Restaurant Operations Lessons from In-N-Out Burger

By Brian Harris

in-n-out-sign

When Lynsi Snyder speaks, people listen. The 33-year-old billionaire owner of In-N-Out Burger, the sole heir to her family’s fortune, makes rare public appearances. It’s ironic since the California-based fast-food chain has been a well publicized stop for local Hollywood stars.

Based on her family’s history, Snyder has a unique perspective on restaurant operations. “We’re not changing things like many other companies do,” she told the Orange County Register in 2013. “That’s kept us unique; it’s kept the customers feeling like we’re not a sellout.”

Here are the three key restaurant operations lessons from In-N-Out:

1. Be Careful When You Franchise

For the past 67 years, In-N-Out Burger’s operations have centered on this original tenet: “Give customers the freshest, highest quality foods you can buy and provide them with friendly service in a sparkling clean environment.”

The Snyder family rule is to maintain control of each location in order to achieve high standards. Like her father and her grandparents before her, Lynsi Snyder has made it clear that In-N-Out Burger will not franchise or sell.

Interestingly, McDonald’s and In-N-Out came of age in the 1950s. When In-N-Out was approached for franchising opportunities, the answer was always no. Meanwhile, McDonald’s said yes and became a global fast-food giant.

Fast-forward to 2015, however, and McDonald’s is shrinking its U.S. store count for the first time in more than 40 years. Sales continue to falter as the brand struggles to redefine itself in today’s market.

2. Keep the Menu Simple

Founders Harry and Esther Snyder did not want to add too many menu items for fear it would affect the quality of In-N-Out Burger’s food and service. The menu has remained largely unchanged since the chain’s founding and includes single hamburgers, cheeseburgers, the Double-Double, French fries, malts, shakes and sodas. The food is made to order with fresh ingredients, meaning no microwaves, heat lamps or freezers.

3. Employee Satisfaction

The Snyders learned early on that retaining good employees -- or “associates” as In-N-Out calls them -- was one way to maintain brand consistency. Entry-level employees are paid more than minimum wage, and some have been with the company for more than 20 years by working their way up to managerial roles.

In January, Snyder attended the opening of the 300th In-N-Out location in Anaheim, CA, on what would have been her grandmother’s 95th birthday. It’s been a slow and steady pace to this milestone. The restaurant chain operates in California, Nevada, Utah, Arizona, and Texas.

With its roots firmly planted, the company is poised for future growth and a possible showdown with gourmet burger chain Shake Shack, which plans to open at least 450 locations in the coming years after going public in January.

It’s proof that having clearly defined goals, a simple menu and a high level of respect for employees can go a long way in the fast-food business.

What Supermarkets Can Learn from Costco

By Jennifer Hoffman

costco-outside

Costco Wholesale Corp. is the rebel of retail. As a wholesale club, it doesn’t advertise to non-members. There are no bright lights and flashing colors as shoppers walk up and down the warehouse rows. The floor is concrete, the steel ceiling beams are exposed and huge skylights save electricity.

It doesn’t sound like a very inviting environment, yet shoppers arrive in droves to Costco’s hundreds of locations worldwide. It’s because Costco operates on the fundamentals of customer loyalty and brand consistency.

At Costco, no product is marked up more than 15 percent, which is less than a supermarket’s usual 25 percent or 50 percent at a department store. To compensate for those small margins, Costco charges a $55 annual membership fee of its 50 million members. Meanwhile, Costco’s proprietary brand, Kirkland Signature, is one of the most successful brands in the industry.

Here’s a quick trivia question: Which has more SKUs: A typical supermarket or Costco? Surprisingly, the average Costco store offers 3,600 SKUs compared to the supermarket’s 25,000. (Source: Fast Company)

In regards to product placement and quantity, supermarkets can learn from the world’s largest warehouse chain in three ways:

1. First impressions are everything

Costco stores are set up as a racetrack. When customers enter the store, they can see a panoramic overview of the store. Each department – electronics, home, fashion, and food -- is visible from the entrance. This design makes a 148,000-square-foot warehouse a lot more navigable.

Food for thought: All too often, customers walk into a supermarket in the middle of the store where their vision is confined to a numbered aisle or two. It’s time to rethink this traditional layout of supermarkets. In 2013, Meijer invested $160 million to build six new supercenters and undertake five major remodeling projects with a brand-new design for strategic product placement.

