Overall, the Chicagoland market — which is the second largest restaurant market in the United States — is relatively quiet but activity is increasing. According to the Council of International Restaurant Real Estate Brokers, there are few products or sites on the market throughout the Midwest, and potential buyers are all looking for good deals. There are active players, but the numbers have declined since the start of 2000. September 11, 2001, was the coup de grâce for the industry.

With Chicago being a major transportation and convention hub, the downturn in travelers for both business and pleasure has had a negative impact on the overall restaurant industry, but it is recovering. The high-end restaurants have seen a decline in customer counts and sales during the past 2 years, while the casual — and especially the fast-casual segments — have led the upswing. At the same time, the burger wars have significantly hurt the fast food segment.

The major impetus in Chicago is the development of new high-rise condominiums and apartments around the city’s central core. This development will create high population densities, helping to offset the reduction in travel and convention business.

As restaurateurs expand their menus and types of service — while vying for their fair share of the eat-out/take-out food service dollar — the definitions of the various categories become blurred. Quick service restaurants (QSRs) try to distinguish themselves from fast food, while the fast-casual segment sees itself as an upgrade to the QSR.

QSRs offer limited service and take-out, and require payment prior to eating. Meanwhile, the family sector is overlapping casual and upscale casual restaurants, while upscale casual is overlapping the tablecloth restaurants and fine dining establishments. The savvy consumer uses many different tools and desires to differentiate how and where to eat, regardless of the definitions. Fast-casual is the hottest segment of the market throughout the Midwest. Fast-casual is generally served in a nicer atmosphere than fast food, with high quality food, friendly and knowledgeable staff, self-serve or quick service, take-out or eat in, and a visit to the cash register before you eat. This style has proven popular in limited menu, ethnic concept establishments such as Mexican, Asian or Italian.

The leaders in this category are Chipotle Mexican Grill (owned by McDonald’s), which got a jump on the other players and has achieved market dominance; Baja Fresh (owned by Wendy’s); and Noodles & Company. Carlson Restaurants Worldwide (T.G.I. Friday’s) bought Pick Up Stix (Chinese) and has opened restaurants in Glenview, St. Charles and South Elgin, with another one under construction in Algonquin. Italian restaurant leaders include Fazoli’s (a joint venture with McDonald’s) and Pronto Roma (Café Concepts), which has opened in Arlington Heights and other suburbs. Buffalo Wild Wings is expanding with its concept.

Corner Bakery (Brinker) is ruling the upscale sandwich market with new units in suburban central business districts (CBDs) like Mt. Prospect and Evanston. Panera Bread, one of the most sought after tenants, has increased not only its store size but also its sales volumes. Culver’s Frozen Custard has been a big hit with its signature hamburgers.

Casual dining is a crowded market, but few deals are being made. The exception is Darden Restaurants, which is simultaneously expanding its Bahama Breeze, Smokey Bones Barbeque & Sports Bar, Red Lobster and Olive Garden brands. The company is opening a Red Lobster and an Olive Garden in the River North area, an Olive Garden in Grandville, Michigan, and a Bahama Breeze in Orange, Ohio.

T.G.I. Friday’s (TGIF) recently opened restaurants in Orland Park and Lake Zurich, and the company is planning to relocate its existing Schaumburg unit to its former Timpano’s location. TGIF also plans to add new units in Minneapolis and Detroit, while TGIF franchisees will operate in St. Louis, Indianapolis, Cincinnati and Cleveland.

J Alexander’s has a site in Northbrook; Bennigan’s has slowed its expansion after opening numerous units, both freestanding and in hotels. Brinker is still expanding, primarily with Chili’s (including new locations in the popular River North area) and to a lesser extent with Macaroni Grill (Village Crossings Shopping Center) and On The Border.

Applebee’s remains one of the strongest players in terms of expansion and recently opened a location in the Schaumburg Town Square shopping center. Restaurant Development Group is expanding its Bar Louis, and Nick and Tony’s concepts throughout Chicagoland and into other midwestern cities, including Cincinnati. Sweet Tomatoes continues its expansion while Fuddrucker’s is back on the expansion trail. P.F. Chang’s is continuing its expansion and search for new sites, and Outback Steakhouse has been busy with its Carrabba’s Italian Grill concept and is looking to bring its Bonefish Grill to the Chicago area. Bucca di Beppo is joining the restaurant concentration in River North while looking at other opportunities. California Pizza Kitchen is planning an opening in the Arlington Heights CBD. Tuller’s Tavern & Chop House, a jazz club and banquet facilities — all courtesy of Café Concepts — and Francesca’s also recently opened in Arlington Heights.

Damon’s Grill, known for its ribs, has enlarged its menu and is expanding to the Schaumburg area, as well as to other Midwest cities. Plans include 20 new units in midwestern and eastern states.

