Potbelly's New Deal With Macy's Is the Latest in Restaurant-Retail Hybrids

This week, Potbelly Sandwich Shop announced that it has signed a multi-unit franchise agreement to open shops in Macy’s department stores. 

The concept of a retailer joining forces with a restaurant franchise is nothing new, everyone has seen a Subway inside of a Walmart. By entering existing retail space, restaurant franchisors can experiment with how they connect with customers, amplify their presence at little cost thanks to the popularity of their host company and expand into territories that may have been too costly to enter the traditional, brick-and-mortar way. After hitting some hard times earlier this year, Potbelly looks to be finding new avenues to boost business.

On the retailer side, adding a restaurant partner may be an effort to help it combat the ongoing decrease in conventional retail shopping as Amazon and other online marketplaces continue to rise in popularity. Earnings at chains with stores located in U.S. malls fell 29% during the first half of 2019, according to data compiled by Retail Metrics.

In the past, the National Restaurant Association has named retail-host restaurants as one of the fastest-growing segments for restaurants, and the concepts raked in sales of more than $42 billion in 2017, according to the U.S. Census Bureau. As the foodservice industry becomes increasingly crowded, QSR and fast casual concepts are hungry for points of differentiation and nontraditional expansion strategies that aren't tied to pricey brick-and-mortar real estate startup costs. 

Whether or not partnerships between brands such as Macy’s and Potbelly are set to become the new normal, these developments reflect the changing tides of the food service industry. As franchisors search for ways to compete with third party delivery and online ordering, including opening locations in mobile kitchens and airports, it looks like retailers may be the next stop. 

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