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Wednesday, Jul 17, 2024

Pro-Growth Plans

Seven years after the official end of the Great Recession, there’s still a distinct discount-minded focus among nationwide retail and restaurant chains looking to expand their footprint in the coming year.

According to a report by the brokerage firm Cushman & Wakefield that tracked U.S. expansion plans by 2,000 North American chains in 22 categories, dollar stores are among the most eager to identify and open new locations in the coming 12 months — led by Dollar General aiming to open 900 stores, and Family Dollar planning 500 openings.

In the discount apparel realm, the still-growing Ross Dress for Less plans to open 70 U.S. Ross stores and an additional 20 under its dd’s Discounts banner, with Marshalls aiming to add 30 locations and Burlington Coat Factory planning for 25 openings.

Whether those and other frugality-oriented chains find new places to set up shop locally remains to be seen and will depend on factors including whether they can find affordable locations — increasingly a tough task in San Diego County, with well-located spaces in short supply and retail rents on the rise.

Express Lane for Expansion

But on the grocery side, the discount invasion is clearly already underway. Grocer Aldi has previously announced plans for “very aggressive” expansion, planning for 215 new stores in the coming year.

Garrick Brown

Garrick Brown, a Cushman & Wakefield vice president who heads retail research for the firm and authored the expansion report, said about 125 of the Aldi stores are expected to debut in Southern California, and 25 to 30 of those could eventually open in San Diego County.

Aldi’s first local store recently opened in Vista, but the company has not disclosed plans for other specific locations. Last year saw the opening of the local region’s first location of the big-box discount grocer WinCo Foods, in San Marcos, and Brown said he anticipates that the San Diego region could be getting more sites of low-price players such as Grocery Outlet and Smart & Final — both of which have opened several local stores during the past two years.

“San Diego is about to see a discount grocery war,” Brown said. “The problem is that there are almost no places to build new neighborhood shopping centers.”

One result is that retailers that do expand locally will need to find infill locations in established urban neighborhoods where their core customers are now flocking. That factor has already led, for instance, to openings by natural foods grocer Jimbo’s Naturally at downtown San Diego’s Westfield Horton Plaza, Grocery Outlet’s opening in East Village, and Target’s opening of a small-format Target Express store in South Park.

Off-Price Players

Brown said discount and off-price players — such as the outlet versions of major apparel retailers including Nordstrom and Saks Fifth Avenue — continue to predominate among the retailers most looking to expand, well after the end of the last major recession. He said the trend is an outgrowth of factors including continued flat income growth for middle-income workers and families, which is keeping spending in check.

The trend is evident in the restaurant sector, where lower-priced, fast-casual chains — generally with no drive-thru, no full table service, and per-person tabs around $10 — remain among the fastest-growing players, with more locations on the way locally and nationally.

Planned growers in the fast-casual segment include Chipotle Mexican Grill (200 locations), Panda Express (120), Panera Bread (95) and the Canadian chain Tim Hortons (150).

The fast-casual chains, along with fine-dining chains such as Morton’s, Fleming’s Prime Steakhouse and Ruth’s Chris Steak House, continue to eat into the customer bases of chains that traditionally sought to serve middle-income families, such as Applebee’s, Friday’s and Chili’s. Fine-dining chains, for instance, recovered much quicker from the recession than the midpriced players, partly because their core customers were not as heavily impacted by the downturn.

Retail chains serving the middle-income category — such as Sears and JCPenney — remain under similar pressures from deep-discounters and higher-end retailers.

“There’s been little or no growth in the middle,” Brown said. “The chains that serve the middle-income customers are being hit from all directions.”

Online Limitations

Online sellers such as Amazon also continue to pose a challenge, though Brown said web and app-based delivery is still not as major a factor in fresh groceries as it is in other retail segments. He said Amazon and other delivery companies still need to build out their warehousing and kitchen infrastructure, in order to make fresh-food delivery as fast and convenient for most consumers as going to a physical grocery store.

