June 29, 2022
The Hidden Costs of Integrating a Restaurant into a Retail Center

Relocating to a Strip Center May Be Right for Your Restaurant If You Understand the Hidden Costs of Integrating into a Retail Shopping Center.

As freestanding restaurant sites continue to become scarce in some areas, with often times cost-prohibitive development costs, the trend to use retail space in shopping centers has been on the upswing. It’s an attractive proposition to retail developers or landlords as restaurants in retail centers generate more traffic and are excellent prospects for long-term leases. The restaurateur has a huge upfront investment in the success of the endeavor, and as a result, is committed to the location for the long haul much to the joy of the landlord. This financial commitment to the landlord provides reassurance that they have a committed restaurant anchor. In this type of lease negotiation, since both the landlord and restaurateur have mutual interests in ensuring the long-term success of the restaurant, in some cases, both parties assume shared costs. It’s prudent for the restaurateur to carefully evaluate the myriad of “hidden costs” impacting design/development issues in the integration of a restaurant tenant space into a retail center.

Code Requirements that Impact Restaurant Design

Building codes, which could adversely affect the required amount of lease area, must be taken into consideration. For example, typically retail spaces have only one restroom located at the rear of the space off the area usually designated for retail storage. Understand that the plumbing code will not only increase the number of restroom fixtures required for a restaurant, but the code also calls for access to public restrooms from the dining area. This results in the need to design a corridor to the existing restroom and add fixtures, or relocate the existing restroom closer to the front of the lease space and add fixtures. ADA considerations need to be addressed, including the need for more square footage devoted to the accessibility components of both restrooms, which further reduces the usable lease area for dining and kitchen areas.

Life Safety Issues

There are three life safety issues that can adversely impact tenant space and costs: exiting, tenant separation, and sprinkler system changes. Traditionally, the code requires that retail uses have one storefront exit while restaurants must have at least one additional exit door from the dining area. The construction solution is simple – add a door; however, the larger impact involves the loss of potential table space that will be utilized instead for aisle(s) egress.

Often restaurateurs are caught by surprise from the perspective of budget planning when the code requires additional fire resistance to the demising wall between the restaurant and adjacent tenant. This added requirement might call for the construction of a shaft wall, resulting in lost tenant space for kitchen and dining areas. Another life safety and fire code consideration concerns additional costs associated with modifications to the existing fire sprinkler system. It is likely that at least some of the sprinkler heads will need relocation based on the restaurant design and the shifting or creation of walls. Additional costs are incurred with the need to bring both a fire sprinkler contractor on board as well as an engineer for additional design support.

Plumbing

From the plumbing perspective, the restaurateur should also be aware of the need to upsize the water line and water meter  because the typical retail space will need only a ½” or ¾” line, and a restaurant usually needs a 2” line with a 1 ½” meter. As part of the construction, the slab is usually saw-cut for plumbing lines for the restrooms and kitchen. This cost can be exacerbated if the slab is part of the foundation for the building. Where it is impossible to cut the slab, the water lines must then be routed through the ceiling space, and the waste lines must be run through the non-structural parts of the slab and then under the structural components. Grease traps are also a component of restaurant code requirements, which must have an available area that is both accessible and in close proximity to the restaurant tenant space. The job becomes not only more expensive, but more complex as a result of longer waste line runs to the grease traps which do not have availability nearby. Often-times multiple grease traps in a series are needed due to the maximum 1,250-gallon size per unit requirement.

Kitchen Ventilation, Air Balance and Mechanical Systems

Mechanical systems can incur even greater costs with the need for additional tonnage for air conditioning units. In most cases, roof top units will need to be added to the tenant space. The existing bar joists for the building may not have been designed to handle the additional weight of the roof top units. Therefore, it may be necessary to reinforce the existing bar joist system and/or add joists for support. The effectiveness of adequate ventilation and the zoning of the air-conditioning system in the dining room is key to effectively distributing consistent airflow throughout the dining area to ensure customer comfort. However, these systems must often be designed in very tight quarters within the ceiling since additional and sometimes extensive exhaust and air ducts are required to address mechanical requirements. Areas of consideration include: kitchen ventilation, proper air balance, refrigeration lines, make-up air, air handling ducts, and restroom exhaust. The challenge becomes more difficult in a multi-story building, where the floor decking for the upper level can leave no flexibility to house these systems. As a result, drop ceilings may be needed. Chases through the wood joist systems can also require insulation since the heat cannot exceed certain temperatures.

High Dollar Item: Electrical System Upgrades

The electrical system upgrades can be one of the most significant costs associated with converting a retail space into a restaurant. Amperage is perhaps the most obvious upgrade in the integration process. Retail space typically requires 200-amp service while restaurants call for 600- or 800-amp service, necessitating not only an amperage upgrade, but also an upgrade of the common service for the building as well. Another factor that frequently comes into play concerns very limited available space for new modifications to the existing building service electrical panels, requiring a revision of the service and replacement of the panels. Contingent on the condition of existing electrical service, conductors might need to be run to the space which can add as much as $10,000 in additional costs. The lease agreement determines whether or not the landlord is responsible for picking up additional expenses associated with electrical system upgrades.

Storefront Considerations

In the case of 12ʼ glass storefronts, adjustments must be made to raise the ceiling toward the front of the space so that the ceiling junction will not conflict visually with the storefront and detract from the aesthetic appeal of the space. The adjustment for visual impact, along with the need to upgrade storefront window insulation and/or install insulated windows to prevent possible window condensation due to store cooling combined with outside heat, again are cost considerations. There are a wide variety of additional considerations that need to be addressed when integrating a restaurant into an existing retail space. For example, the restaurateur might consider the incorporation of outdoor seating in order to accommodate more customers, but the resultant associated costs and complexities, such as impact fees and access control, can be expensive, especially when alcohol is served. Many issues, costs, and considerations may not be apparent by doing a simple walkthrough prior to signing a lease commitment. It is critical to have trained experts provide restaurateurs with a thorough tenant space evaluation so that transition costs can be anticipated and factored  into these major corporate decisions. For example, an invasive evaluation, which includes drilling holes in existing walls to determine the fire rating of the demising wall, reveals costs upfront. Landlords are resistant to allowing this invasive evaluation before the lease is signed, though it is beneficial for the restaurant owner to have a firm understanding of the associated costs before actually starting the design.

For additional information on Interplan’s restaurant expertise, please contact us at 407.645.5008 or via email at [email protected]