Not Just For Breakfast Anymore: All-Day Cafés, Multi-Use Retail Drive Up Revenues, Rents And Retention

Diversifying revenue streams became an imperative in 2020 when the pandemic rocked the restaurant and retail industry, forcing business owners and landlords to pivot to online sales, curbside delivery and outdoor dining to keep rents current and registers humming.

Three years later, restaurateurs and retailers are again diversifying revenue streams, this time with the opposite goal. They want customers hanging around morning, noon and night, having a meal or coffee by day, shopping in the afternoon and enjoying a drink, a game or a trivia tournament by night.

Activating retail spaces throughout the day and into the evening is hardly novel, but it's a trend that has picked up steam in the wake of the pandemic, as a new convenience-oriented and hybrid-working clientele demands more offerings, flexible hours and greater bang for its buck. Commercial real estate experts say it fulfills a consumer desire for social experience, and landlords point to increased foot traffic and sales, which translate into higher profits, thanks to percentage rents tied to tenant revenue.

“It's about creating a feeling. I think it's about the lived experience and the environment,” said Taylor Wos, senior retail development analyst for Toll Brothers, who identified multi-use retail as a trend to watch in 2024. “It's about appealing to what customers want in terms of convenience but also lifestyle.”

Coffee shops aren't just for breakfast anymore. They morph into cocktail lounges by night. Plant stores, like Houston's Eden Plant Co., serve up crafted lattes and WiFi alongside the greenery during the day and offer events like weekly Jazz in the Jungle at night. And flower stores like Arlington, Virginia's Poppyseed Rye no longer rely on aromatic flowers to draw customers off the street. It has added food and beverages to diversify its revenue streams.

Poppyseed Rye opened in November 2021 with the intention of offering fresh food and flowers in an aesthetically pleasing environment, operating partner Jonathan Rennich said. Its operators quickly discovered that customers also wanted breakfast and a place to have coffee and work throughout the day, so it is now opening three hours earlier and has kicked its coffee options into high gear.

“They asked for it and they came. It kind of changed things for us overnight,” Rennich said. 

This change more than doubled the store’s sales on weekdays, and the weekends brought even more business, especially when the store began offering $3 mimosas on Saturdays and Sundays, Rennich said.

Retailers pay rent on storefronts for 24 hours a day, but many sell low-margin products like coffee, which requires a lot of traffic to make a profit, said Phil Colicchio, a specialty food, beverage and entertainment procurement expert for Cushman & Wakefield. Generating revenue all day and into the night is a logical solution for businesses he has coached, and he has encouraged it for years, he said.

Now, an increasing number are taking him up on it, and landlords are actively seeking out those businesses. A July McKinsey Global Institute report noted that as the work world goes hybrid, it behooves retail to follow suit.

Retailers “have to ‘earn the commute' by designing spaces that cater to many different uses,” the report states.

“How do you drive revenue? You enhance your menu and your offerings and extend your hours,” Colicchio said. “It makes total sense that you’re seeing more places that might be considered cafés, coffee shops transition in the late afternoon into beer, wine and cordial environments.” 

European business owners have followed the model for years, but it is just starting to gain mainstream traction in the U.S., he said. Colicchio and other food and beverage experts like CBRE Houston's Restaurant Practice Leader Thomas Nguyen couldn't point to impartial data collected on the rise of all-day activation in the restaurant and retail sphere, but they pointed to abundant anecdotal evidence.

In the past month alone, former NBA players Joe and Jordan Crawford opened Cred Café, a coffee-shop-by-day, speakeasy-by-night concept, in their native Detroit after visiting similar café-bar fusions on their professional basketball travels abroad. A Wichita, Kansas, barbershop expanded its offerings to include coffee, cocktails and food under new ownership.

In Boston, the Friends-themed Central Perk opened, spearheaded by Warner Bros. Themed Entertainment and CenPer Holdings LLC, offering a shop, an all-day menu and plans to soon offer beer, wine and “a creative twist on espresso martinis” in the late night hours. The venue is described as the venture's first location, suggesting it could roll out more.

“The Friends franchise has shown to be timeless,” said Mike Jammen, principal of Boston-based real estate investment firm UrbanMeritage and landlord of the Newbury Street building that houses Central Perk.

Jammen said extending hours and offering additional menu items drives profitability above that of a normal coffee house and is likely to drive higher rents as well. 

“Anything that’s flexible, that’s got multiple options, that’s experiential-based helps,” he said. “Whatever can drive up sales, that, economically, can help drive up rent in the long run.”

