Coronavirus lockdowns, while being gradually relaxed, are ensuring that Memorial Day simply won’t be the same this year.
Most shopping malls across the U.S. remain shuddered, and brick-and-mortar department stores — many which anchor big malls and have traditionally lured in shoppers — are in dire shape.
The COVID-19 crisis accelerated a trend that was already well underway: According to an analysis from Green Street Advisors, more than half of all mall-based department stores will close by the end of 2021. That has made mall occupants that rely on foot traffic rethink business strategies.
“We have been trying to diversify away from malls for a couple of years,” Jim Holthouser, CEO of FOCUS Brands, which operates more than 6,000 restaurants and cafes, told Yahoo Finance recently.
“We didn't need the pandemic to teach us that,” he added. Yet Holthouser is hopeful about a bounce-back in sales and malls, even as FOCUS pivots toward food trucks and colleges.
“Probably like every other business, this pandemic came at us so quickly, “ he said. “Two months into this, I am pleased to tell you that the malls are coming back, albeit slowly.”
FOCUS Brands’ portfolio consists of mall food courts mainstays like Auntie Anne’s, Cinnabon and Jamba as well as Moe’s Southwest Grill, Carvel, McAlister’s Deli, and Schlotzsky’s.
Those brands are staples in shopping centers around the country — which means its fortunes are linked closely to the fate of a retail industry that is being hammered by the coronavirus outbreak. Neiman Marcus and JCPenney (JCP), among others, have already crumbled into bankruptcy, while Macy’s (M) has been closing stores and cutting staff.
Yet FOCUS has shifted its own. The Auntie Anne’s and Cinnabon brands have expanded to more stand alone and street-side locations in recent years. Both are already co-branded in some locations, and FOCUS recently folded Jamba into the joint effort.
Hitting the road
The company is also trying another strategy: Mobile locations. Holthouser believes food trucks and mobile units give the brands flexibility they’ve never had before.
“Basically you have a franchise on wheels that really is not tied to any kind of one specific location,” he told Yahoo Finance. “And it can go to where customers are,” like outdoor and sporting events, he added.
FOCUS’ remaining brands are exploring using mobile units “opportunistically and seasonally.” According to the company, food trucks and other mobile units are an option for certain franchisees, depending on their capabilities and market demands.
The food truck industry has grown an average 8.7% a year between 2015 and 2020, according to research firm IBISWorld. FOCUS brands currently has 30 Auntie Anne’s food trucks portfolio, and one under the Jamba brand, and plans to boost those numbers.
Other big food and beverage brands are taking notice. According to International Franchise Association research, 126 franchise food brands — or about 9% of those operating in the U.S. — offer a mobile option to prospective franchisees.
And off road, FOCUS brands has also diversified to college campuses. The timing has been tough given the lockdowns across the country, and the uncertainty surrounding when students can return to campuses.
“We have begun to go into university areas which is also I guess also a bit questionable in terms of how long those kinds of markets will recover,” Holthouser said. Auntie Anne’s in particular has been focusing on university-based locations, he added.
Other brands like Schlotzsky's are doing better because they have many drive thru locations, according to Holthouser, with sales at about 90% of what they were pre-pandemic. “It really varies across the board based on the kind of product in the portfolio,” he stated.
Joanna Campione is a producer with Yahoo Finance.