2. Product triggers

Costco’s product placement centers around “triggers.” Need paper towels? Well they might not be in the same aisle the last time you visited. That’s because Costco rotates at least 25% of hits hard-goods products inside the racetrack. Costco does this with great skill because they want customers to go on a treasure hunt to see more of the store. The result is a bigger basket.

Food for thought: Do supermarkets use product triggers for staple goods or do they suffer from “numbered aisle syndrome”? While it’s important to cater to the mission shopper, it’s equally as important to test product placements and measure results.  

It seems that Whole Foods has gotten points No. 1 and 2 with its announcement of a new streamlined design that will feature “innovative technology and a curated selection.” The target, of course, is the next generation of household consumers – Millennials.

3. Less is more, even in a giant warehouse

Once again, shopper psychology rules the day. Costco doesn’t offer a mile-long aisle of one product. Rather, brands are carefully chosen and prices are held steady. Low prices and less stress lead to more purchases. Costco’s food court hot dog has remained $1.50 since 1985, so why not buy that fountain drink, too?

Food for thought: Variety is the spice of life, but consider honing in on your top-selling brands. Doing so with be less overwhelming for shoppers and could help boost sales.

Analysts have said that there are too many supercenter competitors in suburbs, and we’ve seen retailers try to shrink themselves into smaller formats. Among wholesale clubs, Costco remains the leading rebel of retail, proving that it’s possibly to be big but not brash.

Sample Supermarket Inspection Checklist

Topics: Grocery

3 Reasons Why Mystery Shopping is Dead

By Brian Harris

fry-mystery-shopper

It’s time to toll the bell for mystery shopping programs. Some retailers may be resistant to the change, and it’s sure to disappoint some faithful shoppers who earn extra money with these programs. However, the process of mystery shopping is outdated, time consuming and limiting when it comes to determining actionable insights.

Top 3 Reasons Why Mystery Shopping is Dead

 

3. Shoppers no longer see the time-cost benefit

Take, for instance, Johnny and Joanna’s mystery shopping experience. They are a young couple who were trying to make ends meet while living in New York City. At first, they enjoyed the free perks, extra cash and flexible schedule that mystery shopping provided. In the end, however, they decided the pay wasn’t worth their time and effort. They called the process of logging information and writing reviews “labor-intensive” and found that they were making less than minimum wage.

Likewise, retailers must consider the time-cost benefit of their current programs. While a retailer may be paying a company to help them sort through paperwork and countless photos, is the cost worth it? As a senior management team, do you have the time and resources to decipher the actionable insights from this data and create a course of action?

2. Mystery shopping has been linked to a growing number of scams

Consumers across the country have reported mystery shopping scams and are increasingly skeptical of becoming involved in these programs. The government has confirmed there are dishonest mystery shopping promoters and scammers who issue fake checks in an attempt to get people to wire money to a third party. Of course, these scams are detrimental to retailers who operate honest programs.

Technology is the double-edged sword for mystery shopping. On one hand, it makes more scams possible. On the other hand, consumer awareness is heightened as people self-educate.

1. Mystery shopping falls short on tracking progress over time

Mystery shopping data may serve as a snapshot of your stores, but it doesn’t provide the kind of thorough analysis retail operators need over time. Ultimately, the need for mystery shoppers is decreasing as district managers in the field employ mobile technology on their store visits. By uploading photos and videos, store managers and employees can be the senior management team’s eyes and ears in the field. Plus, the company’s own employees are better at spotting issues related to their stores.

Also, these staged situations can sometimes tip off employees that they are being evaluated. The “big brother” aspect of mystery shopping – the idea that management is looking for things that are wrong in the consumer’s experience – can cause a salesperson to become defensive when they discuss results with managers.

However, with transparent, employee-led auditing, the senior management team gains the ability to assign tasks when problems are reported at individual stores and track progress to ensure that these issues are resolved. When tasks are completed, employees can be commended for performing their duties, which leads to a more positive work environment.

Topics: Business Operations, Retail

Improving Restaurant Labor Productivity with Mobile Technology

By Brian Harris

qsr-employees

The minimum wage debate is a hot-button issue facing the restaurant industry right now.

Los Angeles just became the largest city in America to raise its minimum wage to $15. The increase will be staged in over the next five years. By passing this measure, the city joins Seattle and San Francisco in the push for $15 by 2018. Meanwhile in New York, a board met Monday to discuss the implications of raising the minimum wage for fast-food workers.

For restaurants and restaurant management companies, there are potential pros and cons of paying minimum wage restaurant employees more. Without getting into the political nature of this debate, it’s important to discuss one overriding issue: labor productivity.

