Dunkin’ Donuts in Memphis, TN with Larry Strain
Guest: Larry Strain
Topics: Dunkin’ Donuts, retail development
Transcript:
Chris Ressa 0:01
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management.
Welcome to retail retold. Today I’m joined by Larry strain. Larry is the founding partner of restaurant development experts. Larry has been in the retail real estate industry for over 20 years, working at some prestigious brands such as Starbucks, Dunkin McDonald’s to name a few. excited to have him on the show. Welcome, Larry.
Larry Strain 0:45
Thank you, Chris.
Ressa 0:46
Thank you for having me. You’ve been in a lot of cool places, you’ve done a lot of real estate development. Tell us a little bit more about who you are and what you’re doing now.
Strain 0:57
Well, thanks for the intro, Chris. And I think when you say you worked at Starbucks Coffee Company, McDonald’s and Dunkin I think every year of working for those organizations as a dog gear, right. So I think it’s really seven years. Retail for every one year of working in the industry. So no one’s ever said that to me. relation I have been in retail development for 140 years.
Ressa 1:27
That’s the best line I’ve heard in a while. There’s been
Strain 1:30
a long tenure. Yeah, well, you know, I started in this in this business. Think about the lowest level position that you can find in retail development. And I was about two steps below that when I got into this. And it’s kind of like in the in the restaurant industry, what’s below the dishwasher, right? And that’s kind of how I got into I got into retail real estate. And I worked myself up over the years through the ranks and multiple different companies. And, you know, I fell in love with it the first day I got into it. It’s, I’m an entrepreneur by heart and doing real estate transactions. Every one is different. Every one is a new experience. And I think it’s probably the number one reason why people never really retire from real estate. It’s a it’s a great job. It’s a great industry. It’s fun, exciting. It’s a roller coaster. And I can’t get enough of it.
Ressa 2:36
Awesome. Well, you found it restaurant development experts, how long is restaurant development experts been around?
Strain 2:43
It’s already on company. So we’ve been around, you know, I like to say three to five years, because there’s a couple of years where we really weren’t very active and doing things were more in the creative mode. But we’re young. And we’re growing. We were pre pandemic. And then, like most companies and people in my field, it’s been kind of quiet for the last 12 months. But we’re seeing a lot of activity in the month of January, in fact that we’ve probably had more activity in January than we have in the past 10 months.
Ressa 3:16
Wow. And what does restaurant development experts do?
Strain 3:21
Yeah, so it’s really a culmination of my experience and retail development from trying to determine which markets are most viable for you to identify for growth. And then how do you identify the sub markets for for retail development, and all the way down to the trade area level. So when we put together a strategic plan for a client, you know, yes, 10 real estate people with a strategic plan, you’ll get 12 different answers. So the way that we look at it is we would take regions of the United States and break it all the way down to trade areas within the regions of the United States and build the plan back up from the from the ground up. So we show clients exactly where to go, and what priority fashion and developing their brand in any market in the United States. And we have a proprietary very interesting way of how we approach that. And it’s it’s really built upon the mistakes that I have personally made in my career, doing this for multi unit brands and multibillion dollar companies. So I’ve made a lot of mistakes, and states that would pretty much crush most retailers emerging retailers today. So I take those experiences, create the strategic plans for the clients. And then we’re interesting and unique because we can also help execute those plans in the market for our clients through our real estate services through brokerage services and corporate outplacement services as well.
Ressa 4:55
understand it’s a growing business because you’re not the Only one in that sector. What separates you from the other players in that sector? I think
Strain 5:09
a few things. The first is our system was built based upon our mistakes, which is hard to say for some of the other concepts and brands out there today that are offering these. They’re pretty much analyst designed. Ours were actually designed by field exam, you know, field, real estate people, in executives. And so in another piece of it is that we actually build the plans for a client. So we don’t license our platform to a client to use our technology to create the plan, we create the entire plan for the client, using our in house systems and expertise.
