Los Angeles, Oct 3 - Executives from restaurant chains Darden Restaurants Inc , California Pizza Kitchen Inc and Buffalo Wild Wings Inc said on Thursday they are seeing prime real estate open up as tenants back out of deals.
"The availability of quality sites is greater than it has been -- more than we were thinking it was going to be just a year or so ago," Brad Richmond, chief financial officer at Darden, whose chains include Olive Garden, Red Lobster and LongHorn Steakhouse, said at the RBC Capital Markets Consumer Conference in New York.
Many restaurants and retail stores have seen traffic fall as U.S. consumers wrestle with the downturn in housing, rising job losses, a credit crunch and higher fuel and food costs.
As a result, they are trimming growth plans or closing stores. Some companies are backing out of planned developments for financial reasons, while others have seen deals languish because developers cannot sign up enough tenants.
California Pizza Kitchen Co-Chief Executive Rick Rosenfield said his company was recently offered two sites previously available only to high-end retailers.
Buffalo Wild Wings Chief Executive Sally Smith said her sports-oriented restaurant chain, which is among the few restaurants posting double-digit sales gains at established stores, is also seeing more and better sites available.
CASH IS KING
As credit companies clamp down on making loans amid the worst U.S. financial crisis since the Great Depression, established restaurant operators with strong chains continue to have the wherewithal to do deals for new restaurants.
Darden CFO Richmond said the chain, which owns all of its 1,700-plus restaurants, has generated funds internally sufficient to fund growth. He added that Darden's investment- grade credit rating allows it to borrow at lower cost.
Many of Buffalo Wild Wings' franchisees "have multiple units and are funding a lot of their growth from cash flow," CEO Smith said.
Elsewhere, McDonald's Corp said its U.S. beverage roll-out remains on track and more than 50 national, regional and local lenders are providing financing to domestic franchisees.
"There continues to be more than sufficient liquidity available to our franchisees to fund capital improvements in their restaurants," McDonald's spokesman William Whitman said.
Jonah Kaufman, who owns McDonald's outlets in the New York area and has been in the business for 32 years, said he called his banker at the JPMorgan Chase & Co unit that handles loans for McDonald's franchisees on Wednesday to check on the availability of credit.
Speaking at the RBC conference, Kaufman said he is getting ready to add new McCafe coffee drinks to 13 stores and he would probably need to borrow $1 million.
The answer from his banker, "was an unqualified yes" -- but with more scrutiny of his financials, he said.
Kaufman said the interest rate would most likely change from his current rate of below 5 percent to somewhere around 7 percent.