Sisters Liliana and DianaJaime are working to double the size of their Mexican restaurant chain Mi Cozumel by the end of 2024.
The company already has four locations in the Tri-State and is working simultaneously on spots in Kenwood, downtown Cincinnati, Florence and Dayton.
Mi Cozumel thrives in larger spaces, which are more difficult and expensive for restaurateurs to operate. The family expects to invest a minimum of $1 million in a new location. Because of that, the company follows a very specific set of criteria in its search for growth.
“We are always seeking second-generation spaces,” Diana Jaime said. “(The cost) always drops to half.”
A second-generation restaurant space was previously home to another restaurant that since closed. Often, a lot of valuable equipment and infrastructure is left behind.
Since the Covid-19 pandemic, a tsunami of national full-service chain restaurant closures has washed across the country. By the end of the year, Applebee’s plans on shuttering up to 35 locations and Red Lobster will give nearly 100 of its restaurants the ax, according to national reports by NBC News and USA Today. Other than Frisch’s, which abruptly closed four area locations earlier this year, the Tri-State has largely been immune to recent mass closures. However, experts say it’s not a matter of if but when the wave will reach Cincinnati. Some local restaurant companies like Mi Cozumel stand to benefit.
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“Conversions are king,” JoAnne Serdar said. She owns Entertainment Properties Inc., which specializes in retail real estate. “Because the cost of doing construction is so high, everybody already wants that infrastructure."
Second-gen appeal: Repurposing restaurant spaces saves substantial money, time
Abe Shteiwi is the founder of Bourbon’s Craft Kitchen and Bar. He opened the restaurant’s second location this spring in the former Wahlburgers in downtown Cincinnati’s AT580 building.
He transitioned the 3,900-square-foot former celebrity-branded burger joint into a full-service dining room and bar.
“The guts that are left could be very beneficial to smaller businesses going in,” Shteiwi said.
Lance Sizemore is in the process of rapidly expanding his new restaurant group Epic Eeats.
His restaurants – laid-back American pub By Golly’s Bar & Grill and family-oriented the Works Brick Oven Pizza – are leading the charge. By 2025, he hopes to have more than a dozen restaurants across the Tri-State and beyond.
Sizemore has plenty of experience opening in repurposed spaces. His second By Golly’s went into the old Varsity Sports Bar and Grill space in Anderson Township, and his third is going into .
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At the same time, he’s also working on a new build. The Works is going into a new 4,400-square-foot space inthe $31.4 million Hayden building. For the new construction, Sizemore is budgeting $250,000 just for plumbing and electrical.
“When you’re going into a second-gen space, that’s already done,” he said.
In a second-generation space business owners can likely open six months to a year earlier than if they built from the ground up, according to Sizemore.
Some of these former restaurants also have a built-in following and can generate interest far greater than new construction, he said.
Opening By Golly’s in the shuttered Varsity space, it was like picking up where they left off.
“A lot of the old Varsity crowd ... came in and were like, ‘Hey, this is even better,’” Sizemore said.
Diana Jaime also has experience with both new construction and second-generation spaces. Mi Cozumel’s Finneytown location is in a former Applebee’s building and the Oakley restaurant sits in a shuttered Bar Louie space. The company is currently rehabbing an old Panera Bread space on Fountain Square and a Red Robin in the Kenwood Towne Centre. Refurbishing an existing space is always Mi Cozumel’s first choice, she said.
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Moving into a space previously inhabited by a major national chain restaurant company limits the need to do major demographic research because the former tenant already put in that work.
Chain closures sweep the coasts, but Midwest will not be immune forever
Aaron Allen is the founder of global restaurant consultancy Aaron Allen & Associates, whose clients include the likes of Red Robin, Outback Steakhouse and TGI Fridays. He said in a way, the pandemic delayed the inevitable. According to Allen, a lot of money was being pumped into the system but now, a lack of funding combined with rising interest rates, food costs, labor costs and rent are adding up.
“It’s happening most in casual dining,” Allen said. “I don’t want to name the dead before they die.”
He said the wave of closures has started in big cities on the East and West Coasts, such as New York, San Francisco and Washington, D.C. According to Allen, it’s only a matter of time before the Midwest gets hit.