Ressa 5:52
Okay, very, very interesting. Do you find that that isn’t the case? For a lot of those companies out there?
Strain 6:00
Who do that almost Yeah, most of the companies, again, their their analysts design platforms, they create regression analysis models predicated upon successful operation of units in that client’s portfolio. They sell, they may have a very sophisticated system, and they sell licenses to their system, and those clients use them to conduct market studies. The problem is, if the person who’s using that program doesn’t have a vast experience in developing market plans, you have to kind of question what the viability of that market plan is after it’s been created. So that’s really what kind of separates us from that is that we use our own in house expertise to create those plans using our own in house systems, which helps protect the credibility of that strategic growth plan.
Ressa 6:54
Got it really interesting stuff. I think that there’s a lot of art and science that goes behind that.
Strain 7:04
Exactly. It’s much more than just math. Which a lot of people like to oversimplify, you know, the analyst inside of you believes that just the stats speak for themselves. And you can rely 100% on what those stats tell you. But again, following those stats, and building retail development, getting burned by that, you know, having your job at risk or putting a franchisees well being at risk for directing them to go after a site, we take those things very personal and to heart and, and we learn from every one of those mistakes, as many as they were, every one of them was a life lesson for us that we took and built into the platform that we offer today.
Ressa 7:50
Excellent. I want to move the conversation now. What are the key trends that you’re seeing in retail real estate post pandemic?
Strain 8:02
Well, obviously, the hot topic right now is ghost kitchens. You know, they’re getting a lot of money thrown their way. It’s a misunderstood space that folks are getting into. And this knee jerk reaction of how to deal with a post pandemic environment is taking a lot of people’s attention away from the traditional brick and mortar retail build out of things and relying heavily upon a ghost kitchen type platform. You know, I’m mixed on it. I think that ghost kitchens are a phenomenal way to extend your brand’s reach through another point of distribution, but I don’t believe that it will become the point of distribution, as which a lot of analysts and most tech analysts are projecting the wave of ghost kitchens to become I think it’ll be an added component just like drive throughs were an added component before they existed or somebody evolving a day part on their menu offering curbside delivery versus in store order placement. You know, I think these are all just evolutions of how the retailers were work going forward. And but I don’t think it will become the primary point of conducting business for brands, how do you build a brand without a retail storefront? Right, because now you’re taking brand development to a whole nother level of consumer product goods. You know, and trying to take a restaurant or a retail brand and try to develop through a consumer product. That methodology just doesn’t make sense to me.
Ressa 9:51
Larry, that was so insightful. I really loved how you mentioned that it is not the point of distribution, rather it is an extension of their distribution. It doesn’t feel to me that every brand will be able to scale this the way headline news is stating they should. People are getting really excited about ghost kitchens, I am too. But again, it’s another point of distribution, not the point of distribution. That said, it will certainly be interesting to see if a virtual kitchen can scale nationally without a physical presence to connect with the consumer. Speaking of the consumer, from a consumer perspective, an additional concern I have is consistency. I think the more different types of distribution points you have, the harder it is to execute with consistency.
Strain 10:44
It absolutely will be. I think that ghost kitchens are a great complement to the overall development plan of your brand within a marketplace. I’ll give you another example. Captive Audience environments, right. So at Starbucks, we had license stores where we couldn’t control the real estate inside of a college campus or a large scale hotel or Convention Center, an airport, a supermarket, right? So we create a licensed venue that allows them to become the operator of that brand within that venue. That is a brand extension. And something that is a very important component of building a brand and a market trying to establish brand equity on brick and mortar development alone is very difficult. You have to be multi channel, right you have to get in all different forms of channel distribution for your brand. In order for all those to collectively help you develop the brand to a tipping point of acceptance within that market that you’re you’re building that brands equity.
