Franchise Investment Expert Weighs in on Why Remodels are a Top 2023 Investment Opportunity for Restaurant Franchise Brands

As competition continues to grow among restaurant franchises, store remodels are a top investment opportunity in 2023. 

In fact, a survey conducted by TD Bank found that 41% of restaurant franchise operators said that they plan to invest in in-store reimagining, remodeling or in digital and delivery systems. These remodels include everything from technology upgrades to exterior updates and dedicated pickup lanes. 

Why Restaurants Are Remodeling

There are several reasons that restaurants are focusing on remodels. For one, many businesses held off on them for some time as the costs associated with remodels went up during the pandemic-related supply chain issues. Now, restaurants are in catch up mode, says CapitalSpring Managing Director Jim Balis. 

“Additionally, there's a lot of new competition coming in and that brings new development,” he added. “If you have a very tired looking restaurant next to one that's shiny and new, the guest is going to be drawn towards the fresher looking building. As a defensive strategy, it's important to keep restaurants as up to date as possible.”

For customers, the visual element can sometimes transcend even the interaction with team members and can be just as important as the food. 

Common Types of Remodels

The types of remodels vary from segment to segment.”Restaurants want to deploy dollars that most efficiently impact the guest,” said Balis. 

Sports bars, for example, may be updating elements such as TVs, audio and other technology that might be out of date, as well the general decor. Drive thru businesses, on the other hand, will skew more towards the exterior of the restaurant since that is where most of the business is coming from, Balis noted. 

Meanwhile, fast casual brands, which have a combination of dine-in and takeout, are starting to design stores in a way that emphasizes new technology for off-premise business such as implementing dedicated lines and pickup cubbies. 

Return on Investment Brands Can Expect

Balis says that restaurants can expect both a financial and non-financial return. On the financial side, certain updates, such as new technology, may improve throughput and order accuracy, which can drive sales. From a design standpoint, a newer look can help retain customers. Typically, there is some type of return that comes along with an update, but specific amounts can vary. 

The non-financial type of return pertains to keeping customers interested and invested in a brand. If someone is a guest of a concept that is 10 years old, for example, and a new brand opens something similar nearby, that guest may be inclined to visit a building with a new, updated design over the old one. 

“There's a brand equity component associated with it,” said Balis. “It’s not necessarily financial but keeps people engaged.” 

Noteworthy Trends

There are several trends that Balis has witnessed so far in 2023, one being full service restaurants focusing on areas of staging for off-premise ordering. 

“Before, people might have had to go to the bar to check on an order,” he said. “But now, there’s a section next to the host that might be dedicated for off premises. Some of that business spike we saw during COVID is still significantly higher than pre-COVID. It’s always been a choke point for restaurants, so having dedicated areas has made that a lot easier to execute.” 

Additionally, when brands are remodeling, they are often upgrading certain technologies that improve the guest experience, as well as exterior elements that make the building pop. 

“On the drive thru side, maybe it's the digital board that also has the order appear on the screen, or using AI digital boards that will suggest cold beverages on a hot day or hot beverages on a cold, rainy day,” said Balis. “Some of these remodels are adding these new technologies that help boost performance.” 

To learn more about CapitalSpring, please visit https://1851franchise.com/capitalspring.