Chicken and Coffee Wars

by Hayden Spiess

Food-and-beverage operators compete for coveted real estate in the Southeast. 

Chicken and coffee are a somewhat unlikely, if alliterative, pair. In the Southeast though, they are currently linked by virtue of the so-called “Chicken and Coffee Wars.” 

Previously, a similarly martial and poultry-centric moniker — The Chicken Sandwich Wars — described the fierce competition and marketing trends among fast food brands as they battled to create the best chicken sandwich — or at least the one with the best performance among consumers. 

Now, amongst brokers in the Southeast region, Chicken and Coffee Wars assigns a name to the related but distinct competition for space among quick service restaurant (QSR) chicken and coffee concepts in a market experiencing unparalleled demand for retail space. 

Hungry for expansion

As Dustin Tenney of Reedy River Retail at SVN | Blackstream, a Greenville, South Carolina-based team specializing in retail investment sales, landlord and tenant representation, puts it: “In addition to competing for the consumer that wants the chicken sandwich or the chicken fingers, [brands are] competing for the exact same real estate as well.” Tenney, who along with partner Daniel Holloway represents several QSR coffee brands, points out that this “obviously drives prices up, because everybody knows that these groups are looking,” which serves to further intensify the leasing dynamics in the region.

Tenney and Holloway name Starbucks Coffee, Dutch Bros. Coffee, Seven Brew, Scooters Coffee, Clutch Coffee, Dunkin’ Donuts and Summer Moon Coffee — the latter two of which the team represents — as brands currently growing their footprints in the Carolinas and the Southeast at large.

Another group looking to expand its presence in the Southeast is Caribou Coffee. The company’s national presence, which comprises roughly half of its 750 stores globally, already includes six stores in Georgia, 10 in North Carolina and one in Virginia. Now, the brand intends to grow with both corporate and franchised locations. 

“From a corporate perspective, we’ll continue to build out North Carolina and Georgia in a significant way,” reports Matthew Walls, chief development officer of Caribou. He adds that “some of the franchisees that signed on this year and late last year will be developing in the South, specifically in Florida.” Walls says that Florida is “a very exciting market” and that the brand, which began franchising stores in the U.S. last year, currently has more than 100 stores in the pipeline to be built in the state over the next five to seven years.

Brian Bern, managing director with Franklin Street, is based in Tampa, Florida, and says that the market is “seeing a ton of chicken” as well. According to Bern, brands include both national names and more local concepts, although he observes that the latter groups “have more of an uphill battle.” Of these smaller names — King of the Coop is one that comes to mind for Bern — he ventures that differentiating themselves may be key. “I think as long as the local places offer something that’s a little unique, maybe they have a chance to make it.”

Bigger names experiencing growth include Chick-fil-A, Raising Cane’s, Huey Magoo’s, Zaxby’s and Slim Chickens, among others. 

Bern goes as far as to say that what he observes among these groups, local and national alike, is an “almost desperation to secure real estate.”

Such desperation has led to rental rates that “shock” Daniel Duque, an associate with CBRE’s Atlanta Retail Services Group, who also attributes high rates to construction costs and strain in the supply chain. Holloway agrees that trends in construction costs are playing a role in rising rents, though he gestures toward “extremely low” vacancy rates and demand from the region’s growing population as the most significant factors driving rents. 

Walls also cites the population growth in the Southeast as an incentive. “The past few years, migration patterns have become more Southward,” says Walls. “That’s a huge reason for any brand to want to go into the Southeast.”

 Southern hospitality 

Slim Chickens, which opened its first restaurant in Northwest Arkansas more than 20 years ago, is a natural fit for the region, at least according to Robert Gerstenfeld, vice president of real estate and construction for the brand. Gerstenfeld says that Slim Chickens’ identity is steeped in Southern hospitality, with the brand infusing that into the design of buildings, dining rooms and food preparation. (Everything at Slim Chickens restaurants is made-to-order.)

Currently boasting more than 220 stores, a “handful” of which are company owned, Slim Chickens is bullish on the prospects offered by the Southeast. “We feel really good about the Southeast,” reports Gerstenfeld. 

The Carolinas represent “one of the hottest markets” for the brand, which has four franchisees across the two states. Slim Chickens also has a presence in each of the major cities in Alabama and Tennessee. “Some of our strongest restaurants and performance stores are actually outside Nashville,” adds the vice president. In Florida, the brand has 10 to 15 sites currently under development. Upon completion, the restaurants typically comprise 2,750 square feet in a traditional, freestanding format with a drive-thru.

Drive-thrus on the menu

According to Duque, drive-thru spaces align with the size of parcel he typically sees chicken and coffee retailers occupying. Such operators normally seek between a half or single acre, reports Duque, who works primarily in tenant representation. He elaborates that drive-thru-only establishments usually occupy between 1,000 and 1,500 square feet, with more traditional dine-in buildings comprising around 3,000 to 3,500 square feet. 

Duque has seen a shift toward such drive-thru-only buildings and smaller formats, with groups looking to “downsize their spaces.” 

Bern echoes this observation, attributing the prevalence of drive-thru concepts to ease of use and consumer mindsets. “We are definitely a society that wants our food quick and to not have to work hard for it or think hard about it,” he summarizes. “Places with drive-thrus that are accessible are going to continue to thrive and survive.”

Brands also seek to position themselves in geographically advantageous spots. Duque says that visibility is one important element when tenants seek space. “A lot of them want to be on the way to or from work, to have as much access as possible,” says Duque. “If they can be close to the Interstate, that’s even better.”

Walls says that this rings true for Caribou. Noting that “coffee brands are driven by traffic,” Walls says that Caribou wants to “be there for folks when they’re commuting to work in the morning,” as well as if consumers “need a quick snack throughout the day” or a “pick-me-up on the way home.” 

In a market of high demand, though, tenants might not always get there first choice and must be willing to adopt strategies to navigate the paucity of vacancies and conditions that favor landlords. Tenney says that Dunkin’, for example, will “mold to a deal to make it work,” although he adds that he and Holloway “never try to put a round peg in a square hole.” Tenney elaborates that the brands the Reedy River Retail team works with “understand that the market is tight” and are willing to “circle back in a few years” if needed.

The test of time

Gerstenfeld of Slim Chickens is well aware of these other concepts vying for the same space and that the brand is not unique in its eagerness to grow in the Southeast. “The Southeast as a retail market is attractive to a lot of folks, and we aren’t any different,” he says. 

Bern observes that of all the chicken and coffee concepts finding the market attractive and populating it, there are “some that just won’t survive.” 

On the whole though, brokers and operators are confident that the Southeast will continue to provide an environment for QSRs to thrive and that chicken and coffee concepts in particular are positioned to succeed. Says Bern: “Why couldn’t there be endless amounts of coffee?” Duque agrees. “Chicken and coffee seem to withstand the test of time.” 

Hayden Spiess

This article was originally published in the November 2023 issue of Shopping Center Business magazine.

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