Labor costs are a growing concern for the restaurant industry, writes Jonathan Maze of Nation’s Restaurant News. The head of the National Restaurant Association’s research and knowledge group recently revealed that restaurants average $84,000 in sales per worker. In comparison, grocers average $304,000 and gas stations rake in $855,000. All of these industries are competing with restaurants for customers, so something must be done.

Mobile Technology Closes the Gap

As we’ve discussed previously, the restaurant industry is highly demanding in terms of brand consistency and customer service. While it’s not easy for restaurants to increase labor efficiency, there may be some options that have not yet been fully explored.

Maze points out that technology is often an untapped resource. At the restaurant level, tablets and ordering apps could help the wait staff become more efficient and possibly reduce the size of the staff.

However, there is a much greater opportunity for mobile technology to increase labor efficiency.  Think of all the time that could be saved if employees started their shift knowing exactly what needs to be done. Senior management could assign mobile tasks to quickly and efficiently resolve issues and complete tasks. Those extra minutes emailing and making phone calls are eliminated, adding up to hours saved.

Consider a scenario where a restaurant chain needs to start preparing for a summer menu promotion. At the front of the house, signage and menus have to change. At the back of the house, new supplies need to be ordered and the kitchen staff needs to prepare. This is a multi-step rollout that needs to be done accurately across a chain.

Senior management could assign mobile tasks with start and end dates to complete the rollout while checking that benchmarks are being reached. With progress monitored in real time, last minute scrambling and guesswork is eliminated, staff members aren’t stressed out, and the restaurant is poised to capitalize on sales.

When productivity increases, labor costs are kept under control because restaurants don’t need to hire as many employees. So, if the minimum wage does in fact increase in the city or state where you operate, a restaurant can afford to pay higher wages without a devastating financial impact.

Remember: If the senior management team wants employees to be more productive, they have to practice what they preach by implementing the right tools and strategies.

Topics: Business Operations, Restaurants

Gas Station Restaurants Cater to Classic American Fare

By Brian Harris

road-side-diner

In 2010, Jeff Lenard, spokesman for the NACS, the Association for Convenience & Fuel Retailing, effectively summed up a growing industry trend: “We're changing from gas stations that happen to sell food, to restaurants that happen to sell gas.” Five years, later the trend shows no sign of slowing down, considering that 80 percent of all fuel purchases in this country are made at convenience store retailer.

According to NACS, convenience stores have offered fresh, prepared food for years, but it is only over the last decade that the trend has accelerated. Perhaps American consumers have finally been able to move past the stereotype that gas stations are an untrustworthy places to have a meal. To a large extent, the industry can thank leaders like Sheetz for raising the bar on foodservice and opened its first convenience restaurant in Altoona, Pa.

Single store owners, like Knucklehead Bend Market & Eatery in Bedford, Ind., are also leading the way by offering a full menu of freshly made food and a motorsports-themed c-store.

You don’t just have to be part of the automobile culture to survive either. Check out Thrillist’s 13 best restaurants in gas stations (and try not to eat your screen).

Focus on Food

One of the greatest things about America is our freedom, particularly our freedom to choose a double cheeseburger with bacon over a kale smoothie. While people like actress Gwyneth Paltrow are launching organic take-out companies, gourmet burger chain Shake Shack is poised to open hundreds of locations across the U.S. in coming years.

Similarly, Freddy’s Frozen Custard & Steakburgers just opened 21 stores in 21 weeks, and is on track to open a total of 45 stores this year in a mix of old and new markets.

While it’s true that Americans are eating healthier, there is still a strong undercurrent and demand for classic roadside dining. So, the question is, will gas stations rise to the challenge and capitalize on this opportunity?

If You Grill It, They Will Come… If You Don’t Gross Them Out

It all goes make to operations. Does your store have curb appeal? If you are, in fact, filling up tanks, does your forecourt send the message that this is a sanitary place to eat? Greasy/grimy cars outside a place where people eat will always be a delicate balance, so the operator has to do their part to make it a sanitary environment.

Don’t give customers a reason to leave your property ready to write a negative Yelp review.

We’re not exaggerating these concerns. Just last week, Cintas Corp. released the results of a Harris Poll it conducted on the cleanliness of a business. Overall, 85 percent of Americans would not patronize a business with negative online reviews about its cleanliness.

Of course, restaurants and hotels ranked at the top of the list of businesses where cleanliness most greatly impacted buying habits. However, respondents also listed convenience stores and gas stations. It’s all related!

