Habit Burger finding new use for old restaurant spaces
Jan Buchholz / Phoenix Business Journal
Habit Burger Grill originated in California as a beach-style fast-casual restaurant that focused on charbroiled burgers, sandwiches and salads.
Habit executives still want to convey that easygoing ambience in the Phoenix desert, but they are doing it with second-generation real estate — spaces that previously served as other restaurants — rather than building from scratch.
“We like to be located in a daily-needs shopping center where there’s a drugstore, grocery store or other fast-casual restaurants, like Pei Wei,” said Russell Friend, Habit’s chief development officer. “Our MO is to always get into high-traffic areas.”
Friend previously scouted sites for Pei Wei Asian Diners on behalf of P.F. Chang’s China Bistro Inc.
Phoenix is the chain’s first market outside California. Two Habit Burger restaurants are open in the Valley now, and a third is under construction.
The first local Habit Burger opened in May in a former Tott’s Asian Diner at McClintock and Guadalupe roads in Tempe. The second opened this week in a former 5 & Diner restaurant at 960 N. 54th St. in Chandler. The third is under construction at 745 E. Glendale Ave. in Phoenix, in a former Pizza Hut building that later housed a coffee shop. It’s expected to open by late summer.
Using second-generation space is a departure for Habit Burger, which typically has purchased new retail space for its restaurants. Since the recession, however, little if any new space is being built, forcing the company to look at alternatives.
“For us to ramp up locations in Phoenix, there just (weren’t) enough new options to grow,” Friend said. “Now, 90 percent of our real estate is second-generation space.”
The company is leasing sites in the Valley from different landlords and paying for expensive build-outs. A typical investment, Friend said, is about $650,000 per site.
Habit’s California stores usually are 2,000 square feet plus a patio. The hot Phoenix summers, however, prompted the owners to opt for larger stores in the 2,200- to 2,400-square-foot range so more people can eat indoors.
All of the Valley locations presented challenges.
• The Tempe site is in a strip mall anchored by a Fry’s grocery store. Habit had to tear out a wall on the southern side of the strip center to expand its space.
• At the former 5 & Diner site in Chandler, the exterior was refaced with stucco and a tower was added to accommodate Habit Burger signage.
• The central Phoenix location is another stand-alone site that required adding a tower to accommodate signage. It sits across the street from a Safeway-anchored strip mall that includes a Pei Wei, Sauce and Qdoba.
“We opened up the storefront windows to bring more natural light in,” said Friend, adding traffic counts are exceptionally high at the intersection of Glendale and Seventh Street, which is near State Route 51.
“That one is going to be a great one for them,” said Chris Hollenbeck, a broker with Cassidy Turley BRE Commercial, who helped Habit Burger find that site.
Hollenbeck said a number of fast-casual restaurants are looking for space. Many of them already have established a presence in the Valley, such as Chipotle and Five Guys Burgers & Fries.
For now, Friend said, Habit will wait to launch a fourth location.
“What we want to do is to really plant our flag in these locations,” he said. “We took our foot off the pedal and are making sure we make the right decisions.”
That resounds with Jeff Green, principal of Jeff Green Partners, a Phoenix-based consultancy that scouts locations for national retailers. He said too many burger places are opening in the Valley.
“The places that concern me right now are burgers, cupcakes and yogurt. I definitely think there’s saturation with Five Guys, Smashburger and now Habit,” he said.
The usual fast-food burger joints and specialty burger places such as the Grind and Zinburger all are competing for the same dollars, Green said.
Friend is undeterred.
“We don’t worry at all about (Five Guys or Smashburger). Their price points are about $2 more than ours,” he said.
Steve Standlea, Habit Burger market partner, disagreed with Green’s assessment as well.
“Demand is really good, and I still think the market is underserved for a high-quality product,” he said.
Standlea expects Habit to expand sooner rather than later, but with a caveat: “It requires really good real estate. That takes a little time. But in doing our research of this market, there are at least a dozen (sub)markets that would fit.”