Ressa 11:50
Wow, that’s really thought provoking. I have not heard anybody connect the ghost kitchens as an extension of brand in the same manner as airports and store within store. Footprints are also brand extension points. That was a really interesting comparison. Thank you for sharing that. Absolutely. The other thing that’s really hot right now, you can’t go on social media. And it’s talked about at nauseam, but I feel we’re tone deaf if we don’t talk about it is the drive thru. Every time we go on social media, there’s a new drive thru concept. Is this the future that everyone’s going to have a drive thru? Or is this an overcompensation for the pandemic
Strain 12:39
overcompensation for the pandemic hands down? You know, before the pandemic curbside delivery was becoming the new drive thru. You know, when Starbucks created their order app, I haven’t stood in line at a Starbucks and probably three years not worked for the company for decades, right? So I’m as admirer to that brand and attracted to it as any person is. But I since the development of that app, I have not stood in line to place an order at a Starbucks, I always place the order ahead and I walk in and the orders ready and I pick it up and I go now, it hasn’t replaced customers wanting to stand in line that hasn’t replaced people wanting to enjoy the experience in the environment of the store. It is just another point of distribution. For people who find value in that point of distribution. It doesn’t replace it not everybody has the same mindset. So you know drive throughs are, are important to a brand. I think that non drive thru locations can be as convenient. As a drive thru location. If they have the right order application and the right curbside delivery program in place. Everybody can become a drive thru. Now. When I can pull up into a parking space and have the product brought out to my car. I mean, that’s really what the convenience of the drive thru is, except now I don’t have to stand in line to place my order at the drive thru. That’s what the curbside delivery is replacing is just like I was standing in that line for all those years placing those orders at Starbucks, the app or place that curbside delivery can help also replace that queue that you stay in at the Chick fil A for 45 minutes to get up to the order screen to place your order.
Ressa 14:24
I couldn’t agree more. One of the things I keep saying to people, I keep getting frustrated at the tagline the restaurant of the future the drive thru of the future, the Store of the Future. It is often brands that have 1000s of locations and the perception from the person consuming the information and reading is that every location is going to be changed to this and I’m like the the capital it takes to do that is enormous. It’s they’re not going to renovate every single store, spend millions of dollars on every single store and turn it into whatever got posted on LinkedIn as the Store of the Future, there will be concepts that come out of the pandemic, and I’m grateful for them. There will be new drive throughs I don’t think it’ll be every store. For every brand, I may be some Well, McDonald’s did a whole remodel where they almost touched every store. They did a really good job of that. However, the picture that gets painted is that it’s going to be every store. This is the drive thru of the future. And every drive thru is going to look like this and every restaurants gonna look like this. And I keep wondering, is it an overcompensation? Are there is it still relevant to have a QSR? That doesn’t have a drive thru? I think it is. They as you said they could they can be convenient. And I’m interested to see how it plays out and to see if this starts to settle a little bit because you can’t go online without seeing a new drive thru concept. And as a developer, it’s helping us because we are developing for new concepts that are out there. So that’s great. But it does beg the question, Does every location have to be a drive thru and we have some QSR locations in our portfolio that are great, do well, when they’re convenient, and they’re not going to need a drive thru? I don’t think in the future, not every location has to be drafted.
Strain 16:27
That’s right. But that’s what, Christina how difficult it is to get a drive that were approved in any municipality in the United States. I mean, I live in Boston, for God’s sakes trying to get a drive through here, right? I mean, it’s impossible. But that’s what was forcing the evolution of the apps, they own our head application. And that convenience piece of it is that man, you can’t build every application that drives it, because the real estate just doesn’t accommodate it, or the jurisdictions won’t allow it or there’s gonna be some barrier to entry to making that happen the way that you know, some people are broadcasting that event to occur. And that’s just it’s an impossibility, it can’t happen.
Ressa 17:05
Fantastic point. Last question that I have before we get into your story. You mentioned the Starbucks app. So a hot topic, more specifically in retail real estate, but a hot topic. You haven’t waited in line in years at Starbucks, you place an order on your app, you go and you pick it up in the store? Is that a physical store? Sale? Or is that a digital sale?
