A cruise ship on the Rhine River in Germany.

The FBI headquarters in Washington, D.C.

A Toys“R”Us in Manhattan.

The Camp Pendleton military base near San Diego.

Where moving people are, quick-service restaurants want to be, a reality that continues shaping the rapid and aggressive evolution of the nontraditional restaurant marketplace. From casinos and college campuses to museums and hospitals, retail stores, and theme parks, quick serves have moved far beyond street locations and mall food courts to launch units just about anywhere they can capture customers.

“We even had one store that was a truck following a particular military unit,” says Elizabeth Rolfe, Subway’s director of new business development.

For growing quick-service concepts, nontraditional units offer a compelling play, allowing companies an opportunity to increase their unit counts, reach new customers, expand their franchisee network, and

capture some impressive revenue courtesy of a captive, convenience-craving audience. Such benefits have heightened competition in the nontraditional space and, subsequently, demanded brands enforce more strategy than ever before to land the right sites with the right partners.

A smart brand play

Few quick serves know the nontraditional space quite like Maui Wowi Hawaiian, which runs about 50 traditional stores and 400 mobile units across 35 states and seven countries.

“Nontraditional is our tradition,” Maui Wowi CEO Mike Weinberger says.

The Colorado-based concept peddling coffee and smoothies boasts outlets in stadiums, theme parks, convention centers, racetracks, and at temporary events across the U.S. At the Houston Livestock Show and Rodeo last March, franchisees Rob and Jean McLean served more than 42,000 smoothies over 20 days, a sign of the appealing revenue a well-placed nontraditional unit can bring.

“A lot of people are realizing nontraditional is a great niche, particularly for franchising companies,” Weinberger says.

Auntie Anne’s executives are among them. In 1992, the pretzel-slinging enterprise made its first foray into nontraditional waters when it opened an outlet in the Pittsburgh International Airport; three years later, the company debuted an outlet at Penn Station in New York City. In subsequent years, however, Auntie Anne’s largely maintained its focus on shopping malls, the bread and butter of its business, says Brian Boycan, Auntie Anne’s vice president of nontraditional development. At best, nontraditional development was a modest side project.

That all changed in 2009, when the Pennsylvania-based company’s strategic plan earnestly examined the company’s growth prospects. With mall traffic trending downward and Auntie Anne’s already claiming a presence in many of the nation’s favorable mall destinations, company leaders recognized the need to “fish in other ponds,” Boycan says.

“We were running out of space with the malls, and branching into nontraditional development allowed us the best opportunity to keep growing,” Boycan says. The company began opening outlets in airports, amusement parks, and military bases, reaching hordes of American consumers who avoided shopping malls, namely men.

Today, nearly one-fifth of Auntie Anne’s unit count falls under the company’s nontraditional umbrella, a number Boycan says is rising fast.

“Nontraditional development now outpaces our traditional growth … and it has been a windfall for us,” Boycan says.

Companies like Maui Wowi and Auntie Anne’s are far from alone in pushing the nontraditional development button. Dunkin’ Brands has largely re-entered the California market through nontraditional venues in military bases, travel centers, and hotels, an aggressive play that the Massachusetts-based company believes will help it fulfill its long-term goal of operating as many as 1,000 units in the Golden State.

Dunkin’ Brands director of nontraditional development Chris Burr says nontraditional units are helping the company introduce the Dunkin’ name to new customers and markets, propelling product trials and the concept’s westward
development push.

But Dunkin’s nontraditional development, which accounts for about 9 percent of the chain’s total asset base, also allows the company to re-engage with light or lapsed users, while simultaneously providing its existing customer base greater access (read: frequency) to the brand. Best of all, Dunkin’ does not have to discover the real estate, but can seize existing space in visible, high-traffic spots.

“Those opportunities are immensely attractive,” Burr says, adding that some nontraditional venues, such as universities, office complexes, and hospitals, not only offer a regular customer base, but also opportunities for catering and other revenue-building maneuvers.

Many quick-service concepts developing in the nontraditional space also relish the opportunity to work with experienced foodservice operators, such as master concessionaires like Aramark and Sodexo, especially since positive relationships with well-resourced concessionaires or corporate partners can deliver a large number of sites in quick time.

In 2010, Auntie Anne’s inked a deal with HMSHost, a master concessionaire at airports and travel plazas. From fewer than 50 airport and travel-plaza locations before the HMSHost deal, Auntie Anne’s now has more than 80.

Similarly, Subway has leveraged its partnership with Pilot to quickly assemble a roster of more than 200 restaurants in Pilot fuel stops across the country.

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An evolving marketplace

In recent years, Subway’s Rolfe says, the nontraditional marketplace has endured a significant shift, becoming less niche and more recognized, more crowded. When Subway first went to hospital trade shows years ago, she says, people inquired about their presence. These days, hospitals call the sandwich chain’s Connecticut headquarters and chase the brand as a partner, intrigued by Subway’s name recognition, R&D, and marketing backbone.

“It’s so much easier to work with an established quick-service partner who has the nontraditional expertise,” Rolfe says, noting that about one quarter of Subway’s 42,000 global locations sit in the nontraditional camp.

While nontraditional development among branded quick serves had been gaining momentum throughout the 1990s and early 2000s, the recession delivered a new normal, one that continues to evolve.

