The Acre Is Optional Now

Freddy's opened its 600th restaurant on October 13 in Beaufort, South Carolina, per Franchising.com. It is a 2,300-square-foot endcap with no drive-thru, 65 seats and a patio, run by franchisee Charleston Custard. QSR Magazine reported October 16 that about half of the chain's current development pipeline is now endcap, inline or second-generation space. A year ago, per the company, that share was about 10 to 15 percent.

Our position: the growth brand that used to need an acre now needs a lease. For owners of shopping center endcaps across the Southeast, that is a new tenant list. But the numbers say the drive-thru still decides the rent, so the endcap that can carry a lane is the one that wins this shift. An inline space without one is a cheaper box with a smaller sales line.

What the company said

CEO Chris Dull put the change plainly to QSR Magazine. "Six years ago, Freddy's was a franchise opportunity for folks who could afford to buy an acre of land and build a building, and that's a very meaningful investment," he said. "Whereas, today, with a format like this restaurant, you don't have to buy an acre of land, you don't have to build a building. You have to finish out an interior, bringing that investment level meaningfully down."

Chief development officer Andrew Thengvall told the magazine that recent projects cut $200,000 to $300,000 in building costs. "It's quicker to open. It's a lower investment, and frankly, it's easier to operate," he said. Per the same report, the chain expects about 60 openings in 2026, holds more than 450 commitments in its backlog, and names Florida and South Carolina among its active markets. Dull said lower entry costs could eventually push annual openings closer to 100.

What the disclosure numbers say

Restaurant Dive reported in July, citing the company and its franchise disclosure document, that an inline Freddy's costs a franchisee about $854,834 to develop. A standalone restaurant costs more than $1.5 million.

The sales side is the part we read twice. Per the same report, standalone drive-thru franchised units average nearly $1.9 million. Endcaps with a drive-thru average about $1.8 million. Inline units average about $1.4 million.

So the endcap with a lane keeps nearly all of the freestanding unit's sales without the land or the building. The inline unit gives up roughly a quarter of them. If those figures hold, the format that pencils best for the operator is not the cheapest one. It is the endcap that can still serve a car.

What we would watch for

First, which endcaps can take a lane. Stacking room, circulation behind the building, the landlord's other leases and local approvals decide whether a drive-thru can be added to an existing endcap. We would expect the endcap that already clears those tests to be the one growth brands compete for.

Second, what this does to pad demand. Freddy's has historically built on the edge of growing towns, where land was cheaper, per QSR Magazine. If half its pipeline moves into existing centers, that is one less brand bidding for the freestanding acre in those trade areas. One chain does not move a market. We would watch whether other growth brands report the same split in their next disclosures.

Third, whether the operators hold. Dull told the magazine that traffic is up year over year but sales are about flat. A lower-cost box helps an operator through a soft stretch. It does not replace the sales.

Our read for landlords: if the end of your center can carry a drive-thru, that is the feature to lead with. If it cannot, price the space as the inline box the numbers describe.