Strain 17:32
You know that? I guess it depends on what hat I’m wearing? You know, I think it’s a store sell. You know, was it the digital device that created the transaction to occur? Yes, I think you can, when you’re breaking up your categories of how your your transactions have occurred at that particular facility. Yes, you could call it a digital cell. But, you know, I don’t understand, I guess the relevance of it, of why it’s important to delineate it that way. To me, it’s a transaction. And however I obtained that transaction, the better. I guess you could say if Chick fil A is using a ghost kitchen, and that order comes in for the ghost kitchen to have that Chick fil A delivered to somebody’s house? Where does that transaction go? Does it go to the unit store? Does it go to the ghost kitchen facility? What do you think? I think it probably goes to the ghost kitchen facility because that’s the whole reason is, you know, why was Chick fil A try to operate a delivery business out of there for Wal environment when that’s what the ghost kitchen was designed to do is to accommodate consumers that want to receive Chick fil A at their house. So you know, the labor burden, the cost of occupancy, all of it goes gets billed to the ghost kitchen. And so that’s where the transaction should occur. And that’s where that p&l results.
Ressa 18:59
On the Starbucks example, I think that’s a physical sale, physical store sale as well, because the sale could happen without the app can’t happen without the store. You still have to walk in the store and get it. It can happen without the app, it cannot happen. It’s just an extension for you to order. But it
Strain 19:21
Starbucks consumer because of the app No, I just ordered differently now because of the app. So it did nothing. I think in bringing new business to the table. It just helped increase the capacity of that physical store by being able to make orders without customers having to stand in line.
Ressa 19:39
You got it. Boom. Totally agree.
Strain 19:42
So think about that. When it gets to ghost kitchens. Am I going to create new customers because of that? You’re not already a customer and now you’ve become a customer of that brand because you’re ordering and it’s accessible through a ghost kitchen. I don’t know. I think you might increase your frequency of that brand, but I don’t know how many new customers that will drive to
Ressa 20:00
opposes. We’re going to take a quick break here. And now a word from one of our sponsors.
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Makes sense? All right. I want to pivot the conversation I want to talk about a story you have and your story happened in Memphis, Tennessee. That’s right.
Strain 21:35
What happened in Memphis, Tennessee with Dunkin Donuts of all companies.
Ressa 21:40
I was there today.
Strain 21:41
That’s right, there’s a day
Ressa 21:44
I was at No, I was at Dunkin today through the drive. grabbing an iced coffee and kindelan New Jersey.
Strain 21:53
So the unique thing about about this particular store in Memphis, Tennessee is it was Duncan’s first store in Memphis, Tennessee. And so it had a lot of significance. There was a lot of stress associated with this store because it had to do well, we had to put it in a great trade area, we had to have all the things that a new store needs and accessibility and visibility and popularity and Union Avenue was decided to be that place to put the first store and if you’re familiar with Memphis, then you’ll understand what Union Avenue is and its significance in the Memphis marketplace. The problem is, it was such a high barrier to entry to get onto Union Avenue, we had to be extremely creative. Because we had it must it, it was mandated that we had a drive thru in that facility. And of course, there were no drive thru availabilities on the entire union or Avenue corridor. And where we want it to be Starbucks number, number one performing store was, you know, half a mile up the street. And, you know, we wanted to send a message to the brand that we were coming and we were coming hard. And so we found a property that had 120 feet of storefront space built up to the street front. So it really didn’t have much for queue. And there was no way to wrap the property. So there is no way for a car stack to wrap the property. So we decided and we actually approached the landlord on this, we thought we were crazy. When we first came to us and said we’d like to punch a drive through right through the middle of the building. And, and he looked at us like we were crazy. And the problem with a lot is we also need it to be a point of egress. So we had to conduct ingress and egress through the center of the building in order to get the cars to wrap around the building for the drive thru and also to allow customers to get out of the property for dine in customers. So when they wanted to leave they needed to be able to come out without having to go through the drive thru. So it was a engineering feat to make this happen. And it also was very convincing on my behalf to the landlord to allow us to do this to his building. And so we created it. And the inside of the space we we put murals inside of the space that were reflective of the community in which we were building the store and had a lot of blues and barbeque and rock’n’roll themed aspects to the murals that we put so pay homage to Memphis and its history. Gibson guitar factory custom built a Dunkin donut guitar for us to display inside of the store and welcome us to the marketplace and it was just it was really fun.
