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

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

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

Between 2019 and 2023, the average size of a commercial lease in Manhattan decreased by 17%, to 2,585 square feet, according to the 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 employee turnover or changes by other businesses to reduce seating capacity, people simply have fewer options for accommodation,” Zamfotis said.

It is difficult to determine precisely to what extent cafes and fast food restaurants have become smaller. Many commercial real estate agencies, 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 renters all agree that retailers are cutting staff.

“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.”

Among those thinking small is Benjamin Sormonte, co-founder and CEO of the Maman coffee and bakery chain. Mr. Sormonte plans to open more miniature Mamans — aptly called Petite Mamans — after opening the first one in Moynihan’s train hall in 2022.

Smaller Maman boutiques range from 350 to 800 square feet, while a full-service Maman boutique 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 retail availability.

Buffalo Wild Wings, Starbucks, Blank Street Coffee and even Whole Foods have also announced or opened smaller takeout-focused stores in New York, in addition to their existing locations. Blank Street, in particular, was born from the small-format model: Most of its stores are less than 350 square feet and designed to serve customers at a rapid pace.

“Every retailer that’s trying this approach 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 changing it and evaluating it. That’s what good retailers do. »

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

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

For example, Gregorys Coffee’s locations range from 400 to 1,800 square feet in Manhattan, Zamfotis said, and he’s looking for rents in the $100 to $300 per square foot range. In those ranges, the cheapest 1,800-square-foot store would cost him $60,000 more per year than the most expensive 400-square-foot store.

“Sometimes it’s hard to justify paying three, four, five hundred extra square feet for seats you don’t necessarily need,” Zamfotis said. “We don’t need a lot of seats. We just need enough to support 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 spaces separate from work or home where people can linger for hours, talking to friends and making 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, however, doesn’t think small-format stores spell the end of coffee as a third venue, 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.

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