Millennials are fueling what has become known as the eatertainment industry — establishments where you can eat, drink and play.
As big box retailers and department stores shrink their footprints, we’re seeing new and veteran eatertainment companies emerge across suburban and urban areas in the U.S. Denver-based Punch Bowl Social plans to open six locations in the U.S. this year, while Dallas-based Dave & Buster’s Entertainment Inc. (PLAY) said it is on track to open 14 to 15 new stores in fiscal 2018.
“So many of the trends and fads we have seen recently are driven by social media. Eatertainment concepts are really designed for Snapchat and Instagram,” said Mike Kostyo, senior publications manager at Datassential, a food industry market research firm. “You can capture that image of you and your friends drinking out of a giant punch bowl together in front of a neon sign.”
Punch Bowl Social, which opened its first location in 2012, typically has self-seating and tables for dining, a bar, a boutique bowling alley with eight lanes, karaoke rooms, bocce, shuffleboard, darts and even classic board games. Just last year the company introduced virtual reality parlors. But what sets Punch Bowl Social apart from other eatertainment firms is its food.
“It really works hard to stay on top of food trends, with options like avocado toast and Fernet coffee in the morning, mini street tacos on the shareable menu,” said Kostyo. “Everything is fun and comforting yet elevated at the same time, with little touches that let diners know they are taking the menu seriously, with options like Anson Mills grits, nitrate-free mortadella, house-made french onion dip, and cocoa-dusted pork.”
Consumers desire good food and experiences
Punch Bowl Social partners with the likes of James Beard award-winning chef Hugh Acheson and serve food from a scratch kitchen. “The culinary piece is so important today because millenials have raised the bar,” said Robert Thompson, founder and CEO. “They care about where food comes from. If they don’t understand food pathway to them and trust a restaurant, they will abandon a brand and move on to others.”
Millennials, which make up the largest demographic in the U.S., are at their prime spending age, and that has benefited companies like Punch Bowl Social. But the appeal of eatertainment goes well beyond that single generation. According to Datassential, 59% of U.S. consumers say they are interested in visiting an eatertainment location. And a majority of adults from 18 to 71 years old, 61%, say they would rather spend on an experience, such as a eating at a restaurant or other activity, than buying an item from a store, according to the National Restaurant Association.
As a privately-held firm, Punch Bowl Social doesn’t disclose financials, but Thompson said the company’s existing locations had an average unit volume (AUV) of about $7 million, and he expects that to increase to $8 million for the new locations opening this year and going forward. AUV, which is the total company-operated sales divided by the total company-operated units, helps companies determine how locations perform. Dave & Buster’s, which had an AUV of $12 million as of fiscal 2016, expects its new stores to represent unit growth of 13% to 14%, according to its latest fiscal third quarter 2017 results.
The right space
But one of Punch Bowl Social’s biggest challenges is finding the right real estate. A typical Punch Bowl Social is about 24,000 square feet. Thompson said he prefers to open in quasi-urban areas at redeveloped historic sites like its second Denver location at the Stapleton Airport traffic control tower, but acknowledged that such sites “are hard to find.” So, some of its existing 11 outposts nationwide are located in mall spaces once home to major retailers, like the one in downtown Indianapolis situated in a mall space that a Nordstrom once occupied.
“A Punch Bowl Social, Bowlmar or Dave and Buster’s are great backfill for larger vacancies,” said Holly Rome, director of retail leasing at JLL. “They’re a great traffic driver versus just shopping; it gives consumers another reason to come.”
Founded in 1982, Dave & Buster’s, with 105 locations in 36 states and Canada, has benefited from retailers’ woes. Dave & Buster’s CEO Stephen King recently told CNBC that the vacated Sears at the Willowbrook Mall in Wayne, N.J., was “a good fit.” Last year, half of Dave & Buster’s 14 new locations were in malls. Its locations vary in size from 14,000 square feet to 45,000 square feet.
“Ten years ago most mall landlords didn’t want to deal with a Dave & Buster’s. A lot of them have had a come-to-Jesus moment — a paying tenant draws teenagers and families,” said Garrick Brown, national retail research director for Cushman & Wakefield, adding that the tenant pool has dwindled significantly. “Those teenagers are young adults, and that’s your market of tomorrow.”
In the retail industry, dwell time is a crucial measure of success. “We are very sticky. When you come into Punch Bowl Social for a cocktail or appetizer you end up staying for three hours because you decide to play a game,” sad Thompson. “Dwell time is longer because there’s so much to do. People start changing plans for the night.”
Amanda Fung is an editor at Yahoo Finance.