Ressa 24:53
Wow, that is a cool story. For the listeners out there, Larry had told me that he was going To tell a different story previously, and he told me before the call that he changed it up. I’m glad he did, because this one is unique. Let’s go back in time a little bit, I have a ton of questions. First question, how does something like this pencil for both Dunkin and the landlord?
Strain 25:21
Well, because it wasn’t a drive thru. And it was an underutilized piece of property. For the landlord, we actually got a hell of a deal on the space. The the space itself was positioned well and the trade area, but no QSR restaurant was going after it because of its inability to accommodate the drive thru and because of accessibility to the parking which is in the rear of the property. And it was challenging to get to and so. So it sat vacant for a while. And when we approached the landlord on this and told him, We were basically going to pay all of the costs for the modifications to the building. And he would be left with a drive thru use facility now where it didn’t exist before we made it. And we would pay the cost for making those improvements to accommodate a drive thru. It came on board eventually, it took some convincing.
Ressa 26:18
You mentioned the engineering. You said it was an engineering feat. I bet you’re underselling it, because to blow a hole in the middle of the building and make sure it still stands. There’s a lot that has to go into that. And then then you have to get it approved. So after you design this, you have to meet with the municipality, are you going to get approvals? Or is the landlord
Strain 26:55
we are we are on the landlord’s behalf, we’re there to help the landlord achieve the permits to get this approved. And of course we we bring in design experts and we’ll bring in engineering specialists to come in and help us with the explanation of this because you got to think it makes a lot of people scratch their heads, because you don’t see this too often presented into you know, the the planning board’s office. And so when they they look at this, they obviously want to add value to it, because that’s what they do they add value to our users, right. And so, you know, one of the issues was how do you get the exhaust out of the corridor if a car is stuck in that corridor, waiting for a parking space, or the drive thru is so busy that cars are queuing in the corridor? So how do you address it? So we had to go back and engineer a ventilation system that helped escape the exhaust gases coming out of the cars while they’re in queue waiting to to buy the products?
Ressa 27:56
Unbelievable? Was this a franchise location or a corporate store? franchise?
Strain 28:03
Wow. So we had the franchisee we had to convince the landlord we had to convince the brand. The the the planning board, and a lot of people that we had to convince that this was what needed to happen to this this particular property. And so here’s that’s kind of how I operate right when I find the site that the brand needs to be at. I’m like a dog on a bone. And I don’t stop until we get it done. And it’s a lot of effort. But that’s what the good sites require.
Ressa 28:32
I couldn’t agree more the best in our industry. Have that tenacity that you’re talking about? You mentioned that the building was right on the road. Was there D O T and for those who don’t know Department of Transportation, because now there was never a turn there, you’re gonna turn off the road and go in the building, I guess is the way to describe it. Were they involved?
Strain 28:59
Of course, yeah. Of course, they were right. And they wanted to limit the accessibility coming off the road. You know, the problem was the narrowness of the property and the setback. So the property was about 40 feet off of the road. So not a lot of space to queue right when you come off of that. And that decision has to be made very quickly when you decide to come off of the road. And then, you know, the building itself. We were working with about 50 to 60 feet of frontage of which that drive thru ingress and egress ate a very big component of that. So how do we continue to to hold the street front value without diminishing it, incorporating into an egress egress access point. So there were a lot of different challenges that came into this particular deal. And making the site work in the marketplace. Wow.
