Competition, rent rates could be factors in recent restaurant closures in Frisco

A tarp hangs over the Mattito's Tex-Mex sign in Frisco in March. Mattito's and Tavolo Italia (next door) closed in January.

A tarp hangs over the Mattito's Tex-Mex sign in Frisco in March. Mattito's and Tavolo Italia (next door) closed in January.

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Competition, rent rates could be factors in recent restaurant closures
Image description
Competition, rent rates could be factors in recent restaurant closures
Image description
Competition, rent rates could be factors in recent restaurant closures
Image description
Competition, rent rates could be factors in recent restaurant closures
A number of prominent restaurants have closed in recent months in Frisco. Mattito’s Tex-Mex, for instance, closed in January in Frisco Square. It had been in Frisco for nearly 10 years. Tavolo Italia, which was owned by the same restaurateur next door to Mattito’s, also closed in January. Extracts Juice closed in late March just down the street from Mattito's and Tavolo.

Along Preston Road, PDQ, a fast-food chicken chain restaurant, closed its doors in January. Other restaurants throughout Frisco, including Golden Moon Chinese Restaurant and NOLA Grill, closed in late 2017.

Business owners and experts have not come to a consensus as to what has led to some notable restaurants to close, and the city does not track how many and when restaurants close. A number of factors have been suggested: increased competition with the new dining options at The Star in Frisco and Legacy West; rising rent rates in the city; and slipping food quality.

Frisco Chamber of Commerce President Tony Felker added the strain of the holidays and a shortage of labor could also be factors in recent closures.

“I don’t think there’s one specific reason [for restaurant closures],” Felker said. “I think there’s a multitude of reasons why a restaurant would go out of business.”

Growing competition


Following a sharp rise in valid restaurant permits in Frisco in the first half of 2017, the number of valid restaurant permits has leveled off into early 2018. The number of valid permits peaked in July 2017 at 480 permits.

The Star in Frisco and Plano’s Legacy West both opened a large chunk of their restaurants in 2017, including several in June and July.

A few Frisco restaurants—especially along Preston Road and in Frisco Square—began closing in the second half of 2017 and in early 2018.

Between The Star and Legacy West, more than 60 restaurants and other food establishments have opened.

These dining options create competition in the area, said Andy Rittler, the executive director of the Greater Dallas Restaurant Association.

“There’s a tremendous saturation of restaurants within [the northwest Plano area],” Rittler said. “Normally I don’t see that there’s a restaurant bubble. In this case, it seems that there are a lot of restaurants that are opening up in a short amount of time, and it presents a lot of challenges for those that are already existing.”

Rittler said there is also a recent competition for labor, especially in Collin County where rent rates have skyrocketed.

Felker noted some restaurant workers may be leaving restaurants throughout Frisco to work at either The Star or Legacy West.

“When I’ve talked to restaurants in those developments, they said they haven’t had trouble finding help,” he said. “I think that’s because they’re pulling labor from other places, which makes it difficult for those other restaurants.”

Gary Paparella does not own a restaurant, but his business Poparella’s Popcorn does draw in a percentage of its revenue from restaurant customers in Frisco Square. Even though Frisco Square is a few miles north of The Star, Paparella said he has felt the effects of restaurant competition.

The competition created by new restaurants on the south side of the city likely played a role in some of the restaurants closing in the past few months in Frisco Square, he said.

After Mattito’s closed across the street from his store, Paparella said his business lost about 10 percent of its usual sales.

“You’ve got so many new places to go in the entire area that everybody’s always looking for something new and exciting before they go back to what they’re commonly used to,” he said. “With Legacy West and even [The Shops at Legacy] with some of the new restaurants that have opened up over there and The Star, people are just gravitating toward all the new stuff right now. Everything we have up here has been up here; it’s pretty much established.”

Rising rent rates


The attention new commercial developments are getting in the area have made them an attractive place for restaurants to open, Rittler said. But the increased demand has also led to an increased cost of doing business in Frisco, he said.

“Rent is really an issue right now,” Rittler said. “A lot of these developers are squeezing rent out of restaurateurs and increasing those rents, and it’s making it an unattainable situation for them.”

Rising rent rates affect even more established restaurants, including Double Dip Frozen Custard, which closed in 2017 after being open for more than 15 years in Frisco, Rittler said.

“I think a lot of the restaurants that have closed down in Dallas and in Plano and in other areas—it’s the rent,” he said.

According to Weitzman, a retail-focused commercial real estate service firm, Frisco had some of the highest rent rates for small shop spaces in 2017 in the Dallas area. The average rent rate for Class A space was $40 per square foot and $28 for Class B space in Frisco, just behind Plano, which had an average rate of $42 per square foot for Class A space and $28 for Class B space.

The Dallas-area average in 2017 was $30 per square foot for Class A space and $19 for Class B space.

"With the challenge of an ever-increasing rental base, you've got to figure out how to meet all your other expectations as well," Rittler said. "You got labor costs, you got food costs. Those are all challenges that you're facing right now."

‘Brighter future’


Some business owners have hope for the restaurant industry in Frisco despite the setbacks experienced in the past few months.

Vietnamese restaurant Forever Pho opened a location in October in a building near Preston Road and SH 121 that has housed multiple restaurants, which are now permanently closed.

Leo’s Street Taco Co. closed in that location in August 2017. Before Leo’s, the location housed Zippy’s Chicken Tenders & BBQ.

Forever Pho General Manager Kiem Nguyen said he is well aware of the turnover this location has experienced in the past. He said he researched the reason why these restaurants closed and found they faced a lot of competition from similar concepts, among other reasons.

When it comes to other pho restaurants in the area, there is little competition, Nguyen said.

“We felt that this area was in need of a good pho restaurant,” he said. “I feel that customers are really happy about the quality of our food. That’s what they’re looking for. Recently, that’s what we’ve been building our customer base from is just the quality.”

Paparella is also hopeful that new attractions in and near Frisco Square, such as the National Soccer Hall of Fame at Toyota Stadium and a sports bar opening soon, will attract customers back to the area.

“There’s a negative, but it’s just a minor setback for a brighter future because there’s a lot of stuff coming down the pike,” he said.

The chamber may also soon partner with the Greater Dallas Restaurant Association to provide more resources for local restaurants facing challenges, Felker said.

The local restaurant industry will continually have ups and downs, , Rittler said.

“Some folks are going to shake out; some folks aren’t going to make it—that’s just the nature of the business,” Rittler said. “The ones that will do well are those that really understand what it means to be a good operator. Unfortunately, some of those that are good operators will even fall victim to [a closure], too.”
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