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An Arby’s closes and a fast food gap emerges in downtown Minneapolis

December 17, 2018

Without notice or a farewell, Arbys closed its downtown Minneapolis restaurant the weekend before Thanksgiving and a gap suddenly became clear: the biggest fast food joints have abandoned the heart of the city.

McDonalds, Burger King, Arbys, Wendys and Taco Bell are gone and unlikely to return.

Some will call the development a sign of improving tastes and healthier eating. But fast food giants are thriving nationally, and plenty of pizza, burgers and dressing-soaked salads are consumed downtown.

Instead, economics are at work. Rent and labor costs are rising, and competition has grown from food trucks. Even the emergence of nicer break areas in offices is hurting them.

Theres a lot more squeeze on restaurants than there used to be, says Andrea Christenson, a senior director at Cushman Wakefield who is one of the top restaurant brokers in the Twin Cities.

Subway, the nations largest restaurant chain by number of locations, still has six sandwich shops spread from Loring Park to the Mill District. And Taco Johns, a regional chain, has one on the skyway level of Northstar Center above the just-closed Arbys.

But with the closing of the Arbys, Minneapolis joins a small number of large U.S. cities including Austin, Texas; San Diego; Columbus, Ohio, and Indianapolis where most big all-day fast food chains have disappeared from the urban core.

Remaining food options are generally more expensive, pricing out low-wage workers and the homeless, who often gravitate toward city centers. Arbys was one of the last places in downtown Minneapolis with a sandwich and fries for $5.

I wondered why they closed, because they were so economical, Marva Overton, a downtown worker, said as she bought a sandwich last week at Twin City Bites next to the former Arbys. It was so cheap to eat there and that was helpful to a lot of people.

While specific circumstances drove the exit of each fast food giant from downtown, broader forces are keeping them away. Nationally, the fast food industry is saturated, and big chains are thinning out franchisees by buying locations or pushing franchise groups together.

Downtown locations are particularly vulnerable to that consolidation because they lack drive-throughs and dinner and late-night eaters, leaving them to rely on breakfast and lunch volume to match what a suburban location does all day. The restaurants also contend with rising rents, higher labor costs and recruiting challenges. The city of Minneapolis requires big chains to pay a higher minimum wage.

In downtown restaurants, where theres typically not a lot of people living and that means commuting or parking issues, its almost impossible to find employees, said Richard Adams, a San Diego-based consultant who works primarily with McDonalds franchisees.

Meanwhile, with the economy humming, building owners can be choosy about the restaurants they attract. Its not just about who will pay me the most rent. Its who fits my image, broker Christenson said. The retail level is minor compared to whats upstairs, which are the offices and the people in them. Landlords are always thinking about whats going to attract them and drive the office rent.

Fast food arrived in downtown Minneapolis in 1971, when McDonalds opened a Town House location with a red-and-yellow awning amid a strip of bars on Hennepin Avenue. The first downtown Arbys opened in 1974 along S. 7th Street approximately where the City Center Marriott Hotel is today. In advertisements for its opening, Arbys touted free coffee and breakfast specials named for Nicollet, Hennepin and Marquette avenues.

In 1985, the Arbys opened on the first floor of Northstar Center at S. 7th and Marquette. It anchored one end of the food court and had a street entrance on Marquette. Burger King took the food courts other corner, with a two-story outlet that opened to 2nd Avenue S. Just a block down the street, another Burger King stood in the lobby of the headquarters of Pillsbury Co., which owned the chain from 1967 to 1988.

The big fast food names thrived downtown through the 1990s. Then, the 2001 recession contributed to the demise of the Burger King in Northstar Center, which closed not long after. The sale in 2000 of Pillsbury to General Mills led to a tenant makeover of what is now U.S. Bank Plaza, and the Burger King there closed in the mid-2000s. The last McDonalds in downtown, part of a food court in Gaviidae Common, closed in October 2013 for a remodeling of that shopping center.

An office makeover played a role in the closing of the last Arbys, too. Wells Fargo, which occupied more than 500,000 of the 645,000 square feet of offices in Northstar Center, moved in 2016 to two new buildings near U.S. Bank Stadium. Without its major tenant, Northstars owner last year defaulted on its mortgage and the complex tumbled into foreclosure. A New York investment firm bought it earlier this year.

Among the new owners first tasks was to negotiate a lease for Arbys to replace one set to expire Nov. 30. Over the restaurants 33 years, its ownership changed hands about a half-dozen times, going from a local franchisee in the 1990s to what is today the parent company of Arbys, Atlanta-based Inspire Brands Inc.

Executives for the two sides explored new terms and remodeling. About one-third of Arbys 3,400 restaurants have gotten a new look in the past few years. Unfortunately, for this specific location, we could not come to an agreement with the landlord on a long-term lease, a spokesman for Arbys wrote in an e-mail. He declined to discuss details. A representative of the company managing Northstar declined to comment.

In the weeks since the closing of Arbys, regular eaters at the Northstar food court peppered owners and servers at other restaurants for information. People come every day and say When did they close? and They always looked busy,andthinsp; said Dave Magnuson, owner of Walkin Dog, a hot dog stand that, open since 1991, is now the longest-running business in the food court.

He said he hopes building managers attract another big name to the space. It gives people more of a reason to come down to this food court, Magnuson said.

Hae-sung Kim, who has run Twin City Bites next to Arbys for 22 years, said business has picked up about 10 percent to 15 percent since its closing. She has long kept prices low to compete with Arbys, charging $5 for a sandwich and $6 for one combined with chips, cookie or soda. Her sandwiches are so good and fresh, Overton, the office worker, said. And theres a good variety.

The Arbys spokesman said it is actively looking for a replacement site in the area without specifying downtown. Christenson said two burger chains are now scouting locations downtown.

But theyre much higher-end burger concepts, she added. Theyre not at that [fast food] price.

Evan Ramstad 612-673-4241

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