Ressa 29:53
I can see that, but worth it worth it. You mentioned that the width of the building of the storefront was like 50 or 60 feet See how wide was the entrance or the corridor for the cars, because then you had to have some space in the facility for people to walk in and where all those murals were and everything, which means it’s pretty narrow space that those people were dining and eating in and having their coffee.
Strain 30:21
Yeah, so about 30 feet, or 30 feet of that of that building was dedicated to that ingress egress corridor through the middle of the building. But the building itself was about 120 feet of total storefront that was contiguous with another adjacent tenant, which was another challenge. Right, we had to deal with the neighboring tenant on how it is that we construct this store. And this was another layer of complexity in the deal structure here.
Ressa 30:48
Wow, yeah, that I can imagine, because you’re going to do some heavy Denman demolition, to blow through the building, as the tenant next door is still operating their business, that most convincing
Strain 31:01
part of that was, look, your customers have a challenge getting to the parking that’s in the rear of this property here. Most people don’t even know that it exists. And so we are therefore going to enhance your ability to get customers to the back of the parking space. And it was kind of embellishing a little bit, but it helped it helped convince them.
Ressa 31:21
Wow. And the store still exists today. Does. Next time I’m in Memphis, I gotta check this. This drive thru Dunkin out?
Strain 31:31
Yeah, Union Avenue, Memphis, Tennessee. It was a fun, fun project. And but you know, there’s that’s one of 1000s I could tell you right now. I mean, there’s a lot of them out there that I’ve been involved in. But that one sticks to mind because it was the first store to market and complex for obvious many reasons.
Ressa 31:54
Fantastic. What a cool story. Thank you for sharing that. I want to take us to the last part of the show. Retail wisdom. I’ve got three questions for you. Are you ready to question one? What extinct retailer Do you wish would come back from the dead?
Strain 32:11
I’d have to say it would be the retailer that I spend the most time inside of when I did go to those locations. I went there infrequently. But when I was there, they would capture me for a couple of hours while I was there. And that would probably be the sharper image. I’m a kind of a gadget geek. And so I had to walk through the entire store and put my hands on every gadget in the entire facility before I left so that I was up to date on what those those you know, the new things coming onto the market.
Ressa 32:43
We’re gonna go off script. What gadget Are you excited about right now? Catch it.
Strain 32:49
You know, I was I was doing some Christmas shopping, my daughter plays high school basketball, travel, basketball and you know, a lot of stress on her legs and her knees and your ankles. And I saw this device that you strap around your legs, your hips and your feet and it uses air pressure and adds air pressure at different points through this therapy session that is pre programmed in your phone that you know, create some type of relief on your store and strained muscles. I thought that was just mind boggling.
Ressa 33:24
Wow. That is mind boggling. Thank you. Question two. What’s the last item over $20 that you have purchased in a store?
Strain 33:34
Well, let’s see. If I look around my office here. I think the first thing that comes to mind is this bottle of Bombay Sapphire. Say that was probably the last thing I went to the store and purchased 20 bucks on which really wasn’t that long ago.
Ressa 33:53
Fantastic. That’s great. Last question. You ready? Larry? You and I are at Target. We’re shopping. I lose you? What aisle would I find you in?
Strain 34:03
That’s an easy one. I would be in the automotive aisle. Oh, I’m a shade tree mechanic by heart. And so I love tinkering on cars. And so I would probably be in that aisle. Checking out whatever things I could tinker around with my car on.
Ressa 34:26
Very cool. Well, this has been great. Love the talk about ghost kitchens drive throughs a very cool story where you developed it. Incredible drive thru. And this has been awesome. So thanks so much, man. And I really appreciate you coming on the show. This is great,
Strain 34:47
Chris, thanks for what you’re doing, man. This is awesome. I wish this was around 20 years ago when I got into the business. I was always looking for advice and mentorship and what you’ve created here is just it’s fantastic. So everybody who’s getting into this industry and they have access to this. I’m sure they think you as well.
Ressa 35:06
Thank you so much for saying that man. Absolutely. Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode