The Small Balance Intersection Update - September 28, 2024
Michael Boggiano, CPA CPM
Experienced CRE Finance Professional | AI & Data Analytics Enthusiast | Championing Small Balance Commercial Lending
Stat Of The Day:
20%
The share of reporting hotels in the Top 25 U.S. markets that charged an average daily rate of at least $200 this year, up from 13% in 2019, according to August year-to-date data from CoStar Group.
Street Name: Convenience Lanes
Elevated Drive-Thrus: The Future of QSR Expansion?"
Chick-fil-A’s new elevated drive-thru format in McDonough, GA, is a significant move in the post-pandemic quick-service restaurant (QSR) landscape, where mobile ordering and drive-thru demand have surged. The innovative design features four drive-thru lanes, an elevated kitchen, and a conveyor belt system that delivers food to crew members for customer pick-up, eliminating dine-in options. This model mirrors Taco Bell's “Defy” concept, which opened in Brooklyn Park, MN in 2022, showing that this elevated approach can increase efficiency and throughput. Taco Bell’s Defy prototype has averaged 25% more visits than the chain's standard locations, with peak visit increases of 35% during the summer months, while maintaining 10% shorter customer dwell times.
If Chick-fil-A’s elevated format achieves similar metrics, the implications for store economics could be profound, allowing for higher customer throughput on a relatively unchanged store footprint. This increase in traffic, coupled with streamlined operations, could lead to improved margins and enhanced cash flow at the store level. For chains already excelling in visit-per-square-foot efficiency, such as Chick-fil-A, an elevated drive-thru model could unlock even greater operational gains. Moreover, it could encourage wider adoption of mobile ordering apps, a trend increasingly critical to QSR profitability.
The broader QSR industry is watching these developments closely, as drive-thru innovation becomes a competitive differentiator. Brands like Shake Shack have also experimented with drive-thrus, showing promising results compared to traditional locations, while others like Chipotle are testing automated formats to boost efficiency. Elevated drive-thru concepts offer another method to attract customers while reducing operational bottlenecks, particularly during peak periods. While the format won’t work in every retail setting, the early data suggests that it can be a powerful tool for chains looking to differentiate and scale more efficiently.
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领英推荐
Expansion Ave
Small Businesses Weigh the Impact of Fed's Rate Cuts
The recent Federal Reserve rate cut of half a percentage point is prompting many small businesses to revisit their expansion and spending plans. Some entrepreneurs, like David Harrison of Rental Concepts, are planning to open more stores due to anticipated lower borrowing costs, while others, like Annie Bassin of Annie’s Ginger Elixir, are adopting a cautious "wait-and-see" approach. According to a survey by Vistage Worldwide, about 25% of small-business owners see the rate cut as impactful, but many feel that larger cuts are necessary to make a difference. Interest rates on small-business loans, which averaged 9.5% in August, are still significantly higher than pre-2021 levels, limiting the extent of investment. Companies like SecureIt Tactical and Bonita Fierce Candles are hoping that lower rates will also boost consumer confidence and spending, which could drive their growth. However, some businesses, particularly newer ones with limited reserves, remain hesitant to take on more debt without further rate reductions. Expectations for the effects of these rate cuts vary, with many entrepreneurs anticipating that any tangible benefits won’t materialize for several months. The Fed's actions have provided a sense of optimism, but economic uncertainty still clouds long-term business strategies.
Caution: Increased Building Costs
Multifamily Developers Push Back on Federal Energy Code Mandate
A new survey from the National Association of Home Builders (NAHB) reveals that multifamily housing developers are concerned about the Biden administration’s mandate requiring new homes financed through federal loans to adhere to the 2021 International Energy Conservation Code (IECC). Under the mandate, HUD- and USDA-financed single-family homes must meet 2021 IECC standards, while multifamily buildings will need to comply with either the 2021 IECC or ASHRAE 90.1-2019. The majority of developers surveyed, 56%, worry that the increased costs associated with these energy codes will discourage future projects, despite calls for more housing from both presidential candidates. Additionally, 44% believe they will need to raise rents to offset compliance costs, which could negate any savings from reduced utility bills. Although the mandate applies only to specific federal loan programs, just 11% of developers currently build in areas that have adopted the 2021 IECC, signaling a substantial shift for most builders. Concerns have also emerged about the impact on affordable housing, with 61% saying the mandate would discourage such projects if adopted by Fannie Mae and Freddie Mac. The NAHB is actively working with Congress to challenge these new requirements.
ChatGPT Way
ChatGPT Voice: Your New Personal Assistant
Alexandra Samuel's article in The Wall Street Journal highlights the growing utility of AI, particularly ChatGPT, in both personal and professional tasks. She describes using the mobile app’s voice interface to enhance productivity by allowing voice-to-voice conversations that feel natural and human-like. For instance, Samuel often leverages AI to overcome writer's block through stream-of-consciousness conversations, with ChatGPT assisting in drafting outlines. In her busy schedule, she uses AI for last-minute meeting preparation, transforming otherwise idle time, like commuting, into productive work sessions. She also taps ChatGPT for on-the-go research, grocery shopping assistance, and hands-free tasks, like hanging curtains. The AI’s multilingual capabilities offer judgment-free language practice, while voice interactions during sightseeing make mundane activities more engaging. While Samuel appreciates these conveniences, she notes the awkwardness of using voice AI in public, as others are not yet accustomed to this form of interaction. The article highlights how AI tools are becoming an integral part of daily life, blending seamlessly with various tasks.