Dive Brief:

• Potbelly Sandwich Shop signed a multi-unit franchise deal Wednesday to open restaurant locations inside Macy’s department stores, according to a press release.
• Per the agreement, the restaurant chain will place three outposts in California Macy's stores and one in New York. It previously opened an outpost in Macy's in Mall of America in 2018.
• Potbelly has almost doubled its franchise footprint through multi-unit agreements, amounting to 42 units throughout the United States. The chain currently maintains more than 450 corporate and franchise stores.

Dive Insight:

For retailers, adding an in-store dining concept is a tactic that targets consumer love for experience-based shopping. Consumers are looking for more than just a store that sells their favorite products at the right prices. They want to have a memorable interaction with the store, too.

The strategy also allows restaurant brands to explore alternative formats, access new consumer groups and expand to geographic territories that may have been too costly to launching a full-scale brick-and-mortar store in.

For Macy's, adding a restaurant partner may be an effort to help it cope with the ongoing downturn in conventional retail shopping. It recently reported plans to cut profit forecasts due to inventory oversupply and declining year-over-year foot traffic at its mall locations.

Restaurant/retail hybrids aren't a new concept, though. Department stores once featured tea rooms and cafes to help refuel weary shoppers or to attract hungry consumers that might wind up browsing the retail side of the store, too.

Whether Potbelly's sandwich-focused fare is what Macy's average shopper is looking for today remains to be seen, but rival retailers seem to also see opportunity in this model. Nordstrom is due to launch a flagship New York store this month that will feature six food and beverage venues in partnership with James Beard Award-winning chef Tom Douglas and Seattle-based chef Ethan Stowell instead of its standard Nordstrom Café. The move could be due to similar struggles with sluggish retail sales, which has led Nordstrom's to close stores over the last few years with more likely to close. 

Crate & Barrel also adopted the in-store restaurant experience with a full-service restaurant called The Table at Crate in its Oak Brook, Illinois, store. It performed so well, according to the company, that it now has plans to launch another 15 full-service restaurants in its stores. The concept reportedly turned a profit by its second month in operation. 

Whether or not restaurant and retail partnerships like the Macy's and Potbelly's deal or restaurant concepts created by retailers to appeal to their exact cliental will become dominant trends, these developments reflect blurring lines between these markets. And as thin-margined restaurants search for experimental locations — like commissary kitchens and grocery stores — to drive growth, big-box retailers may be a lucrative opportunity.