Simona Café, an “all-day neighborhood favorite” in Arlington, Virginia, opened last year, serving food, coffee, beer and wine for at least 12 hours daily. It opened a second location this year in a D.C. space that previously housed Sweet Science Coffee. Jad Bouchebel, the café's founder who also owned Sweet Science, saw an opportunity in converting it and activating the space for more hours.

“We wanted to attract people all day long,” Bouchebel said. “They can come in any time, do some work, get coffee.” 

The conversion increased sales by about 30%, he said. The new location is in a mixed-use D.C. building with apartments on top, and the café is seen as an amenity for the residents, helping to get the units leased up, Bouchebel said. 

In Arlington, offering beer and wine enticed customers to hang out on the large patio during summer evenings.

“With coffee, even though the weather is cold, they can grab and leave. With beer and wine, they have to sit down,” he said.

Also in D.C., the all-day Any Day Now opened this year. These cafés’ openings follow the 2015 launch of The Royal, an early-morning-to-late-night café with a South American flair and a neighborhood focus, as described by the Washingtonian.

The Royal was an early adopter of a trend highlighting convenience and spontaneity that the pandemic only accelerated, according to a 2023 restaurant trend report from BentoBox that indicated the crisis left lingering traces on the industry. Walk-in parties were twice as common as reservations in 2023, the report shows, pointing to remote and hybrid work as the cause of more flexible, all-day consumer behaviors.

People are also eating at more unconventional times, according to a Yelp report. Restaurants are seating 10% of diners between 2 p.m. and 5 p.m., double the percentage of people that ate in that time frame in 2019, data shows. 

Simona doesn't accept reservations to keep things casual and welcoming, Bouchebel said, and it intentionally opened in both residential and commercial settings to capture traffic from people working at home and in offices.

“It's a very European approach,” Colicchio said. “The idea is quite simple. If what you are seeking is basic sustenance and community, you should be able to find it at a price point that doesn't preclude you from going back every day or every other day.” 

The pandemic has also fostered the desire for a community gathering place, he said. 

“The desire to have a third place has never been more prevalent,” Colicchio said.

“It’s a shrewd business move on the part of retailers because it’s allowing them to find opportunities to be better operators and connect on different planes with their customers,” Wos said, adding that for landlords, “it gives [tenants] the ability to potentially pay more in rent because they can make more money.” 

Landlords are increasingly seeking out multi-use businesses, particularly because they can include a percentage rent clause in the lease to profit from tenant sales, Colicchio said. A percentage rent clause means that if sales reach a certain level, known as a breakpoint, landlords then earn a small percentage of each sale on top of base rents. 

“Most landlords are actively searching for groups that want to do this,” he said.

Percentage, or overage, rent allows landlords to share in the profits of successful businesses, putting the onus to attract foot traffic on both retailers and landlords, according to the NRTA, a tenants association. Jammen is utilizing percentage rent clauses at some properties, including at Central Perk in Boston, he said.

In that area of town, retail rents range from well over $100 to $450 per SF, so the breakpoint is elevated, he said.

“The breakpoint is high enough that I think if they go through it, everybody would be happy,” Jammen said. “They wouldn’t mind paying a percentage rent at that point.” 

Beyond higher rents, CBRE's Nguyen said multi-use spaces are community amenities. Nguyen helped bring Drop Shots, a facility with indoor pickleball courts and plans to add a 4K SF bar, to the Houston Farmers Market. He was also involved in the deal to launch The Decoy, a venue with a bar and regulation sand volleyball courts in Spring Branch.

“It just makes sense that people are going to be out and about and having dinner at all these great restaurants. Why not have these areas where they can be entertained as well?” Nguyen said.

Coming out of pandemic restrictions, consumers realized what is important to them and thought more about how they spent their time, Wos said. Businesses can now use that to their advantage by determining how to create new value and an experience that resonates with people, she said.

“Figuring out what you can do to feel good and enjoy your time on the planet is something that we all struggle with,” she said. “Retailers have the opportunities to tap into the more primal drive of individuals.” 

But offering gimmicks or trying to do it all isn't necessarily what it takes to make it in the industry, Nguyen warned.

“You can have a restaurant that sells one item, and it [can] be successful,” he said. “You can't be everything to everyone. And if you're trying to do too many things and you're not very good at any of them, you're not going to be successful either.”

It comes down to customer service and the quality of what you are selling, Nguyen said. 

“As long as you do everything quality ... people will take you seriously, and they will come back,” Bouchebel said.