Rising Costs and Inflation Squeeze Restaurants' Real Estate

Inflation is reshaping the real estate landscape for restaurants, with soaring prices for land, rents, and construction materials putting a strain on operators. Longer construction lead times and supply chain issues further complicate the development process. Franchisees, hit harder by inflationary pressures, are opting to slow down new unit development and focus on existing locations to recover lost margins.

Additionally, high land costs and a lengthy permitting process hinder expansion plans. Some operators are exploring creative solutions like food halls, compact restaurants, and smaller footprints to mitigate costs. The industry is adapting to a new era of real estate challenges amid shifting customer behavior and the need for improved margins.

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