Mall restaurants like Cheesecake Factory, Italia help attract shoppers

Editor’s note: This is the third story in a three-part CNBC series about the future of U.S. shopping malls, as developers change spaces to add new retailers, experiences and even apartments. read on the first And the second the part

Malls were the most prominent shopping destinations. Now they are home to the hottest restaurants.

The slow death of department stores and the rise of online shopping have hit U.S. shopping malls, especially in the last decade. The once-essential shopping centers have seen their numbers drop from a peak of 2,500 in the 1980s to about 700 today, according to Coresight Research.

But now many in the retail industry say rumors of the mall’s demise have been exaggerated. Many Gen Z customers prefer to shop in person and prefer the mall experience. Developers’ creative solutions have turned vacant department stores into housing, bringing customers closer to the store

And landlords are devoting more square footage to restaurants and bars, which have become a big draw for visiting malls.

“It’s been a big change,” said David Henkes, senior principal at Technomic, a market research firm that focuses on the restaurant industry. “It used to be that shopping would drive people to the mall and then maybe you’d grab a bite to eat. In a lot of ways, that’s been flipped on its head. Now, the dining options drive people there and then you’re hoping to have a little while they’re there. will shop.”

Yelp found that 17 of the 25 most popular mall brands, based on consumer interest, were restaurants, according to a report published in October.

Going back 10 or 20 years ago, restaurants accounted for only 5% to 10% of the typical leasing area in malls operated by Brookfield Properties, according to Chris Brandon, the company’s senior vice president of leasing for food and beverage retail. It will typically include a food court and several full-service restaurants. That has changed in recent years.

“It’s grown an incredible amount in the last five to 10 years,” Brandon says. “In some of our shopping centers, we’re seeing 20% ​​to 30% of the total (typical leasing area) dedicated to food, and that’s 100% by design.”

Brookfield’s portfolio of 129 malls includes Tyson Galleria in McLean, Virginia; Christiana Mall in Newark, Delaware; and First Colony Mall in Sugar Land, Texas. Its mall restaurant tenants include more than 540 full-service restaurants and nearly 2,000 fast-casual establishments.

More than half a century ago, the Paramus Park shopping mall in New Jersey opened a food court on its second floor, becoming the first example of a successful mall food court in the U.S. A decade later, food courts became a staple. American Mall, Sbarro, Mrs. Fields and chains like Auntie Anne’s are helping to expand.

Like a full service chain The Cheesecake FactoryTGI Fridays and California Pizza Kitchen also became mall mainstays.

But those familiar names are no longer the only option for shoppers. Today, malls offer a wide range of food and snacks, from regional restaurants to local chefs and emerging bubble tea chains.

“What malls are looking for may be more upscale, what we might call ‘contemporary casual’ restaurants,” Henkes said. “It’s not exactly fine dining, but it’s kind of a step up from traditional casual.”

These “contemporary casual” eateries include upscale options like Korean barbecue, steakhouse, or sushi. Although price points vary, a meal at this new mall eatery will probably cost around $30 per person, if not more.

For James Cook, head of retail research at real estate firm JLL, the expansion of dining options offers an experience that’s familiar — but still elevated.

“The difference I make is that I don’t dress up to go to a mall,” she said. “It’s a restaurant where I can pay more, but don’t necessarily feel like I have to wear a suit jacket or anything like that.”

The pandemic has made malls a more attractive option for restaurants.

During the lockdown, operators saw their traffic disappear. Even as consumers begin dining out and commuting again, restaurants in central business districts struggle to attract diners due to a new hybrid workforce and other changes in consumer behavior. But the stools come back.

“Even today, foot traffic in suburban malls has rebounded to above pre-pandemic levels, while in cities and town centers, foot traffic has not rebounded,” JLL’s Cook said.

That foot traffic also appeals to emerging chains looking to expand quickly. Restaurant companies prefer sweet green And Mendocino Farms has opened new locations in malls as they look to increase their sales and brand awareness.

“One thing that our property can offer is scale, and scale really quickly. If they used to do X in their food truck, now they’re doing X times two or three,” Brandon said.

For example, Dean Tai Fung, a Taiwanese restaurant chain, has honed in on malls for its U.S. expansion, according to Alison Lin, Yelp’s head of restaurants. According to the chain’s website, upcoming locations will open at Fashion Square and Brea Mall in Scottsdale, Southern California. Din Tai Fung ranked second in Yelp’s report on the most popular mall brands by consumer interest (Din Tai Fung declined to comment).

As malls devote more space to food and drink, food courts have been supplemented by a newer, more advanced option: food halls.

Like food courts, food halls offer an array of dining options, usually from stalls, to general seating after diners purchase their food and drinks.

But unlike food courts, halls usually offer more expensive options, usually tie-up with local chefs, and promise more interesting dishes than those found in food courts. While a food court sells fare from national chains, food halls typically stick with local vendors that have a few locations.

“A food court is about giving you a burger, fries or a slice of pizza so you can shop longer at the mall,” Cook said. “A meal is part of the experience.”

Often, food halls have multiple vendors. But Eataly is an exception.

The Italian chain sells itself as a trip to Italy without the plane ride. Its large location has full-service restaurants; Artisan Groceries; quick-service counters that sell gelato, pizza and espresso; Including cooking classes. Eight of Eataly’s 13 U.S. locations are in malls, with more to follow next year

Italy’s North America CEO Tommaso Brusso joined the company last year after two decades in the fashion industry, leading mall brands such as Benetton and Diesel.

“People go to the mall for shopping, but they also go for the cultural experience,” said Bruso, adding that Italia has had success with customers both inside and outside the mall.

But the food hall didn’t win over everyone. Brandon says food courts have performed better for Brookfield’s mall. He pointed to Chick-fil-A and Panda Express as two tenants that typically see strong sales in food courts. In 2023, average annual income is a A Chick-fil-A mall location was $4.5 million; The chain’s best-performing mall restaurant generated nearly $19 million in annual sales, according to franchise disclosure documents.

Even with more competition for buyers than ever before, The Cheesecake Factory has managed to stay on top. And it shows how restaurants can support a sprawling mall.

The chain, known for its extensive menu and massive columns, ranked No. 1 in Yelp’s Mall Brands report.

It has been a rocky year for the company. Like many restaurants, the chain has struggled to attract diners, many of whom have recouped their restaurant spending. In the latest quarter, the company’s same-store sales rose just 1.6%. Activist investors are also pressuring the company to divest its smaller brands, such as Northern Italia. (The Cheesecake Factory declined to comment.)

Still, the company continues to outpace the broader casual-dining segment, based on metrics provided by industry tracker Black Box Intelligence.

Cheesecake Factory shares are up 43% this year, outpacing the S&P 500’s 27% gain over the same period.

While fellow mall staples like California Pizza Kitchen and TGI Fridays have filed for Chapter 11 bankruptcy in recent years, The Cheesecake Factory has escaped the same fate.

And it probably helped her landlords financially. According to a 2023 Moody’s Analytics report, enclosed malls with Cheesecake Factory locations are more likely to be current on their debt payments. Author Matt Reidy, director of commercial real estate economics at Moody’s, said it is probably the result of the company’s strong site selection, rather than a mall storage cheesecakes.

Still, Reidy said having one of the restaurant’s locations helps. And Brandon of Brookfield agrees.

“Oh my gosh, are they productive. It’s incredible what they’re able to do, and they’re a valued partner of ours. We have dozens of leases with them, and we really value them as tenants,” he said.