Amid the recession’s falling sales and traffic numbers, many quick serves sharpened their competitive elbows to secure space in nontraditional venues, eager to capture any persuasive revenue plays. As a result, the competition—and, in some cases, the costs per square foot—intensified, which led many quick-service companies to look beyond the commonplace nontraditional development opportunities, such as airports, travel plazas, colleges, and stadiums, and embrace more novel opportunities, such as museums, office buildings, and even churches.

Subway, in fact, has development agents in markets across the country tasked with identifying prospective nontraditional opportunities, no matter how seemingly wild.

“We don’t limit ourselves in any way,” Rolfe says.

In quick time, the idea of where quick-service eateries might appear snowballed as chains explored any sites with captive audiences—zoos, ferry boats, bowling centers, and more—and the host sites became increasingly more receptive to branded quick-service concepts.

The surging nontraditional world then dovetailed with another industry trend: the local movement. With both host sites and consumers clamoring for local flavors, regional and local independent brands began nudging their way into request for proposal (rfp) meetings alongside the industry’s major players.

Steven Brush, head of Philadelphia-based Brush Enterprises, a consultancy specializing in nontraditional restaurant development, has seen a steady uptick in RFPs from airports, stadiums, and other hosts that are specifically looking for local concepts that can flex their ability to deliver hometown flair. “I believe this is a long-term trend,” Brush says.

The escalating competitive environment has forced national quick-service players to embrace bold, strategic moves. While Boycan says much of Auntie Anne’s earliest nontraditional development happened “without thinking about it,” he says the company is “much more deliberate” about it today.

“It’s about seeking out relationships with the right people,” Boycan says, adding that he’s been in recent RFP meetings in which 200 companies are battling for a single nontraditional space.

To better position itself to win nontraditional deals, Auntie Anne’s has taken some ambitious steps, including creating cobranded units with the likes of Subway, Checkers, and Red Mango, as well as rolling out a redesigned store that softens the company’s customary white-tiled, stainless steel look with warmer tones and a more contemporary design.

“We’ve had to be proactive,” Boycan says, predicting that the competitive environment for nontraditional units will only escalate in the coming years as more brands look to capitalize on nontraditional’s
potential.

Some necessary diligence

For brands looking to make nontraditional inroads, industry insiders say many fail to understand just how different nontraditional development is from its traditional counterpart. Meanwhile, many more struggle to exercise the diligence necessary to assess a site’s profit potential, as well as the company’s ability to provide distribution and field support.

“A lot of concepts have brick-and-mortar restaurants figured out, but learn that translating that expertise into the nontraditional space isn’t as easy as they would’ve hoped,” Weinberger says.

While Dunkin’ Donut’s location at Fenway Park in Boston claims access to more than 37,000 fans for three-plus hours 81 days each year, Burr says, the unit sits empty the bulk of the calendar year. Such recognition, he adds, always enters into Dunkin’s cost-benefit analysis.

“You can be busy for three days and dark for the next seven, so that’s all balanced into the equation,” Burr says.

He adds that Dunkin’ takes each nontraditional site through an approval process in which the company analyzes demographic data for the opportunity.

While traditional development decisions will lean on information such as population and household income, nontraditional development demands quick-service leaders review other metrics. A hospital site, for example, will be judged on its beds, employees, and outpatients, while the number of gaming positions looms large at a
casino location.

“Knowing how many people live within a five-mile radius of the airport or casino won’t do you much good with your analysis of a nontraditional site,” Burr says.

Furthermore, not all airports, universities, or stadiums are created equal, and some nontraditional spots can be fickle environments.

In airports, the decision to move an airline to a different terminal can easily shift an eatery’s fortunes; some college campuses have active student unions, while others are more decentralized; and traffic in a sports arena can be significantly impacted by a team’s winning—or losing—ways.

And whereas traditional store development might include a franchisor, franchisee, and real estate pro, nontraditional development often features the franchisor, a large contractor, and the client or host facility. With contractors and clients in particular, Brush says, there are often various layers of personnel with whom a quick-service company’s representatives need to develop relationships.

“Nontraditional development is 100 percent relationship driven, and that’s something anybody doing nontraditional development needs to know,” he says.

Above all, Brush says, quick-service companies must understand where they want to be in five to 10 years. How many units does the company want and where? How does the company plan to develop longstanding relationships with its target audience? As compelling as the prospective move into a large health-care facility a state beyond the company’s current geographic footprint might be, a brand targeting Millennials might be better served passing on that health-care site to pursue colleges or arenas in its current or adjacent markets, Brush says.

With about 10,000 nontraditional units, Rolfe says, Subway has developed the necessary experience to know which sites make sense and which don’t.

“Sometimes people approach us and have an underperforming location and are convinced a Subway in that spot will change its fortunes,” she says. “We’ve learned that an underperforming unit for them might be an underperforming unit for us, as well.”

Finally, there exists a range of operational challenges in the nontraditional space, such as security, communal storage space, and limited hours of operation, and quick serves frequently need to alter their floor designs, equipment, and menu. Flexibility is a must, experts say, and companies must often bend and shape their concept to fit the nontraditional venue.

“You have to understand that every audience and every space is a little different,” Weinberger says, adding that he will not budge on brand identity or product integrity, no matter how compelling the nontraditional opportunity. “So long as we can have our brand and product intact, we can go down the road of due diligence and see if the financials and operations make sense.”

Appealing as some nontraditional spots might seem, Burr says, discretion is sometimes the better part of valor.

“In some cases,” Burr says, “you just have to say no.”