that could capitalize on the fast-growing pool of downtown residents and office workers.
As more all-star cities are seeing continued growth in downtown daytime populations, the wider franchise industry needs to seize the opportunity to cater to these attractive customers. Recalling my own subterranean and above-ground exploits, I would specifically call out beauty, fitness and massage brands, fresher restaurant concepts with catering potential, snack and treat brands, electronics repair outlets, dry cleaners and staffing agencies to heed the call of growing city centers.
For all the franchised brands expanding their non-traditional footprints into college campuses, transit stations, stadiums and airports—all places where competition is cutthroat—urban walkways remain a path less traveled.
Tom Kaiser, pictured on the opening page, is senior editor of Franchise Times and writes about urban tales in franchising in each issue. Send story ideas to firstname.lastname@example.org