"I'm Lovin' It”: Why McDonald’s, Chipotle, and Starbucks are Flocking to the Sun Belt
What do McDonald’s, Chipotle, and Starbucks have in common? They love the Sun Belt, a region of the U.S. stretching across the Southeast and Southwest, for their next phase of restaurant expansion.
Several restaurant chains are betting on the Sun Belt to deliver future sales growth:
- McDonald’s restaurant growth plan will be concentrated in Florida, Texas, Arizona, Georgia, and North Carolina, per JPMorgan
- Portillo, a Chicago-based hot dog company, plans to invest more in Sun Belt states after seeing stronger sales in Texas, Arizona, and Florida compared to midwestern states like Indiana and Wisconsin, per CNBC
- Raising Cane’s, Starbucks, and Chipotle have been focused on opening new restaurants in Sun Belt states for years
So, what makes the Sun Belt a desirable region for restaurant chains?
The primary reason is population growth. People won’t stop moving to the Sun Belt states, which are attractive to Americans because they typically have affordable housing, lots of jobs, and warm weather. The ten fastest-growing counties from 2020-2022 were all in Sun Belt states.
Another reason Sun Belt states are attractive to restaurant chains is their lower labor costs. Many of them, like Texas, Louisiana, Mississippi, Alabama, etc., follow the federal minimum wage of $7.25/hour instead of setting state minimum wage laws.
In addition to population growth and lower labor costs, Sun Belt states tend to offer fewer restrictions on franchising, cheaper real estate, and less red tape on commercial development. Texas and Florida have also used lower taxes and less regulation as key selling points to convince more businesses to move to their states.
It isn’t just restaurants increasing their footprint in the Sun Belt for sales growth. Other businesses like Uniqlo, a Japanese retailer with a U.S. headquarters in New York, is slated to open its first store in Texas this year.