The Takeaway

In summary, gas station restaurants continue to evolve and the future is bright. Operating a “hidden gem” of a restaurant can be fun, but you still need a loyal customer base. You need to make that first good impression to get customers in the door.

Just ask Al Hebert, a medical journalist who blogs at GasStationGourmet.com.

“The average person just fills up their tank, pays with a credit card and drives off,” Hebert told the Washington Post. “But if you just walk a few feet from the pump to the store, you might discover one of the best eating experiences of your life.”

Topics: C-store

Motivating Your Retail Employees

By Julia Burnett

modells-undercover-boss

President Teddy Roosevelt will forever be tied to Big Stick ideology, which has the mantra “speak softly and carry a big stick.” It was his foreign affairs philosophy that you negotiate peacefully while threatening the “big stick” of military action if needed.

Prior to his appearance on the hit TV show “Undercover Bosses,” CEO Mitchell Modell of Modell’s Sporting Goods was more of a leader who spoke loudly while carrying the big stick. As the fourth generation leader of his family-owned business, he aggressively cut spending with the goal of driving profits. As of the episode’s filming, Modell’s operated 154 stores in 11 states. Revenues exceed $600 million.

What Modell didn’t realize, however, was that his no-nonsense, profit-driven approach had become too far removed from the everyday operations of his business. He went undercover to find out why some stores were underperforming, but learned a great deal more in the process about his associates.

One of his first assignments was working with an assistant manager in Connecticut. The manager, James, called Modell’s New England stores the “red-headed stepchild” of Modell’s, a New York-based company. The stores were understocked and James felt frustrated by upper management’s lack of attention to the problems happening in his store.

Taking the “Big Stick” approach, Modell got on his cell phone and started complaining to someone on his team that district managers were not doing their part to audit stores.

Don’t Lose Sight of the Team Effort

Digging deeper, Modell discovered a systemic problem affecting not only his retail associates, but also his warehouse employees and truck drivers. The issue was low pay. Employees who were not managers were making minimum wage, even though their jobs required hours on their feet and other physical demands. One retail associate has resorted to living in a homeless shelter in order to support her young children.

“When I look at the situation at our distribution center, I’ve got to change this,” said Modell. “I’m going to make sure that we’re a company where people feel good about coming to work and feeling that’s if they’re going to work hard, they’re going to be recognized and rewarded. Right now, that is not the case and I feel horrible.”

Remember Your Associates are People, Not Numbers

In retail, employee turnover is high and margins can be tight. It’s all too easy for senior management to just focus on the latest reports.

One truck driver named Kirk said upper management was clueless. “They only look at the bottom line and when they only look at the bottom line they lose focus of what really happens,” he said.

Rather than try to solve the problem from the “ivy tower” of a New York City office, they have to take action as Modell did. This doesn’t mean they have to shave their heads and wear a walrus moustache in disguise. Instead, they need to enable their district and store managers to be their eyes and ears in the field.

Perhaps motivating your retail employees comes down to three basic principles:

  1. Pay them enough to reduce turnover and incentivize your motivated talented employees to stay.
  2. Take the time to ask your employees how you can make their job easier.
  3. Energize your employees by motivating yourself. Show them you care enough about your business to follow through on their feedback. It sends the message: “What we do here is important and you are a part of our success.”

Following the show, Modell decided to motivate himself to lose weight, given the physical demands of his associates’ jobs, which he found challenging. He changed the employee compensation structure of his company, and emerged from the experience re-energized, re-committed to his associates and full of lessons for his two young sons, the future leaders of the family business.

Topics: Business Operations, Retail

5 Lessons from C-store Mergers & Acquisitions

By Scott Hill

c-stores-ma-brands

The saying “when it rains, it pours” doesn’t have to have a negative connotation. In the c-store industry, it is raining mergers and acquisitions, and pouring dollars for these growing companies.

2014 was one of the busiest years on record for M&A activity, as documented by Convenience Store News.

To recap, here are some of the most significant deals of last year:

  1. Marathon Petroleum Corp.’s Speedway LLC division purchased Hess Corp.’s retail holdings.
  2. Energy Transfer Partners LP (ETP) bought Susser Holdings Corp., Aloha Petroleum Ltd., and 40 Tigermarket stores from Tiger Management.
  3. CST Brands Inc. purchased the general partner interest of what is now CrossAmerica Partners LP. Together, the two companies purchased Nice N Easy Grocery Shoppes Inc.

