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

New York’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 employee turnover or changes by other businesses to reduce seating capacity, people simply have fewer options for accommodation,” 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 a lot 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.

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 rolled out smaller, takeout-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 less than 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 is having a field day 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 design of the new outpost 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 him $60,000 more per month 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 smaller 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.

“Profits are probably big in places where you can get in and out very quickly,” she said. “The social costs are invisible, but very deep. »

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

“I’m a big believer in the future of third places,” he said. It may be a different version, he noted, “but they’re always going to exist because people always want a place to gather. And the coffee shop has always been that central meeting point for people.”