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Why fast food chains are turning to alcohol

As quick service restaurants look for new revenue streams in a saturated market, an increasing number are now selling alcohol alongside their usual caffeine hits and iced smoothies in a bid to boost their evening appeal.

Starbucks is the latest U.S. big name chain aiming to carve out a new niche in the night time drinking scene as it expands its Evening Program that it launched back in Seattle in 2010. In the next five years it plans to serve beer, wine and small plates at 2,000 locations.

“There are two dimensions Starbucks can grow in any market: space and time,” says James Cook, Director of Retail Research at JLL. “In geographic terms, the company has a limited number of holes left to fill in the U.S. – its greatest opportunity for expansion is in Asia – so that leaves time. Starbucks has long pushed to become that ‘third place’ in our lives, after home and office. By opening up the evening drinks, the third place extends into the night with alcohol and tapas.”

Looking to the night time economy

The roll-out is modest in comparison with the brand’s overall global ambitions and its long term plan to almost double its market value to $100 billion. The night time plan adds to its offerings at only 17 percent of its existing U.S. locations but these have been strategically chosen.

Cook explains: “Locations that were originally selected for high daytime traffic are often duds after hours. Starbucks has clearly been selective in choosing where to place its initial Evenings locations, rolling them out where they’ll have the greatest shot at catching on.

“For example, the five initial Chicago locations with Evenings menus are within above-average areas of alcohol spend. Our analysis found an average local booze spend $3.8 million higher than the overall average at these locations.”

Starbucks is far from being the only established QSR to try and make inroads into the alcohol space. Burger King and Taco Bell are also experimenting, but their moves have been modest. The BK Whopper Bar concept only has a few locations, and Taco Bell will serve adult beverages at only two spots for now. Its first Taco Bell Cantina opened in Chicago in September with another planned for San Francisco later in the month.

“These new urban restaurants are a critical part of our growth strategy in markets where people experience our brand differently,” says Brian Niccol, chief executive officer, Taco Bell Corp in a company press release. “Today’s consumers are living in more urban settings and our new restaurants cater to their lifestyle in adapting our traditional restaurant concept to fit their modern needs.”

Dealing with a new type of customer 

The move isn’t without its challenges: While fast food restaurants are no strangers to serving tipsy customers at the end of a night out, serving alcohol comes with a new set of risks.

As Forbes contributor Darren Tristano tells the publication: “Cups and containers for alcohol will be clearly marked to prevent people from sneaking out with a beer or slipping it to a minor, but this move will still add a layer of operations beyond a standard fast-food restaurant. Keep in mind that the vast majority of sales in fast food come at the drive-thru. That alone has put the brakes on alcohol in the segment for decades.”

And then there’s still the huge task changing the way in which customers view their local coffee shop or fast food joint. “In America at least, alcohol is not an integral part of our QSR experience,” says Cook. “Starbucks will likely face limiting factors to success with its Evening program. Undoubtedly there will be high-traffic urban areas that will see increased revenues from the move. But even in those areas, there’s no guarantee that patrons will choose to do their drinking there.”​

This article originally appeared on Real Views, JLL's news site that features stories exploring the world of real estate and its impact on the wider business world. Visit the Real Views site to subscribe for our weekly email of top stories, delivered direct to your inbox.