Fast food and coffee chains are opening smaller stores, offering takeout only

New York City’s new Chick-fil-A restaurant has everything you’d want from a chicken restaurant: friendly waiters, crispy fries and a line of hungry customers. There’s only one thing missing: seats.

The store, which opened in March on the Upper East Side, is the chain’s first to handle takeout and delivery exclusively. It’s part of a trend of smaller, takeout-focused stores that have boomed during the pandemic and remained popular, particularly among Manhattan’s coffee and fast-food chains.

From 2019 to 2023, the average size of a commercial lease in Manhattan decreased 17%, to 2,585 square feet, according to CoStar Group, a commercial real estate data firm.

That decline was most visible in coffee shops, where Manhattan residents found themselves with fewer seats, said Gregory Zamfotis, founder and chief executive of Gregorys Coffee.

“In many places, because of turnover or because of changes by other businesses in reducing the number of seats, people simply have fewer options for housing,” Zamfotis said.

It’s hard to pinpoint exactly how much smaller coffee shops and fast-food outlets have gotten. Many commercial real estate brokerages, such as CBRE and Cushman & Wakefield, track only a handful of small leases signed by these tenants each year. But real estate analysts, brokers and tenants all agree that retailers are downsizing.

“Smaller is better,” said Steven A. Soutendijk, executive managing director at Cushman & Wakefield. “There are far more tenants looking for smaller stores than larger stores.”

Benjamin Sormonte, co-founder and general manager of the Maman café and bakery chain, is one of those who thinks small. Mr. Sormonte plans to open more Miniature Mamans, aptly called Petite Mamans, after the first one opens at Moynihan Train Hall in 2022.

Petite Mamans range from 350 to 800 square feet, while a full-service Maman can be as large as 3,200 square feet, Sormonte said. The smaller stores allow him to target customers on the go and give him more flexibility when looking for new locations, a crucial advantage given Manhattan’s historically low store availability.

Buffalo Wild Wings, Starbucks, Blank Street Coffee, and even Whole Foods have also announced or rolled out smaller, grab-and-go-focused stores in New York City alongside their existing outposts. Blank Street, in particular, was born out of the small-format model: Most of its stores are under 350 square feet and designed to serve customers at a rapid pace.

“Every retailer that’s trying this has both models,” said David Firestein, managing partner at brokerage firm SCG Retail. “Brands that have 10, 20, 50 or 100 stores are constantly looking at the model and constantly evolving and evaluating. That’s what good retailers do.

Chick-fil-A has both cards up its sleeve on the Upper East Side, with its new mobile store on Second Avenue at East 80th Street, just a few blocks from a more traditional sit-down location on Third Avenue at East 86th Street. Jared Caldwell, the owner and operator of both stores, said he wanted the new store’s design to complement the first and accommodate the growing number of digital orders.

Small stores have another significant advantage over full-size stores: lower rents.

For example, Gregorys Coffee’s locations range from 400 to 1,800 square feet in Manhattan, Mr. Zamfotis said, and it seeks rents between $100 and $300 per square foot. Within these ranges, the cheapest 1,800 square foot store would cost $60,000 more per year than the most expensive 400 square foot store.

“It’s sometimes hard to justify paying those extra three, four, five hundred square feet for seats you don’t necessarily need,” Zamfotis said. “We don’t need a huge number of seats. We just need enough to accommodate some of the traffic that wants to stay.”

For coffee shops, the small stores represent a departure from the “third place” business model, popularized by Starbucks, in which stores function as separate spaces from work or home where people can linger for hours , talk to friends and make new ones.

Third places can be anything—your hometown bar, a public park, even a fast-food restaurant like McDonald’s—as long as people are there to gather, says Kathy Giuffre, professor emeritus of sociology at Colorado College. When speed of service, short hours, or space constraints limit social gatherings, loneliness and isolation can increase.

“The profits are probably large in places where you can get in and out very quickly,” she said. “The social costs are invisible, but very profound.”

Mr. Zamfotis doesn’t think small-format stores spell the end of coffee as a third place, though, even given Manhattan’s limited space and high rents.

“I firmly believe in the future of third places,” he said. It might be a different version, he noted, “but it will always be there because people still want a place to gather.” And the café has always been this central gathering point for people.