Landlords today are desperate to find up and coming tenants. But it’s always a risk taking a bet on a retailer without a proven track record.
Firms need to adjust in order to make the leap from being a local to a regional or national chain. One company that says it is ready for that challenge is Energy Kitchen, a health-conscious quick service restaurant that currently operates 10 restaurants in the New York City area. The chain, which launched in 2004, sells fare like bison and ostrich burgers, healthy wraps and protein shakes. In growing from a single site to 10 locations, the firm already has made adjustments to its model.
Today, Energy Kitchen runs four corporate stores and six franchisee-owned locations. As it looks to secure new leases in markets like Florida and Maryland, its management would like to shift to being primarily a franchise business. And in 10 years the firm would like to increase its portfolio to 1,000 sites.
Also, today the chain operates in urban downtowns and commercial business districts—nine of its stores are located in Manhattan, and the tenth in Hoboken, N.J. Over the next several years, however, Energy Kitchen’s owners would like to focus on opening locations in high traffic shopping centers.
Site Optimizer recently spoke with Randy Schechter, Energy Kitchen co-founder and vice president, about how the concept was born, the chain’s expansion plans and its strategy in securing new locations.
Site Optimizer: How did you come up with the concept for Energy Kitchen?
Schechter: Myself and my partner, Anthony Leone, were working in Manhattan, and we could never find places to eat. We got frustrated with a lack of healthy choices, so we decided to take it into our hands and create our own concept. Energy Kitchen sells burgers, and wraps, and smoothies, but everything is baked, steamed and grilled and nothing is over 500 calories. We looked for different types of proteins and different types of products that are leaner and better for you than traditional fast food options.
SO: Did either of you have restaurant experience prior to starting the chain?
Schechter: Anthony had worked at Boston Market and at Ranch One. I had more of a corporate business development background, corporate marketing and sales. Basically, we were two young entrepreneurs and we raised probably a couple hundred thousand dollars from friends and family to get the concept off the ground. Our first store opened in 2004 in Chelsea [a trendy New York City neighborhood].
SO:What did you find to be the biggest challenge about opening that first store?
Schechter: Opening the first location in the restaurant business you wear a lot of different hats. We were doing everything from fixing the equipment to building a Web site to developing a menu. So I think the early challenge for us was the [number] of arms and legs that the business [calls for].
SO: What are your expansion plans right now?
Schechter: We have 55 stores in development in Florida, Washington, D.C., Boston, White Plains, Long Island and Maryland. We are looking for major markets, with major foot traffic and upscale demographics. For example, in Florida, we are opening a store in Boca Raton. In Long Island, we are looking at places like Syosset. Real Main and Main type locations.
SO: Do you eventually plan to be in every state?
Schechter: For the next 12 months, we are focusing on the East Coast. In 2012, we are going to be expanding into markets like Texas and Chicago. And then in 2013, our expansion plans call for international growth. We are being approached by people from every major international city because nobody does what we do. We are in discussions [for stores] in Dubai, U.K. and Canada.
SO: How large are your stores?
Schechter: They should be about 2,000 square feet. And we like to-tenancies with supermarkets like Whole Foods and gyms.
SO: How do you choose and evaluate new locations?
Schechter:: We work with top notch brokers in each market, so in Florida, we have one brokerage group. Here in New York, we have a different one. The ultimate site selection is done at the corporate level, but we work hand in hand with the broker and the franchisee.
We developed an in-house real estate department two years ago because real estate is the cornerstone of success for every company so we wanted to control it internally. We use a software program called Demographics Now and then we use the reports from the brokers to create different maps for us, outlying where our competitors are, etc. And then we do site walks—we believe [when] you get out into the market and see the physical space, that’s where the ultimate decision is really made.
SO: Can you talk about instances where your ultimate decision on whether to open a store went against accepted wisdom?
Schechter: We have two stores in Manhattan, one on 52nd Street and Second Avenue and another one on 41st Street and Second Avenue. A lot of people in the industry told me not to look at those locations because they were inferior, and now those are our number one and number two stores. Sometimes the numbers and the expertise don’t tell the whole story. We believe in using our feet.
SO: What drove your decision to become a franchise operation?
Schechter:We’ve got such an overwhelming response from people that wanted to franchise that we took a look at franchising and put a lot of resources behind it, in terms of training and marketing.
SO: What are you looking for in new franchisees?
Schechter: We are looking for high net worth and someone who has a lot of business experience. We prefer restaurant experience, but it’s not required.
SO:All of your operating restaurants are currently in New York. As you sign deals for locations in other markets, what has been the biggest difference from how you handled your real estate needs?
Schechter: Generally, when you are dealing with an urban prototype, there are a lot of challenges—you have landmark buildings, you have unique layouts. Because we are in New York, we have a lot of different prototypes set up so we are geared to open anywhere. As you move out to the suburbs in Florida or Long Island, the stores tend to be more rectangular, more cookie-cutter. The build-outs in these locations aren’t as challenging.
SO: Energy Kitchen is a relatively young chain. What kind of a reception are you seeing from landlords outside the New York area?
Schechter:We spend a lot of money on doing different trade shows and we have a public relations firm, so by the time we get into a new market, most landlords have heard of us already. I think for a company that’s well capitalized, that’s growing like we are, we’d like to take advantage of the current economy. There are a lot of vacancies out there and we are able to negotiate very favorable leases.