Among companies with their headquarters in San Diego County, nationwide expansion plans are generally conservative for the coming year.

Officials of San Diego-based Jack in the Box Inc. recently announced that the company plans to open 20 new Jack restaurants nationwide in the coming year, most of which will be franchised locations. Officials said new locations will likely be outside of the company’s current strongholds, such as the West Coast and Texas.

Jack in the Box also is projecting to open 50 to 60 new locations of its Qdoba Mexican Eats chain, about half of which will be company locations. Cushman & Wakefield projected that 35 Qdoba locations would open in the next 12 months, after the chain closed 63 underperforming locations in the last few years.

Cushman & Wakefield projects that Carlsbad-based Rubio’s Coastal Grill will open 20 new locations in the coming year, primarily in the western U.S. Interviewed in late 2015, co-founder Ralph Rubio told the San Diego Business Journal that the company would be scouting new sites on both U.S. coasts, after recently acquiring and rebranding eight leased restaurant locations in Florida that formerly housed Lime Fresh Mexican Grill.

For the time being, Rubio said, the company’s focus will be on expanding and remodeling its existing restaurants in Southern California, and expanding northward into new markets such as Cupertino.

Folding the Failures

Brown said the Cushman report’s retail and restaurant projections are based on numerous elements, including company announcements and current market conditions for various industry segments and geographic areas.

One caveat is that even though chains might announce plans to open new locations, they frequently also make behind-the-scenes plans to close existing ones that are underperforming. Restaurant failures among franchise-focused companies, for instance, could be on the upswing in coming years, as individual franchisees face rising expenses including wage and food costs.

“The chains don’t like to talk about locations they’re planning to close,” Brown said.

The Cushman report indicates that cost-consciousness is also evident in the nationwide plans of service and do-it-yourself-oriented businesses, especially in the automotive and beauty sectors. Those eyeing major expansion in the coming year include O’Reilly Auto Parts (200 stores), Auto Zone (160 stores) and Driven Brands, which operates service chains including Maaco and Meineke (75 locations).

Also in growth mode are discount hair-styling chains including Great Clips (170 stores) and Regis Concepts, operator of salons such as Best Cuts and Cost Cutters (200 stores). For consumers aiming to save money by handling their beauty chores at home, retailers looking to sell them more products include Ulta Beauty (100 stores planned) and Sally Beauty Supply (100 stores).

These are among retail and restaurant chains planning new stores or scouting sites in the local region.

Aldi — The Germany-based discount grocer, with U.S. headquarters in Illinois, previously announced plans for “very aggressive growth” over the next few years. Of 215 new stores planned in the coming year, about 125 are expected to open in Southern California, and 25 to 30 stores could eventually open in San Diego County. Aldi’s first local store recently opened in Vista.

Smart & Final, Grocery Outlet — Discount grocers Smart & Final of Commerce and Grocery Outlet of Emeryville have opened several new stores in the local market over the past three years, and both are scouting additional locations. Smart & Final announced in October that it plans to open 100 stores over the next four years, primarily in Western states. It opened earlier this year at 11 local sites formerly occupied by Haggen Inc.

Dunkin’ Donuts — Massachusetts-headquartered Dunkin’ Brands Group is aiming to add 400 primarily franchised Dunkin’ Donuts locations over the next 12 months throughout North America, along with 150 locations of its Baskin-

Robbins ice cream chain. Dunkin’ Donuts has been scouting for franchisees locally since 2013, and Baskin-Robbins announced in September 2015 that it is recruiting franchisees in California to develop shops in San Diego and San Francisco. Dunkin’ Brands last year opened a new location in Ramona that officials said was California’s first drive-thru location selling Dunkin’ Donuts and Baskin-Robbins ice cream.

Cracker Barrel — The Tennessee-based chain, with full-service restaurants designed in a country-store theme, plans to add 25 locations to its current 635 over the next 12 months. It is currently targeting the West Coast, with San Diego County and other Southern California sites being scouted.

Sources: Cushman & Wakefield, company statements


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