Demand for street-front quick-service restaurant (QSR) retail unit space remains high in Metro Vancouver, but the industry is experiencing a slowdown in available new franchises.
Michael Anderson, president and managing broker at Langley-based Northern Vision Realty Advisors, said there’s “more demand than space” for street-front QSR retail units in Metro Vancouver.
“Many quick-service restaurants require a kitchen exhaust,” said Anderson. “Those spaces are rare.”
Franchises are vying for spots in areas with residential towers – including Metrotown and Brentwood in Burnaby, and North Road in Coquitlam.
Anderson said drive-thru restaurants are becoming “a thing of the past” in Metro Vancouver except where chain restaurants own land.
“Very few developments are offering a drive-thru restaurant, and when that happens, there’s fierce competition,” Anderson told Western Investor. “Land is costly, so I think you’re seeing more of a shift to the street-front situation or the non-drive-thru.”
Sean Black, chief investment officer of Vancouver-based restaurant operator Happy Belly Food Group, is betting on more health-conscious appetites.
Happy Belly opened its newest Heal Wellness location in Vancouver’s Kitsilano neighbourhood in October, serving smoothies and açai bowls. It’s the third of 10 planned for B.C., adding to 12 existing locations across Canada. Black said the company plans to have about 20 locations by year-end, expanding to 40 by the end of 2025.
Black said Happy Belly is experiencing “healthy” sales growth due to “significant demand.”
“Emerging brands are stealing market share,” said Black. “I think people are changing where they’re spending.”
Happy Belly has 421 committed retail locations from master franchisees across Canada with several emerging brands – including Yolks – in its pipeline, opened or under construction. It’s planning to enter the U.S. market in 2025 with a Heal Wellness multi-unit deal in Florida.
Joe Sangha, franchisee partner for three new Heal Wellness locations in Kitsilano, West Abbotsford and Chilliwack, said he sees growth potential.
“It’s a simple, clean operation – very easy to operate with lower startup costs than other QSRs that require hood ventilation,” said Sangha, who is opening three more locations in Alberta.
Happy Belly’s support system was a draw for Sangha, who was B.C.’s first franchisee of Mucho Burrito, a brand Black held through Extreme Brandz, sold to MTY Food Group in 2013.
“Finding the right location isn’t always easy,” Sangha said. “The other issue is staffing. There’s high turnover in QSRs, which makes it challenging. Now with limitations on the [Temporary] Foreign Worker Program that specifically affect the QSR space, I think we’re in for some challenging times.”
Mark von Schellwitz, vice-president, Western Canada, for Restaurants Canada, said there’s a slowdown in new QSR franchise openings in B.C. due to lower discretionary income and higher operating costs.
“We’re seeing demand soften a little bit simply because of the troubles the industry is in, especially on the QSR side,” said von Schellwitz. “In QSR, your profit margins are so tiny. You need that heavy volume to make a profit in that business.”
Von Schellwitz said about 53 per cent of Restaurants Canada’s B.C. members are not making money, contributing to “a record number of bankruptcies in 2024.” Rising real estate and operating costs are the key factors.
Restaurants Canada’s Q3 report found that QSRs are disproportionately affected, with 23 per cent describing the business climate as “very poor.” This compares to nine per cent of full-service restaurant members. Of B.C.’s 15,000 restaurants, about 37 per cent are QSRs.
Von Schellwitz said leasing costs are “not sustainable” as rents continue to increase.
“You’ve got a lot of people closing their restaurants as a result of that. That is even more pronounced in the big urban centres where those lease rates have really increased substantially.”
