Web Exclusive | January 2015 | By Christine Blank

Hot Market: Detroit

Some limited-service chains see big potential in bankrupt city.

Once a bankrupt city left for dead, Detroit is showing signs of becoming a hot destination for quick-service and fast-casual concepts. Where city blocks were once ghost towns, real estate developers today are building thriving centers for businesses and entertainment venues—and restaurant operators are excited to get on board.

“There have been a lot of significant changes in the last couple years that have made Detroit—especially the Midtown area—a hot spot for business developments,” says Kassem Fardoun, a franchisee for Chicago-based Falafill.“The Detroit revitalization has spread like wild fire, as you see many restaurants based in [suburbs like] Royal Oak and Ferndale opening up second locations and pop-ups all over Detroit.”

The fast-casual, Middle Eastern–style tapas chain recently began franchising after it was acquired by Chicago-based Forever Brands, which operates Forever Yogurt and Bee & Tea. The first Detroit Falafill unit—the brand’s first outside Chicago—opened January 12, and four more are planned for the city in 2015.

“Detroit has one of the biggest Middle Eastern populations in the country,” says Falafill founder and executive chef Maher Chebaro. “You find a lot of mom and pop restaurants, but what we are offering is a little bit different.”

Falafill is opening its first store in Midtown, a promising neighborhood near downtown. “The Midtown neighborhood is very diverse, and my restaurant speaks to vegetarians, vegans, and those who only eat Halal meat/chicken due to religious preferences,” Fardoun says.

“The Detroit revitalization has spread like wild fire.”

Dallas-based Pie Five Pizza Co. is also investing in Detroit, awarding up to 55 units to franchisees John “J.D.” Draper and John Draper II. The father-son team plans to expand the build-your-own pizza concept throughout the Chicago and Detroit areas, along with certain cities in Wisconsin.

The Drapers are Detroit natives and believe the time is ripe for quick-serve and fast-casual eateries to expand to the city. “Because of where Detroit has transitioned from, there is a prime opportunity. It is a prime market for growth, not only before the bankruptcy, but certainly after,” J.D. Draper says.

The Drapers plan to open five or six Pie Five locations in Midtown or downtown Detroit by the end of the year, starting this summer.

“Part of our mission is to bring national [brands] to Detroit. A lot of national food players have come out of Michigan, including Little Caesers and Hungry Howie’s Pizza,” John Draper II says. “There is an appetite here [for pizza] and there is an opportunity to prove the pizza concept. If it works here, it works anywhere.”

Little Caesars Pizza, which was founded in Garden City, Michigan, in 1959, is building a new 205,000-square-foot headquarters in Detroit. Twenty-five years after moving its headquarters from the suburbs to Detroit’s Fox Office Center, Little Caesars will open a Global Resource Center that will expand its campus to more than twice its current size.

The new headquarters will be part of the Columbia Street neighborhood in The District Detroit, which aims to transform dozens of under-utilized blocks between downtown and midtown Detroit into a world-class sports and entertainment district.

“This is a transformational time in our city’s history, and we’re honored to continue contributing to the rebirth of our proud community,” says Christopher Ilitch, president and CEO of Ilitch Holdings, in a statement. “We want the millions of visitors to The District Detroit and our headquarters campus each year to know that we are an entrepreneurial Detroit and Michigan brand—born and bred.”

Meanwhile, health-focused fast-casual concept Freshiiopened two locations in Detroit last year, including one on Wayne State University’s campus. Another location is expected to open in the hot downtown area early this year, joining the nearby 7 Greens Detroit Salad Co. And several restaurant brands are slated to open units at the Detroit’s Metropolitan Airport this year, including Chili’s,Papa Joe’s Gourmet Market,Plum Market/Zingerman’s Deli, Bigalora Wood Fired Cucina,Chick-fil-A,Potbelly Sandwich Works,Pinkberry,andQdoba.

One challenge for operators looking to grow in Detroit is that prime real estate is hard to come by, particularly in the downtown area; developers long ago snatched up property when it was a bargain. “People think they can get the best buy of their lives,” John Draper II says. “That was true three years ago. We have leveled off now and the cost per square foot is even with the rest of the Rust Belt.”

Other factors that make downtown Detroit challenging are the historic buildings, which carry with them a host of regulations and challenges when renovating, as well as developers who already have plans for certain retail districts.

“Downtown is a hotbed,” John Draper II says. “A developer has bought quite a bit of space, from retail to residential to entertainment. He is dictacting a vision and we have to abide by that vision.”


Which Wich is also opening a downtown location in a couple of months.

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