Consumer behavior also plays a major role.
“Gone are the days when Applebee’s called me up and said, ‘Hey, we want to open eight stores,’” Serdar said.
She’s been a part of thousands of transactions over her decades as a broker. Serdar used to do a lot of business with national and local chain restaurants including Frisch’s, Applebee’s, Hooters and O’Charley’s. Now, it’s a much different landscape.
“A lot of old concepts are going out of favor with the public,” Serdar said.
Many of these major chain restaurants failed to reinvent themselves over the decades and fell behind newer and more exciting eateries. From an economic perspective menu prices have risen as fast as 8.8% since the pandemic, slowing to a 4.1% climb in June 2024, according to the National Restaurant Association.
Kathleen Norris is the founder of Urban Fast Forward. She’s one of the architects of Over-the-Rhine’s retail revitalization. She said middle-class diners are the ones being impacted the most.
“If they’re choosing to go out, they want more,” Norris said. “And if it’s date night, we’re not going to Applebee’s.”
Local suburbs offer opportunity if chains like Red Lobster, Buca di Beppo close
In addition to Red Lobster and Applebee’s, other national chain restaurant companies such as TGI Fridays, Outback Steakhouse and Buca di Beppo have all announced a slew of closures this year. Although none of these organizations is based in the Tri-State, they harness a great deal of local real estate.
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Those five brands alone operate more than two dozen restaurants across the region, primarily in suburbs near high-traffic areas like malls.
Pete Montgomery is the director of commercial leasing for CMC Properties, a development company that owns and operates residential, retail and commercial property in the Greater Cincinnati area. He said the local mom and pop operators will benefit the most if and when this real estate becomes available.
“The chain era is over,” he said. “It’s a golden opportunity.”
Smaller operators that otherwise wouldn’t normally be able to afford moving into a high-traffic area could take advantage of the real estate and the assets left behind. According to Montgomery, kitchens can now cost around $600,000 to $700,000 to build from the ground up.
“This is going to save people hundreds of thousands of dollars,” he said. “(There’s) ample parking, a great location and its half-built.”
Thunderdome: Location matters more than square footage
Major sit-down chains that are failing usually occupy larger spaces. And the bigger the space, the harder it can be to make money. Taking a large leap in square footage isn’t always the best move.
“You don’t automatically triple your audience because you tripled your capacity,” Norris said.
However, for Mi Cozumel, operating in a large space is imperative. The company’s current restaurants, including those still under renovations or construction, range from roughly 6,000 square feet to more than 10,000 square feet.
Joe Lanni is the co-founder and owner of Thunderdome, a Cincinnati-based restaurant group with more than 50 locations nationwide, including Bakersfield, the Davidson, the Eagle, Maplewood, , SoHi, Krueger’s Tavern, CityBird and Currito. His company has succeeded with redevelopment projects: Currito in Hyde Park used to be a Smashburger and the Davidson on Fountain Square sits in the former Royce space.
When Lanni puts a restaurant into a second-generation space, he’s primarily looking at where it’s located.
“We’re interested in being in an area, and then if we get a second-gen that saves us a bunch of money, that is the super cherry on top,” he said.
Meanwhile, Sizemore is constantly keeping his eye out for major chain closures in the area. If the real estate isn’t what he’s looking for, there’s still plenty of opportunity for him to save money by taking advantage of what’s left behind inside the shuttered restaurant space.
“That’s where you get some good deals,” he said. “They’ve got a lot of good equipment in there.”
According to Diana Jaime, space limitations and layout constraints sometimes won’t work with a particular concept, removing that second-generation space as an option. In some cases, second-generation spaces might also not save as much money as initially anticipated.
She said sometimes when they are looking to move into a former major chain location, the kitchens are left in such bad condition that most of the equipment is unusable. For example, in Oakley, only a few pieces of kitchen equipment could be salvaged and the floors needed to be redone, which delayed the opening back about two weeks.
However, for Mi Cozumel, the pros of second-generation spaces far outweigh the cons and have played a massive role in launching their fledgling restaurant empire’s accelerated growth path.
