How Dining in the Parking Lot Helps More Restaurants Survive

Three months ago, Vu Truong said his brew pub was in danger of closing for good when he hatched an idea: turn empty parking spaces into an outdoor patio to let more diners enjoy craft beer and popcorn chicken in socially distant seating. Today, that concept is one way restaurant properties across the country are able to stay open during the pandemic.

Truong said parking tables instead of cars in the lot allows his restaurant, Phoenix on Westheimer in Houston, to recoup some lost traffic while still following Texas' 50% restaurant capacity guidelines. That may be the toughest test of outside dining in the country right now because of Houston’s nationally known sweltering summer heat. But even in the Gulf Coast sun, diners are more than happy to fill the pub’s expanded parking lot patio, which has become a model for the city as it introduced a program encouraging restaurants to turn underutilized parking into expanded seating space.

The city of Houston is embarking on a new program allowing restaurants to convert half their off-street parking lot spaces into restaurant seating, throwing a lifeline to an industry hard hit by coronavirus restrictions. Houston’s program follows similar initiatives launched in recent months in Los Angeles, Dallas, Charlotte, North Carolina; Tampa, Florida; and elsewhere.

Municipal officials are passing the new rules to try to slow the wave of permanent restaurant closings nationally as Americans eat out less and social distancing mandates are constricting already razor-thin restaurant profits.

As many as 33,000 U.S. restaurants and drinking establishments have permanently closed in the past five months, including about 9,300 just in the month of July, according to food industry data source CHD Expert. In July, California saw the most permanent closings with 1,271 locations shutting for good, followed by Texas at 844, New York's 653, Florida with 587 and Illinois at 381, according to CHD Expert.

“We anticipate states will delay reopening plans and we will see a declining new landscape, which will inevitably impact the future success of businesses, turning even more temporary closures into permanent ones. Second, the permanent closure rate will continue. The virus isn’t going anywhere soon, so businesses will need to be resilient,” said Jolien Demeyer, global marketing director at CHD Expert, in a statement.

If Phoenix on Westheimer is any guide, the blistering summer heat isn’t deterring diners from seeking outdoor space. Truong said he invested roughly $3,000 on purchasing umbrellas, furniture and special fans to circulate cool air in non-air conditioned spaces.

“On any given evening, if you were to only look inside the pub, you would think we were dead, having only 15 or so people inside. If you go outside, everyone is spaced out and it’s busy, or busy enough,” Truong said. “It has helped for sure.”

The parking lot conversion so far has boosted the restaurant’s revenue back up to about 80% of its normal range, Truong said. He’s even looking to hire more employees. “Some owners aren’t willing to (invest) yet but they need to if they want to survive,” he said.

Truong said he’s officially the first restaurant to sign up for Houston's new ‘More Space’ Program, which allows restaurants to voluntarily convert 50% of its off-street parking spaces into outdoor seating. The city asks that restaurants notify the city of the changes, according to officials.

Weather Challenges

The concept faces a major challenge from different types of weather. In the Sun Belt, summer is scorching. And in the northern half of the United States, cool weather make things difficult starting in late October or sooner. And in all seasons, rain is a big problem, no matter how big the umbrella. There are also limitations to the amount of space that can be used because customers still need to park their cars.

Even so, other restaurants in the Houston area have already gotten creative about their parking spaces too. Lopez Mexican Restaurant on Grand Parkway has set up a large, white, wedding-size tent in its parking lot with spaced-out tables and string lights. And hundreds of other restaurants have turned parking spaces into makeshift takeout and curbside pickup spots — now considered an almost necessary practice during the pandemic.

But city officials are hoping that passing more formalized rules will allow restaurants more flexibility and encourage diners to safely support local eateries. Restaurant brokers said the new rules will probably be a welcome relief for restaurants and their landlords.

“So long as this practice does not adversely impact other tenants in the shopping center, this practice appears to be a win-win for restaurants and landlords. Staying flexible and open to new ideas is important in these unprecedented times,” said Lilly Golden, a Houston retail broker with Evergreen Commercial Realty, in an email.

And brokers say that outdoor seating and drive-thru options are now some of the most sought-after amenities for new restaurant leases.

Before the pandemic, drive-thru "was a very strong preference but now it’s a must-have. Some fast-casual concepts are saying no drive-thru is a deal-killer now — they have to have that drive-thru because it keeps them alive when people don’t want to get out their car” and go inside a restaurant, said JoBeth Prochaska, senior vice president with the retail-focused commercial real estate firm Weitzman Group.

Prochaska said she expects more restaurants to take advantage of the More Space program in the fall when the weather cools. Landlords also are bracing for a wave of new requests to defer rent payments in the fall as many restaurants arranged to defer payments only until September or October, she said.

Though many restaurants have adapted and expanded takeout options, most are still struggling to pull in the same traffic they did before the pandemic, said Mark Davis, a retail broker with Davis Commercial in Houston.

However, Davis said some restaurants are seeking to take advantage of lower rents and new opportunities cropping up during the pandemic. Davis has signed two restaurant deals in the past month in Houston's Montrose neighborhood: 3,500-square-foot lease for Chicago-based Chinese restaurant Lao Sze Chuan in the former Texadelphia space at 3407 Montrose Blvd. and a 3,000-square-foot lease for North Carolina-based The Seafood Connection at 507 Westheimer Road. Restaurants signing leases now could be six to nine months away from opening, hopefully by the time a vaccine is developed, Davis said.

“There is still demand for restaurant space. … The landlords have gotten a little more aggressive in their rents to make that happen,” Davis said. “While a lot of people are struggling, people are still out their looking to open new concepts.”

Other Cities

Outside of Houston, restaurants in other cities are reporting success with similar parking space-to-patio conversions. Tampa was the first city in the country to implement such a program through the city’s “Lift Up Program,” said Ashley Bauman, spokeswoman for the city of Tampa.

Lift Up has had “lots of participation,” Bauman said. For now, the program is paused during hurricane season, but Bauman said the city of Tampa is looking to restart and expand it in the fall.

In Dallas, the Bishop Arts District neighborhood on the west side of the central business district was the first area to begin embracing the idea of expanding traditional patio seating in front of a restaurant into a city-owned parking lot.

Jason Roberts, the owner of Revelers Hall and founding director of The Better Block, a place-making nonprofit group, and his team decided to build what he calls a "parklet" at the end of April in front of the Bishop Arts bar and restaurant as an example of the possibilities of the structure if the city approved the idea.

The Bishop Arts District is about 10 minutes from downtown Dallas and has more than 60 boutiques, restaurants, bars, coffee shops and art galleries. "It sort of broke the rules to help city councilmembers understand how parklets work," said Jim Lake, who, along with his wife Amanda Moreno, owns property in the neighborhood.

Instead of relying on patio dining on narrow sidewalks, parklets let businesses offer outdoor seating for at least 10 people who are socially distanced, Lake said. In May, the city council approved the use of parklets, on a temporary basis, giving businesses the ability to apply for a permit.

Other similar spaces, such as one in front of Veracruz Café in Bishop Arts, are expected soon. And not only are restaurants thinking outside their four walls to survive, stores are joining in, using market stalls to bring jewelry, clothing and home goods outside to customers.

"The market stalls are being used on a regular basis," Lake said. "Both the parklets and market stalls help customers feel comfortable and is available to all of our tenants at no cost to them. They just have to reserve it."

CoStar News reporter Candace Carlisle contributed to this report.