Michael Walters: Why Restaurants Flock to Dallas

Michael Walters
Michael Walters

As a native Texan, it is easy to be biased on why the state should be considered the best place in the country in which to live and work. With more than 27 million individuals residing in the Lone Star State, it’s not surprising that Texas has increasingly become a go-to state for businesses—and, more specifically, restaurants looking to expand. Regardless of my favorable personal opinion, restaurants have solidified themselves in the Texas real estate industry as a key player in the development market.

A clear benefit for us in the Texas real estate industry is that land and opportunity are plentiful. Notably, Dallas saw nearly $18 billion in new project starts in 2015, topping Forbes’ “Boom Towns” list of metro areas with the most construction. Forbes also states that in 2015, 98,900 jobs were added in the greater Dallas-Fort Worth greater. How lucky are we that businesses in Texas do not have to endure a state income tax, corporate income tax ,or a personal income tax? There is also the fact that, according to the Tax Foundation blog, only a mere five states give Texas a run for its money on having the lowest liquor sales tax in the entire country. For these reasons, the increase in jobs, real estate productivity, or the fact that many businesses are choosing to uproot their corporate headquarters to our state, should come as no surprise.

Once a restaurateur assesses these very fortunate factors of owning a business in Texas and decides to expand here, they will find no shortage of drinkers or diners. With a lack of outdoor attractions like beaches or mountains, our entertainment tends to be shopping and eating out. According to The Bureau of Labor Statistics, two Texas cities are among the top five cities that spend the most money dining out in the United States, with Dallas ranking No. 1 and Houston at No. 4. Impressively, Dallasites rank above the nation’s average for the amount of income we spend on food and alcohol. I myself am no exception, and have fully embraced the foodie culture, appreciating the new and continuously evolving concepts that restaurateurs develop.

With a customer base just waiting to burn a hole in their pockets, the restaurant business gains the added benefit of a wide spread between the tipped and non-tipped minimum wages. With Texas’ non-tipped minimum wage at $7.25 and a tipped minimum wage of $2.13, the profit margin for restaurant owners is exponentially greater than other states. In some states, such as Nevada, Oregon and Washington, non-tipped minimum wages range from around $8 to $15, and the owners do not receive tip credit entirely.

For example, one of the top destinations for restaurant expansion could’ve been Seattle, because of their robust growth over the previous three years (2011-2014), before their city council passed a $15 an hour minimum wage. This has been ramping up since April of 2015 and, in turn, causing a mass exodus of minimum-wage reliant restaurants over the last 10 months.

Fortunately, there have been no such threats to the wages in Texas, and specifically in the DFW area, allowing a restaurateur to have peace of mind when factoring in labor costs to their long-term spending decisions. Additionally, Texas’ tip credit allows restaurateurs to have the tremendous opportunity to allocate this additional revenue to better their businesses. For example, hiring additional or highly trained wait staff and providing an unprecedented level of service.

With a booming job market, an astounding customer base, and unparalleled tax and wage benefits, the Texas real estate industry should to be prepared to welcome restaurateurs with open arms and, hopefully, enough space!

Michael Walters is president of the Restaurant and Entertainment Group at Falcon Realty Advisors. Contact  him at [email protected]

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