On any given weekend, the hottest spots at the Mall of America in suburban Minneapolis are not necessarily the amusement park, the retail areas or even the rotunda, except on those days when it’s hosting an exhibition of waterskiing squirrels.
Instead, the places to be are either of the shopping behemoth’s third-floor food courts, one of which is anchored by a Shake Shack, the other a Chipotle Mexican Grill. And lately, it’s seemed, those areas have been busy.
Indeed, traffic at the nation’s malls improved last year, according to data from Placer.ai. While traffic to shopping centers was still 2.3% below where it was in 2019, that figure has been improving annually since 2020. Traffic was down 10.9% in 2021, compared with pre-pandemic levels.
Traffic at open-air shopping centers rose 1.6% in the first quarter of this year—though indoor malls were still down 5%, but that was an improvement from a year ago.
Malls are still recovering but they are far from dead. And data from restaurant chains appear to show that they’re benefiting from a return of shoppers.
At Chick-fil-A, average volumes at its stand-alone, non-mall locations increased 8% last year to a gaudy $9.4 million.
Inside malls, however, unit volumes soared 20%.
U.S. system sales at Charleys Philly Steaks are up 44% since 2019, according to data from Restaurant Business sister company Technomic. At Cinnabon they are up 42% over that period, while Auntie Anne’s system sales are up 35%.
Auntie Anne’s locations can generate more than $700,000 in sales per year out of mall locations. | Photo by Jonathan Maze
Average unit volumes at Auntie Anne’s and Cinnabon locations inside malls are now north of $700,000, and a combined location can generate more than $1.2 million.
“We are in the fortunate position of having brands that consumers have grown up with and made memories with,” said Kristen Hartman, president of the specialty category for the two chains’ parent company, GoTo Foods. “Post-pandemic, consumers wanted to get back to experiences and brands they love. As a result, our mall-based brands have experienced stronger performance than ever.”
The country’s first enclosed shopping mall opened in the Minneapolis suburb of Edina in 1956. Shopping malls, both indoor and outdoor, expanded rapidly in the decades that followed, effectively moving the retail center of gravity from downtown areas to the suburbs.
Restaurants developed in or near the malls because, well, that’s where the people were. “I think it’s a little misnomer about malls and Cheesecake Factory, that we always wanted to be in a mall,” David Gordon, president of The Cheesecake Factory, told analysts last year, according to a transcript on the financial services site AlphaSense. “In reality, the malls were in the geography that we wanted to be in.”
Still, malls attracted a lot of brands both in and out of the centers, giving them a steady stream of customers out and about. Chains like Chick-fil-A and Panda Express first evolved as mall-based brands before they expanded rapidly with brick-and-mortar locations. Others, like Sbarro and Cinnabon, established much of their identities with the shopping mall.
That became a problem after the Great Recession, when rapid growth in ecommerce sapped traffic away from those retail centers. That worsened when the pandemic hit, which led to temporary closures of numerous malls for safety reasons.
Dozens of traditional retailers filed for bankruptcy over the past 14 years. That has included many of the department stores that historically served as mall anchors, such as Sears, Neiman Marcus and JC Penney.
Many others that didn’t file for bankruptcy, like Macy’s and Nordstrom, have nevertheless shuttered numerous locations. Many successful malls to this day lack those anchor tenants that once lured customers.
As mall sales declined, so too did sales at the restaurants inside them. Charleys lost more than a quarter of its sales in 2020. Auntie Anne’s lost 40% of its sales in 2020 and it would be two full years before the pretzel chain would bounce back.
The brands themselves had been working to evolve their models to adapt to a reality without the hungry shoppers they once counted on for their core business. Auntie Anne’s, for instance, has opened drive-thru locations as part of a cobranding arrangement with sister chain Jamba.
Charleys, meanwhile, created a standalone version of its concept, called Charleys Cheesesteaks and Wings, which it has been growing aggressively since the pandemic. “We recognize that the mall is not going to help us continue to grow,” Company President Candra Alisiswanto said on the Restaurant Business podcast A Deeper Dive in 2022.
