Chain Gang

Why Do We Suddenly Have So Many Chain Restaurants In Tucson? Blame UA Economist Marshall Vest.

By M.F. Munday

IN THE NEXT few months, construction will begin on the 20-plex Century Cinema at El Con Mall. With an entertainment generator like that comes traffic and people looking for a meal.

"It's ideal for chain restaurants," says one observer of the local real-estate scene, adding we're likely to see four to six restaurant pads at El Con--pads for new chain eateries on the eastside of the mall's parking lot, as well as inside El Con itself, and elsewhere surrounding the born-again retail center built on the bones of the original El Conquistador Resort.

A couple of miles east on Broadway Boulevard, at Park Mall, where a longer-term plan for a big overhaul project is in the works, they're going one step better than ordinary restaurant pads: A whole section of that mall will be devoted to "gourmet" eats. And you can be sure the chain companies will be looking to set up shop there, too.

Currents According to several real-estate pros who should know, the owners of both El Con and Park malls want restaurants with staying power to move in. And those with the best record for staying power are the chains.

Two pads on the east end of El Con, with three around the rest of the property would keep traffic coming in, the cash registers humming, and shares of monthly gross piling on in.

In the past year, we've had dozens of chain operations pouring cash into Tucson for real estate, construction, and start-up overhead. And many of the chainers have set up not just one unit--or "door," as they're called in the trade--but, like Wall Street favorite Brinker International, two or three doors with plans for more.

They all want to own a piece of the rapidly growing Tucson market. And the global investment community continues to support them with more and more cash. Brinker International, for example, had new credit facilities of $375 million at the end of fiscal year 1997 with its multiple chain restaurant operations generating nearly $140 million in net cash for operating activities.

That means Brinker International can easily spend the nearly $4 million it did to open up just the most recent Macaroni Grill in Tucson.

WE HAVE TUCSON'S job-growth rate to thank for all this chain interest.

"Tucson had been on their radar screens for some time," says retail real-estate pro Paul Schloss of Grubb & Ellis. "We weren't near the Top 40 retail markets until 1996."

A lot of chains and other retail stayed out of Tucson because the job-growth rate here looked way lower than would indicate a healthy population with the kind of discretionary income that makes chain restaurants want a piece of that pie, according to Schloss.

So what happened?

Marshall Vest, of the UA's BPA College Forecasting Project, got tired of answering one repeated question from his economist colleagues up north: "What's wrong with Tucson?"

They wanted to know how Phoenix and its sprawling satellites could have job growth, according to the Arizona Department of Economic Security (DES), of 6 and even 7 percent, while Tucson had an official job-growth rate of only 2 percent. Vest's own numbers showed Tucson job growth of around 4 percent, still less than Phoenix, but respectable for growth-seeking chains, which have nearly taken over the Phoenix out-to-eat scene.

One year ago, Vest discovered that the DES numbers weren't so carefully compiled: "About five years ago," says Vest, "DES started lumping in numbers from some jobs around the state into Maricopa County, and jobs actually in Pima County never showed up."

Vest gets dozens of calls a week from analysts and consultants on corporate expansion, all wanting to know what he can tell them about the market. Last April, when Vest discovered the state numbers weren't an accurate reflection of Pima's job growth, he started telling everyone who called his office about what he'd found. "Everyone who calls me, they want to know the job growth numbers," says Vest. "That's the one they all want. It's the number they all use as a screening device. Because without good job growth, people don't have money to spend."

Tucson's job numbers were good. And DES numbers, which had shown flat and low job growth for Tucson and Pima County, weren't accurate.

Consultants liked Vest's numbers more. Brinker International announced its plans for opening three new doors--Macaroni Grill, On the Border and another Chili's--late last spring.

Meanwhile, local restaurateurs have been belly-aching, saying the chains coming in aren't playing on a level field. Tucson City Councilman Steve Leal has asked city financial staff to see if there's something the city can be doing to help make Tucson's locally owned restaurants more competitive with the big boys. TW

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