Biaggi’s Italiano Ristorante is open in Deer Park, the Chicago area’s showcase lifestyle shopping center, where it joins Stoney River and Max & Erma’s. Biaggi’s currently has 10 units including Bloomington and Champaign, Illinois; West Des Moines, Davenport, and Cedar Rapids, Iowa; Madison, Wisconsin; Omaha, Nebraska; Fort Wayne, Indiana; and Eden Prairie, Minnesota; and is under construction in Evansville, Indiana, and North Carolina.

Champps Americana opened in Lincolnshire, as did Bin 36, where they will join Lettuce Entertain You Enterprises’ (LEYE) successful Wildfire restaurant. LEYE has another Wildfire under construction in Schaumburg.

Ram Restaurant & Brewery is planning to open its third area unit in Rosemont. Also in the northern suburbs, Dimitri’s Greek Seafood opened along with its Egg Shell Café. The Angelos brothers also are opening another one of their very successful Jameson’s Charhouse units in Bloomingdale in front of Stratford Square Mall.

The Clean Plate Club bought Crawdaddy Bayou on Milwaukee Avenue in Wheeling and is converting it to one of its Pete Miller’s Steakhouses. Mitchell’s Fish Market is planning to open its first location in this market in the North Shore Village Shopping Center in Northbrook. The Cheesecake Factory and its Grand Lux Café continue their expansion and garnered everyone’s attention when they opened a unit, along with Noodles & Company, Einstein Bagels and Krispy Kreme, in a SuperTarget in St. Charles. Big restaurant openings in the River North area include the entry of Fogo de Chao (19,500 square feet), a Brazilian churrascaria wood-fired grill, and the expansion of Bob Chin’s Crab House restaurant (34,000 square feet). Weber Grill has also joined the River North flurry of restaurants. O’Charley’s is reportedly looking around.

The sandwich wars continue as Quizno’s tries to catch up with the more tenured Subway, while Schlotzsky’s Deli and Potbelly Sandwich Works expand at a slower pace. Togo’s is in the running but has a slight edge when combined with Dunkin Donuts and Baskin-Robbins into their single-building “combos” concept.

The fast food/QSR sector has been hit hard by the $1 menu burger wars instituted by McDonald’s. Burger King was recently sold to a Texas group, and its future course is uncertain. Some of the more active players moving forward include Red Robin, Buona Beef, Brown’s Chicken and Portillo’s. Yum Brands (formerly Tricon Global Restaurants) is multi-branding its KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W chains, in various combinations. Steak & Shake remains in the running and is expanding at a more subdued pace. Dairy Queen is converting some of its units to DQ Grills and will compete with the other QSR players. Cold Stone Creamery is opening new units. The hottest concept of all is Krispy Kreme, with its cult-like following, 24-hour service and high sales volumes.

Chicago’s Target Markets

The Chicago CBD is expanding outward in all directions. The South Loop area is enjoying a resurgence from the Loop to McCormick Place and continuing southward past 39th Street and westward along Roosevelt Road. The new Millennium Park is adding excitement to the whole lakefront, as well giving impetus to the revitalization of State Street. To the north, Rush Street, North Michigan Avenue and River North seamlessly blend together forming the nucleus of the shopping, nightlife, entertainment and restaurant concentrations. East of Michigan Avenue, the River East area is becoming a hotbed of activity with new theaters, hotels and restaurants. The West Loop area is undergoing dynamic growth in all sectors, and merges into the world-renowned Greek Town with its variety of authentic Greek restaurants. To the northwest, the Clybourn corridor continues its renovation, with lifestyle retailers and local restaurateurs serving the Lincoln Park and Lakeview neighborhoods.

Suburban Target Markets

Lifestyle centers are the current wave of new activity in Chicago’s suburbs. Deer Park Town Center, for example, is a national showplace of how to make a lifestyle center successful. Target markets in the northern suburbs include Gurnee, the Milwaukee Avenue restaurant row in Vernon Hills, Buffalo Grove, Wheeling, the Highland Park CBD, Deerfield/Northbrook, Evanston, Glenview and Skokie. Places to watch in the northwestern suburbs include Rosemont, Mount Prospect, Arlington Heights, Deer Park, Lake Zurich, Crystal Lake and McHenry County.

One of the hottest markets in the western suburbs is the Randall Road corridor from Algonquin to Batavia. In addition, the Oak Brook-Lombard-Downers Grove corridor, Wheaton, Naperville, Aurora and Oswego are all rising as preferred restaurant locations.

In the southern suburbs, Orland Park-Tinley Park, Chicago Ridge, and Lansing-Calumet City should also be considered up and coming restaurant hot spots.

F.J. (Mel) Melaniphy is chairman and CEO of Arlington Heights, Illinois-based Site Location Specialists, Inc. Cedric McGraw is president of Northfield, Illinois-based Restaurant Services Corporation.


©2003 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.