Portillo’s Beef Bus in Kissimmee, FL.
Source: Portillo’s
When based in Chicago Portillo’s When it enters a new market, it sends out a “beef bus” in advance to push hot dogs and Italian beef sandwiches to new customers for weeks, introducing them to the brand and whetting their appetites before the new restaurant finally opens.
Lately, the beef bus has been making frequent trips to the Sun Belt.
“Texas itself has grown more in the past decade than our eight Midwestern states combined,” Portillo CEO Michael Osanloo told CNBC. “So, go where the growth is. It’s a matter of course.”
The chain’s sales in Texas, Arizona and Florida are higher than in Osanlu said Midwestern states such as Indiana and Wisconsin. Portillo’s opened its first Texas location more than a year ago. In its first 12 months of operation, the restaurant’s sales reached $13 million, equivalent to $1 billion in restaurant box office.
While the specific states included in the Sun Belt may vary, the name refers to the southern third of the United States known for its sunny weather. The region has experienced rapid population growth in recent years, setting it apart from the Northeast and Midwest. That trend has accelerated during the Covid-19 pandemic as consumers seek more space, warmer weather, fewer government restrictions and cheaper housing in cities like Charlotte and Phoenix, which compete with Houston, along with Texas cities such as Dallas, is among the most populous cities in the United States.
Due to changing demographics, restaurants are now looking to the area to drive sales. Smaller chains expanded earlier into the Sun Belt rather than the Midwest or Northeast.For more mature companies, e.g. McDonald’swhich means accelerating the growth of new restaurants in areas that are currently underrepresented.
“We always say retail follows the roof, so when you have a lot of people moving to an area, there’s going to be a lot of demand,” said Justin Greider, senior vice president of Florida retail at real estate firm JLL. “Combined with the overall growth we’re seeing in consumer spending at restaurants, it’s kind of the perfect storm to create a really ripe environment for a lot of restaurant groups that want to come here.”
It’s not just restaurants looking for sales growth in the Sunbelt. Fort Worth Base American airlines Routes are being updated to reflect demographic changes, executives said Monday at an investor event. macy’s department store The company has been opening smaller stores in suburban malls, starting in the Dallas and Atlanta areas. Real estate investment trusts such as Phillips Edison had earlier invested in the area, and Southern immigrants led the development of their shopping centers.
Golden arches meet golden light
As the third-largest restaurant chain by number of locations in the U.S., McDonald’s can’t be accused of neglecting the Sunbelt, but it has been slow to follow the trend and penetrate these growing markets.
“In our U.S. market, our store count is growing much slower than the population growth in the fastest-growing regions,” Manu Steijaert, McDonald’s global chief customer officer, said at the company’s investor day in December. “We do have a Significant opportunity to adjust this ratio.”
JPMorgan Chase said McDonald’s aims to open 900 new restaurants in the United States by 2027, with the majority of locations concentrated in Florida, Texas, Arizona, Georgia and North Carolina.
“What we’re seeing is because of the scale they already have. Growth in the Southeast hasn’t been as proactive,” Greder said of McDonald’s.
But other chains were quicker to see opportunities in the Sun Belt. Greider names chicken chain Raising Cane’s, Chipotle Mexican BBQ and Starbucks The three companies had been working to expand their footprint in the Sun Belt even before the pandemic.
In addition to its well-known chain stores, Greider also owns We’re also seeing high-profile, chef-led restaurants moving south from New York and Chicago.
“In the latter half of (the pandemic) and post-COVID, we saw a lot of full-service and chef-driven restaurant groups really making a big push into the Sun Belt because they saw that this wasn’t just a place where there was a huge opportunity,” Greder said. : “To grow, but where their existing customers have moved. “
For example, Major Food Group’s New York City celebrity hangout Carbone opened a location in Miami in 2021 and another in Dallas in 2022.
Chains see opportunity in warm weather
For regional chains looking to expand nationally, the Sunbelt also offers an opportunity to expand their footprint with customers who already know the brand.
For example, Friendship, an 89-year-old chain, has been largely focused on the Northeast since it was founded in Massachusetts in 1935. Under new ownership, the chain is finally looking to expand beyond the Mississippi River.
Brix Holdings acquired Friendship in 2021, months after the company filed for Chapter 11 bankruptcy protection. At the time, Friendly’s had more than 100 locations, down from 850 restaurants in its heyday.
Brix Holdings chief executive Sherif Mityas said the chain’s sales were growing again and it was the perfect time to expand Friendship’s business.
“Strategically, from a growth perspective, we want to start moving west,” Mitias said.
Many of Friendly’s customers grew up with the brand in the Northeast before moving to the Sun Belt. Additionally, the chain is known for its ice cream, and the warm climate makes it a better business environment than the Midwest.
The weather is getting warmer too One of the reasons why coffee chains dutch brothers Bet on the Sun Belt.
“More than 80% of our business is cold drinks, so we find warmer markets perform better, but that doesn’t mean we won’t do well in Minneapolis, the Great Lakes region or the Northeast, but our Dutch brothers CEO Christine Barone told CNBC in a January interview.
The chain plans to open 150 stores this year, mostly in Texas and Southern California. Over the next 10 to 15 years, the company aims to operate at least 4,000 locations, with a footprint that looks like a smiling face and stretches across the U.S., starting in California and extending to Texas and back to Virginia. state.
More suitable for business?
The region’s business-friendly reputation also played a role in its rise.Among the top 10 states, 7 CNBC’s list of America’s Best States for Business in 2023 is located in the Sun Belt.
While there are some notable exceptions, such as California’s impending fast-food wage hikes, states like Texas and Florida are luring businesses with lower taxes and loose regulations. For the second consecutive year, Texas has replaced California and New York as the state with the largest number of Fortune 500 companies.
“In addition to population growth dynamics, many Sun Belt states have a ‘friendlier’ business climate, which is also attractive to restaurant operators,” said Kevin Schimpf, director of industry research at Technomic. “(This means) fewer Restrictions on franchising, lower labor costs and reduced red tape for new commercial development, among others.”
That’s part of the appeal of Friendly’s, which wants franchisees to run new stores.
“From an entrepreneurial and business perspective, the Sun Belt is really growing faster than the rest of the country,” Mitias said.
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