Chains battle for hot Modesto intersection

Although many experts say the economy is headed for a recession, if it isn't already in one, that kind of bleak financial outlook isn't doing much to discourage some businesses from seeking new footholds in the Northern San Joaquin Valley.

In no place is that more apparent than in Modesto, despite the continuing news of business failures and closures around town over the past several months. It's important to remember that businesses, especially small ones, often go under, even in the best of times. During a downturn, the weaker businesses are exposed and closures tend to spike.

Against that dour backdrop, some businesses have targeted Modesto for expansion — and not just out at Vintage Faire Mall. Much of the recent activity involves national chains and franchises in heated competition for a couple of hot corners in the city.

At McHenry and Briggsmore avenues, three companies wanted two vacant spots at the city's busiest intersection. Rite Aid and CVS pharmacies were pursuing a site southwest of the intersection, which had been the longtime home of the Foster Farms Dairy operation. Across the street, on the southeast corner, a T.G.I. Friday's was negotiating to take over the old Mallard's Restaurant site.

Here's where it gets tricky. Rite Aid and CVS identified the old Foster Farms site as the location they wanted for a new outlet. Rite Aid apparently would move south from its current McHenry home into a new building with a drive-through. CVS is in the midst of a big push into California and wants to open a couple of stores in Modesto. It's already made significant progress on putting up a store where the Krispy Kreme used to be at Briggsmore and Orangeburg avenues in the Sills Plaza shopping center. When this pharmacy giant announced plans to replace doughnuts with prescription drugs, it also indicated it was targeting a second site a few miles to the east — McHenry and Briggsmore. But more specifics weren't available then.

On a parallel but separate track, former Modestan John Trani and his family had identified the old Mallard's as the perfect spot for their first T.G.I. Friday's. His father, Nick, was a longtime corporate executive with Carl's Jr. and at one time owned more than 20 franchises in and around the Central Valley. Although they no longer own and operate those outlets, the family recently started opening Carl's Jr. restaurants in Washington state. The son also has some Hooters outlets in the Bay Area.

So when it comes to operating successful franchise restaurants, these folks know what it takes, and they wanted the old Mallard's site for the first of several T.G.I. Friday's they plan to open in Northern California. In fact, they liked the McHenry Village spot so much, they began pursuing it as soon as they heard Mallard's was going, going, gone.

In the weeks that followed Mallard's collapse, John Trani negotiated a proposal with Standard Management Co., the owner of McHenry Village, to tear down the old restaurant and replace it with one about half the size. Remember, Mallard's founder Dan Costa has said it was too big, at more than 11,000 square feet, to be successful with today's dining public and more efficient restaurant formats. That's just one of many reasons he wasn't interested in trying to revive it.

Convinced he had a deal, Trani moved ahead with his plans to bring T.G.I. Friday's to Modesto. That's when CVS stepped in. It had lost out to Rite Aid for the old Foster Farms site and then set its sights on Mallard's and McHenry Village. It made Standard Management an offer it couldn't ignore. Although Trani had a development proposal with the McHenry Village owners, it's not a lease agreement and not binding.

So let the bidding begin. After some back and forth between the three parties, it became clear CVS had the economic punch to knock out the T.G.I. Friday's franchisees. Trani took his case to the McHenry Village merchants, arguing that his restaurant would complement what they had to offer and bring more foot traffic to their stores. He pointed out that CVS would compete with them, selling some of the same kinds of merchandise, from gift cards to paper products. His reasoning struck a chord with some of the merchants, who lobbied Standard Management on behalf of T.G.I Friday's.

Late last week, Standard Management decided to go with the restaurant rather than the pharmacy. Of course, that was after the bidding drove up the amount of money it was going to get from the lease, but then that's just business, and Trani must have gotten a deal he can live with or he would have walked away.

While the T.G.I Friday's and Rite Aid projects appear ready to go, one commercial real estate agent cautions that nothing is set in stone until construction begins.

So for now, at least, CVS appears to have been shut out at Briggsmore and McHenry. But with a new outlet about to open at Sills Plaza, it will have a foothold in town. And if it's that interested in opening a second store in the city, there are plenty of landlords who would be glad to have CVS as a tenant.

If CVS had managed to land the Mallard's site, that would have put two similar retailers in head-to-head competition across the street from each other. Both likely would have wanted drive-through lanes, which T.G.I. Friday's won't have, dumping more traffic on an already overstressed McHenry and Briggsmore intersection.

Besides, how many pharmacies does one intersection need? Don't forget, there's also a pharmacy in Safeway just north of Briggsmore and a Longs Drugstore across the street from McHenry Village.

Unfortunately, the old Longs store probably will have a tough enough time competing with even one new pharmacy when Rite Aid opens. That's too bad, because Longs was in Modesto long before national chains had much interest in the area.

But like it or not, the valley is on the map now of businesses in search of new markets. And in spite of an economic downturn, or perhaps because of it, the need to expand and grow will continue to drive business growth in the region.

Have an item for Business Beat? Send it to David W. Hill, Business Editor, The Modesto Bee, P.O. Box 5256, Modesto 95352; or dhill@modbee.com.

This story was originally published March 5, 2008 at 4:22 AM with the headline "Chains battle for hot Modesto intersection."