EG Group, a U.K. retailer that operates fast-food outlets, has 25 stores under development domestically and internationally, and Karam says that number will grow. Sbarro is also working with a number of other convenience store companies as well as travel centers such as TravelCenters of America, which has a 25-year history with the restaurant.
“So now the brand has these four categories and you start to tally the development opportunities domestically as well as globally,” Karam says “ … And the most important thing is that with our 65-year history, we know how to optimize sales and profits in those spaces better than any brand in the industry. We've gone in behind and replaced Papa John's and Pizza Hut and other national brands. And the sales increases are meteoric—I mean 2x, 3x. So we know how to optimize sales in these impulse pizza category venues, and that's where the chain is today.”
However, uncertainty remains about malls, which have seen a consistent decline in foot traffic over the years. Coresight Research said in a report in August that a quarter of malls will close in the next three to five years.
Looking into Karam’s crystal ball, he believes that will shrink the U.S.’s mall population to roughly 700 stores. Currently, Sbarro has 230 mall-based units domestically, and the chain wants to grow into 500 to 600. So Karam says there’s still room to expand.
Of the 65 stores under development right now globally, 25 are in mall food courts. Karam lists multiple reasons for this. For one, mall conversions reduce franchisee investment from approximately $400,000 to fewer than $100,000. Additionally, because of the decline in mall traffic, rent is decreasing significantly. Sbarro recently opened a mall-based store in Orem, Utah—the brand’s 26th opening of 2020. Twelve more units are planned for the rest of the year.
The restaurant offers third-party delivery in almost all of its mall locations, a channel that’s risen to 6 to 10 percent of sales. In 2018 and 2019, same-store sales were positive in those units despite the downward trend of malls.