Outdoor spaces require extra planning
Growler USA has 15 locations and most have outdoor spaces that range from a dozen seats up to about 80.
Outdoor patios are often a “bonus” space that restaurants can use to boost sales without shelling out more money in extra rent. But the logistics of activating that outdoor space can require some careful planning to understand what works and what doesn’t.
Al fresco dining areas come in all shapes and sizes. Some restaurants will add a few token seats outside on a city sidewalk, while others put considerable time and money into the design, décor and furnishings in those outdoor spaces.
In fact, some restaurant operators spend upwards of $1 million to build out an outdoor dining area with features such as a permanent rooftop cover, a full bar, a variety of seating options and decorative landscaping.
Outdoor dining provides a variety of perks for restaurants. It can be a very inexpensive way to increase seating capacity. In most cases, the outdoor space is not included in the rentable square footage of a space. For example, a 5,000- to 6,000-square-foot restaurant might be able to increase seating and sales with a 1,000- to 2,000-square-foot outdoor dining area. However, those restaurant operators that include percentage rent in the lease will pay the landlord a portion of the additional sales generated from that outdoor space.
Both restaurants and landlords are using outdoor patios as a way to “energize” the front doors of their properties, says David Orkin, executive vice president, restaurant practice leader, Americas for CBRE. “They are more focused on it and more sensitive to it than they may have been 10 to 15 years ago, because there is much more competition and developers recognize that restaurants are what are really driving traffic for their retailers,” he says.
Outdoor dining helps to create excitement, energy and color in front of a restaurant that helps to draw people. It also can be a big money maker. Some brands generate over $1 million in sales annually just from those outside areas, notes Orkin.
Growler USA has 15 locations and most have outdoor dining that ranges from a dozen seats up to about 80. “Any chance we get to have outdoor seating, we take advantage of it,” says Ron Curnutt, executive vice president of operations at Growler USA in Centennial, Colorado. The outdoor space helps to increase seating capacity for locations that are typically about 2,500 to 3,000 square feet, and people really gravitate toward the outdoor seating and the colorful umbrellas. “It’s not a deal breaker, but it is certainly beneficial to have the outdoor seating,” he says.
Fazoli’s considers outdoor dining spaces to be the “cherry on top” of a site, says Perry Pelton, director of real estate at the Italian fast-casual concept.
Locations with existing outdoor dining space or the ability to create that space are in high demand. Growler USA typically locates in community and neighborhood centers. Some of the in-line spaces do have adequate space out front for a few tables. However, the end caps generally have the best options for outdoor seating, and given there are only two end-cap spots at most centers, those spaces are very competitive, notes Curnutt.
Restaurants often have a checklist of real estate requirements when selecting new locations and outdoor dining space is often that “cherry on top,” says Perry Pelton, director of real estate at Fazoli’s, a fast-casual Italian concept based in Lexington, Kentucky. The company has outdoor dining at about 20 percent of its 220 locations around the country.
Fazoli’s typically occupies about 3,300 square feet on an end-cap or freestanding location, which includes about 60 to 70 seats. So, the ability to increase seating capacity is a big incentive, and Fazoli’s looks for opportunistic ways to add outdoor dining space.
“If the brand is attempting to include a patio for a Fazoli’s site that doesn’t currently have one, we can simply create it,” says Pelton. In most cases it is possible to create the patio space by converting two or three parking spaces against the building to accommodate a modest patio. “This can work with a variety of different layouts, including freestanding or an end-cap with drive-thru space”
A lot of factors go into the decision on whether or not to add an outdoor patio, and Fazoli’s typically leaves that up to the franchisee to determine if outdoor seating would be a good fit for a particular location or market.
Not every location is conducive to outdoor dining. For example, if a location is on a busy street and has a lot of traffic noise or other distractions, that is not going to be an enjoyable experience for customers, notes Pelton.
Understand the logistics
Seating capacity: A restaurant may have to include the outdoor seating in its overall seating capacity, and there may be limitations on total amount allowed. Seating capacity also can impact issues such as sewer and restrooms.
Parking: Remember to count outside seating when planning for adequate parking.
Covered spaces: Can the space be covered? If so, how much of the space can be covered, and what type of covering is allowed? Some municipalities view a hard cover over the top of outdoor dining area as counting towards gross leasable area of a shopping center. If a tenant has a covered patio, the developer may not be able to build as much permanent space elsewhere in the center. So, the developer could restrict the use or size of that covering.
Special permits: Typically, a shopping center owner or restaurant operator will need to get city approval for outdoor patio seating. In most places, the city will put limitations on that seating, such as for the size, hours of use and noise/music. Some locations also may need to have appropriate zoning to allow for the outdoor dining use.
Liquor licenses: Many municipalities require the restaurant to have a physical barrier between the restaurant and the sidewalk or the rest of the shopping center, such as a railing, wall or landscaping feature.
Landscaping: Know what is allowed for landscaping around the outdoor dining area, and have a plan to manage irrigation of that landscaping.
Seasonality: Plan for the outdoor elements, such as sun shade, umbrellas and heaters or misters to extend the use of those areas in cold or hot weather.
Impact on operations: It is important to consider how that outdoor space fits into the overall flow of the restaurant in terms of wait staff, kitchen and bar. How that patio will be used also can impact design of the interior space. For example, if the patio will be used as an extension of the bar, then it will be logical to locate the patio closer to the bar area.