Announced in 2014, closed in 2015

  1. Alimentation Couche-Tard merging with Kangaroo Express Parent, The Pantry Inc.
  2. CST and CrossAmerica are teaming up again to acquire Erickson Oil Products Inc., operator of Freedom Valu stores and Landmark Industries, operator of Timewise stores.

2015 Deals

  1. 7-Eleven just announced it will buy Tedeschi Food Shops Inc.’s network of 182 stores in the greater Boston area and New Hampshire. Tedeschi Food Shops also operates stores under the Lil Peach and Store 24 banners.
  2. In another major deal, United Oil, a Southern California operator, will triple its store count after completing the acquisition of 251 gas stations and convenience stores from PC&F. The deal will also triple the workforce of United Oil, which will be renamed United Pacific.

What Can Operators Learn?

The tripling of newly formed United Pacific’s workforce calls to mind a few important lessons about the merging of companies and their respective brands. These are important lessons for retailers of any size, whether they operate 50 stores or 500.

Here are five lessons from M&As:

1. Set clear and attainable goals

Companies like Alimentation Couche Tard likely spent weeks, if not months, developing a synergy plan. Prioritize tasks. What comes first? There are the monumental tasks of notifying employees and, if applicable, shareholders. There are also the logistical challenges of changing banners, possibly closing some stores, and rebranding other locations. Set “start” and “finish” dates for your objectives, and funnel down from the most important tasks.

2. Capture the best practices from BOTH sides of the business

Don't always assume the new parent company does everything better than the acquired company.

For instance, 7-Eleven has not yet announced how the rebranding of Tedeschi Food Shops will occur or if any stores will be shuttered. However, Tedeschi is renowned for its fresh foodservice, while this has been an area 7-Eleven has tried to improve. Will 7-Eleven integrate some of Tedeschi’s expertise? It will be interesting to see what happens.

3. Perform store audit/site profiles on new locations

Create a store profile for each location and document square footage. Note the number of cold vaults, if rebranded signage is needed and whether hot/cold food is served.

Also, set a standard baseline score for tracking performance on newly branded stores and be able to compare them against existing locations.

4. Standardize employee training

It’s likely there will be some slight differences in corporate culture, dress code, and even routine tasks like cleaning the store. Training for these tasks becomes easier when there’s a defined list of objectives across your network.

5. Notify partners and vendors

Communicate with your partners and vendors to consolidate deliveries and refresh the merchandise mix. This is why historical views of promotions are especially helpful. Just like you can capture best practices from both businesses, you can now offer “the best of the best” in merchandise.

Topics: C-store

How to Optimize C-store Cold Vault Sales

By Vladik Rikhter

c-store-cold-vault

Convenience store managers should think of the cold vault like it’s the Super Bowl. It’s a highly competitive event for c-store operations, and execution is crucial to sales.

The good news is that c-store beverage non-alcoholic beverage sales grew 6.4 percent in the first quarter of this year, while alcoholic beverage sales saw a 5.5-percent uptick, according to the latest Wells Fargo Securities LLC Beverage Buzz survey. Lower gas prices have certainly prompted consumers to upgrade their beverages, and one retailer predicts that 2015 will be a banner year for the beverage industry.

The participations of this competition are the younger generation of Millennials. This consumer group is driving c-store food and beverages sales, and beverage category managers like BP America’s Ed Hobson are following trends closely.

What’s hot in BP’s ampm stores among Millennials:

  • Craft beer sales (20 percent growth this year)
  • New flavors and product innovation (especially for the energy drink sub-category)
  • Seasonal offerings
  • Natural flavors

What’s not:

  • Carbonated soft drinks – sales remain flat in light of health concerns
  • Artificial ingredients

The Importance of Tracking Competitor Promotions

Technology is changing how convenience store retailers respond to their competitors in real time. Perhaps your competitor is offering a buy 2-for-1 on a proprietary product, or maybe they’re highlighting a vendor promotion at the forecourt. Since you’re not privy to their sales data, it’s important to conduct site visits and gather data on what’s visible to the eye in terms of promotions.

Also, remember to account for channel blurring. When ampm conducted their own shopper surveys, they found that shoppers didn’t realize that ampm’s pricing on energy drinks was better than grocery-store pricing. In response, the c-store retailer changed its outdoor signage to promote its price on energy drinks.

The retailer also responds when products aren’t selling. “We have to be very selective on what we bring in. If something is slow-moving, it’s out,” Hobson told CSP. He says managing the limited space in the c-store requires greater vigilance.

