Last month we discussed Food Halls. This month we will tackle another industry game changer, retailer inroads into the restaurant business. Several chains including Whole Foods, Wegmans, Nordstrom, Outdoor World and even Lexus in Japan are trying their hand in the industry. But is it sustainable? Can they do it well?

Why try the restaurant business?

As a restaurant professional, you know how tough the business is. Why are retailers taking the risk? The answer is “dwell time.” The longer they can keep people in the store, the more they will buy. Supposedly. A great example is Nordstrom, which has incorporated Sportservice into some of their stores and used an espresso bar to make customers feel more comfortable and at home during their time in the store It also may work for a company like Lexus, where car buyers can take a break from a long purchasing process to grab a bite to eat without leaving the premises, but can it work in grocery stores?

Can they be a consumer destination?

With a cart full of perishables, will consumers stop for a sandwich and craft beer before heading home? Or will they just make their own at home with freshly purchased ingredients. It seems for grocery store restaurants to succeed, they will have to be a destination that diners will make a special trip for, which puts them on a level playing field or even below other dining establishments.

Some retailers are finding they make more revenue per square foot in their restaurant space than they do in their retail space. Given that increase in profitability, it’s not surprising they would at least make the attempt, but as restaurant professionals know, it’s not without risks. Hiring reliable staff, maintaining cleanliness and offering quick and accurate service are just a few of the challenges.

Is it worth the risk?

Can retailers withstand the risks of running a restaurant? So many things can go wrong, the worst of which is, not doing it well. Operating a restaurant is challenging enough for the experts. It’s just loaded with pitfalls for dabblers. One subpar meal can be enough for a diner to not return. Retailers could lose not only restaurant customers, but retail business. For most it’s simply not worth the risk.

Brand dilution is another potential risk. Most retailers go to great lengths to establish a brand identity. Is it worth muddying their brand with an attempt into the restaurant business?

For most restaurants, retailers will not present substantial competition, at least not in the long run. But that’s no excuse for complacency. Keep an eye on developments in both the local and national industry and make adjustments that allow you to maintain and grow your business.

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