How Arby’s cracks the big city code, in The Urbane Franchisor
Photo by Nicholas Upton
Profit remains the best reason brands should invest the time, effort and money it takes to bring their concepts into the most urban places in the country. A lot of people live under those sky-scraping rooftops.
After opening its second new restaurant in Manhattan—and one in downtown Pittsburgh—Arby’s is on the urbanized front lines of a franchised restaurant world that often plays it safe and easy while sticking to a suburban playbook.
Addressing its motivations for focusing on inner-city markets, Arby’s Chief Development Officer Greg Vojnovic said the country’s top 10 designated market areas are home to almost 100 million, which is an awful lot of people for a national brand to ignore.
“A lot of franchisors shy away from those areas with a high amount of urbanicity—it’s tough, right?” Vojnovic posited. “Manhattan has been the death knell for many national chains.”
Dense downtown locations have higher real estate costs, older building stock that often does not conform to building templates, stricter municipal codes and fiercer competition for employees and choice-rich customers.
On the other hand, “it’s the densest, most valuable marketplace in America and your revenues will typically be higher,” Vojnovic said of his research before diving into the New York market. “It’s harder to do business, but there’s also 24- to 25 million people in the marketplace.”
Standing alongside East 23rd Street in Manhattan, in the shadow of the Flatiron Building, a pair of ultra-tall skyscrapers and caddy-corner from Madison Square Park, the appeal of this newest Arby’s is readily apparent—this place is crawling with people.
Near the Flatiron Building in NYC, this Arby's wears the brand's design template well.
There are foreign tourists goggling the landmark Beaux-Arts skyscraper a block over, parents and kids schlepping bags out of the LEGO Store, diners downing burgers outside the original Shake Shack in the park, and scads of office workers and residents trying to avoid the annoying photographer standing in their way on the sidewalk.
That photog was me, of course, but I was graciously joined by Arby’s Chief Operating Officer John Bowie who pointed out the detailed pros and cons for one of his brand’s newest restaurant locations—and one of the largest in Arby’s global system at more than 5,000 square feet.
Rather than one level with a drive-thru, this unexpectedly sprawling Arby’s has a shotgun-style main level, a guest mezzanine over the back half of the store, and a full basement that also serves as a crewmember break room, dry storage and full-service catering kitchen to replace those drive-thru dollars the brand typically relies on in suburban locations.
The Atlanta-based QSR giant used a broker to find its second Manhattan location, which it signed for a 10-year lease, and used its in-house design team to adapt its new Inspire design to fit this unique 100-year-old building in the Flatiron District.
From outside, the flashing marquee and big-hat logo is typical new-concept Arby’s, but the interior is remarkable. Expecting cramped quarters, this 5,000-plus square-foot store is positively spacious with space for a huge line that gets diners off the street, a large community table near the windows, a line of two-tops under a wall of mirrors reflecting Edison-style lamps, an elongated kitchen with gleaming white subway tiles, and a bright red drop ceiling leading the eye toward a mezzanine level that offers a third dining zone with space for an additional 50 diners—it’s huge!
Arby’s CEO Paul Brown is a cities and development guy, and he shared his enthusiasm for the then-upcoming New York City locations when we spent the day together in late 2015. Two years later, it’s great to see the brand hitting the milestones previously laid out, all while continuing its streak of positive sales growth in a strained restaurant market.
Asked about its new flagship, Brown was clearly excited about details like a back of the house that’s 20 percent smaller than the old concept, with plenty of room for catering. He also called out giving guests a window into the production of the food, which is a point of pride for the company.
The company has held several executive team meetings at the Flatiron location, while also bringing current and potential franchisees through the doors to show off the new design, and the brand’s ability to fit in non-standard locations.
Asked about the challenges of working with the city, Bowie said New York was surprisingly helpful with each Manhattan location—and not nearly as difficult as some might expect.
“Every single square inch has a purpose,” Bowie said of the smaller kitchen, adding that its proprietary Cook and Hold ovens are also a part of the brand’s sustainability efforts to use less energy. “The risk is as high as the potential reward.”
Vojnovic echoed that thought about real estate costs in New York, which tend to range between $200 and $500 per square foot. By contrast, Cleveland, for example, is closer to $75.
“It’s expensive for a reason, it’s expensive because there’s a lot of stuff there,” adding he’s learned to encourage franchisees to spring for top-dollar spaces. “By choosing less expensive real estate, you actually increase your risk.”
As cities grow, and suburban real estate competition becomes increasingly fierce and expensive in the coming years, I’ll be watching what brands have the guts and internal horsepower to adapt their concepts to non-conforming urban spaces. One size fits all is certainly a money-saving real estate strategy, but not one smart enough to reach everybody.
Tom Kaiser, pictured on opposite page hitting the streets in New York City, is associate editor at Franchise Times. Send story ideas about urban tales in franchising to email@example.com.