Real-time data collected with mobile technology can help retailers achieve greater vigilance and ultimately “stick the landing” in sales.

Topics: Retail, C-store

The Impact of Food Delivery Apps on Operations and Brand Image

By Julia Burnett

postmates-app

Food delivery is a natural progression in an age of convenience through mobile technology. Essentially, restaurants had a twofold, industry-wide problem that needed to be solved:

  1. How could restaurants expand their client base to offer take-out that’s fresh, delicious and breaks away from frozen foods?
  2. How does a restaurant execute a delivery service that meets brand expectations?

If the restaurant doesn’t deliver on a quality product, it risks losing a customer for good. In the age of Yelp, where grievances against brands are aired quite publicly, this is a risk not many restaurants are willing to take.

Ultimately, this is why more restaurants are outsourcing delivery to third-party companies. We see this in a variety of recent examples:

This is not to mention the countless other food delivery services, including the GrubHub portfolio featuring GrubHub, Seamless, MenuPages, DiningIn, Allmenus and Restaurants on the Run.

Sticking to What You Know

The convenience for both restaurant and customer is advantageous, and the food delivery app landscape is getting very crowded very quickly. Also competing are chef-made meal services, as well as services like Blue Apron and Good Eggs that deliver ingredients for home cooking.

As the restaurant industry becomes niche, from the types of cuisines to the type of dining environment, apps are following suit. For instance, Caviar is a premium food delivery service that partners with high-end restaurants.

In light of this trend, it’s becoming increasingly important for restaurants to have their operations down to a science. If hot, fresh food is going to be delivered within a small window, it needs to be prepared promptly and accurately across the chain.

In addition, if a restaurant decides to use a third-party ordering system, they have to be prepared to audit and test that system. For instance, a customer may not remember that it was the Postmates service that messed up their Chipotle order; they might hold this experience against Chipotle, even though the order is not placed through the restaurant chain’s corporate website.

At the end of the day, the buck stops at the brand!

Topics: Restaurants

The Changing American Mall Landscape

By Brian Harris

mall-court
Photo by Kishjar, via Flickr

Is the American mall really dying? A lot of news outlets would have you think so. Before ringing the death knell, however, consider that only two dozen malls across the United States have closed since 2010. In other words, only 3.2 percent of American malls have failed in the last five years, writes Angelo Carusi, principal, Retail Specialty Practice Group, with Cooper Carry.

When businesses fail to adapt, they are forced to close. As Carusi explains, malls close because shopping habits change, demographics shift, better retail centers are built nearby and malls become saturated with the same merchandise. While mall owners face financial challenges and rising rents, sales and net operating income are actually on the rise.

Teenage Wasteland with Linen Napkins

Teen mall traffic has declined by 30 percent over the past decade, according to a 2014 study by Piper Jaffray. The things that normally drew teens to malls – video games, movies/music and branded apparel – can now be easily purchased online. Everyone has the silver screen in the palm of their hand, helping to explain why movie theater traffic has declined.

However, there’s one sector where foot traffic hasn’t declined: restaurants. “We see restaurants as the next generation of hangout for teens,” the report concluded. And kids these days don’t choose fast-food restaurants as a hang out – they choose establishments with higher brand status.

Keep in mind that teens are influenced by their parents, and adults are working in an increasingly service-oriented American economy. More adult consumers are expecting a little bit of luxury in ordinary experiences, whether it’s reclining in a plush chair in a movie theater, or having an optional valet service at a crowded mall with a Cheesecake Factory restaurant.

Upscaling is not a retail trend that’s confined to food courts, but it is easily witnessed there in recent times.

Success Linked to Snobbery

"Class A malls are repositioning themselves to be destinations, with more restaurants, which is making them more resilient to what's going on with the Internet," Rick Romano, a portfolio manager of the Prudential Global Real Estate fund, told Reuters.

The American mall has become another retail “experience.” Class A malls are anchored by stores like Bloomingdale’s and Lord & Taylor. It makes sense that high-end tech retailer Apple searches for Class A malls when opening new stores.

Class B malls, in comparison, are anchored by stores like J.C. Penney and Sears, which have struggled financially in recent years. These malls are also experiencing increased competition from suburban shopping centers.

In summary, mall management and retailers can adapt by attempting to go high-end – whether that takes the form of renovations, an enhanced shopping experience through technology, or a revamped merchandise mix. This strategy might not apply to every store, but it’s currently the winning strategy for the brick-and-mortar retailers that are anchoring American malls.

Topics: Retail