And indeed, according to data from Coresight Research, there are fewer malls today than there were a decade ago. Malls now account for 5.5% of brick-and-mortar real estate, down from 5.7% in 2014, according to the research firm.
The closures of some malls might have helped traffic at remaining centers. “The mall landscape has changed somewhat coming out of the pandemic,” Hartman said. “Some lower performing malls have closed, and those consumers have moved to other, nearby malls, driving more foot traffic in those locations.”
But they still do a better job at getting people to spend money. That 5.5% of retail space accounted for 12.9% of retail spending, according to Coresight.
And the country’s strongest malls recovered quickly from the pandemic, driven in part by a consumer who was sick of being stuck at home all the time.
With fewer malls, traffic has gravitated towards those that remain. And restaurant chains with a lot of mall locations are seeing sales growth as a result. | Photo by Jonathan Maze
Traffic at the top malls was up 12% on average in 2022, compared with 2019 levels, according to Coresight. Occupancy rates at those malls reached 95.1%, nearly pre-pandemic rates.
“Good real estate is good real estate,” David Simon, CEO of mall owner Simon Property Group, told analysts in February, according to an AlphaSense transcript. “Tenant demand is pretty good across the board.”
As it turns out, brick-and-mortar remains the primary method people use to buy stuff, despite all the growth in ecommerce sales. In-store sales accounted for 85.1% of total retail sales in the first half of last year, according to Capital One.
Then again, that was down 1.61% compared with the same period in 2022—meaning online retailing continues to gain share in that business.
Landlords themselves, however, believe that brick-and-mortar remains an important component of the retail world. “The importance of bricks and mortar has never been higher,” Simon said.
To be sure, as much as malls have improved, they have also evolved, and the way consumers use them has, too.
Malls are busier in the afternoons, for instance, as more consumers work from home, and they are less busy in the evenings.
In 2019, according to Placer.ai, 56.7% of traffic at malls on weekdays took place between 1 p.m. and 7 p.m. Last year, that was 58.7%. “Think about the flexible work environment,” Conor Flynn, CEO of mall operator Kimco Realty Group, told analysts this year, according to a transcript. “Most folks are working maybe one or more days a week, either from home or from the local area. And typically we’re seeing that pickup in visits to the shopping center.”
Mall owners themselves, meanwhile, have worked to evolve the types of tenants and types of uses in their shopping centers. More malls are being redeveloped to include housing, office and other spaces. More than half of mall redevelopment projects include some kind of housing—and most still include retail—while more than a third include office use.
“A lot of mall operators are going through mixed-use redevelopment, with apartments, coworking spaces, entertainment,” R.J. Hottovy, head of analytical research with Placer.ai, said in an interview. “The way you interact with the mall has changed quite a bit.”
A typical mall devotes about 10% to 20% of their retail space to restaurants. And even then, the kind of restaurants they are working to lure has changed. Some brands are gunning for more higher-end restaurants.
More malls are targeting higher-end, luxury shoppers, and the elevated fare targets that group. “The mall business is evolving more into a luxury style business,” Manny Hilario, CEO of STK and Kona Grill owner The One Group, said at the ICR Conference in January.
Others are targeting eatertainment brands such as Pinstripes, Puttshack or Main Event, and they’re finding success. Traffic thrived at Cross Creek Mall in Fayetteville, North Carolina, after a Main Event opened there last year, according to Placer.
Other restaurants can help a mall, too. Traffic surged more than 15% at Southgate Mall in Missoula, Montana, after a Texas Roadhouse opened there last year, according to Placer.ai.
Many of the existing mall-based concepts, notably chains like Auntie Anne’s and Cinnabon, are enjoying a consumer shift toward snacking. Indeed, it’s one of the areas where mall concepts thrive. Many of them are geared toward those who just want a small snack during a shopping excursion.
“Snacking has become a way of life for consumers today,” Hartman said. “Auntie Anne’s and Cinnabon are two brands that lend themselves to that.”
While those brands are expanding with other types of locations, franchisees remain interested in shopping centers, particularly with cobranded units.
“Malls, Hartman said, “will always have an important place for consumers, and for our brands.”