Home Depot nails down diner deal; retailer takes restaurant plunge

Retailer takes restaurant plunge

ATLANTA -- In a further sanding away of the lines between types of retail, Home Depot customers will soon be able to buy Big Macs and Blimpie sandwiches along with hammers and paint at a select number of the home-improvement stores.

Home Depot Inc., a 231-unit retail chain based here, recently announced that in the fall it would start selling several branded products through a new food court concept called Depot Diner in 16 stores in its Atlanta, Los Angeles, New York City and southern Florida regions.

Depot Diners will be managed through joint ventures with Morrison's Hospitality Group and McDonald's Corp., and the initial test will include branded products from competitors Blimpie International, Nathan's Famous, Pizza Hut, Freshens Yogurt--and burger rivals McDonald's and Burger King.

The announcement puts Home Depot on the growing list of retailers seeking ways to get a leg up on competitors by offering customers more convenient and comprehensive shopping. Wal-Mart, Kmart and Caldor's now offer branded foodservice as well.

"The primary objective of the Depot Diners is to provide an extra convenience for our customers and employees," said Bernard Marcus, Home Depot's chairman and chief executive. "It is a logical extension of our overall service commitment."

Depot Diners will take up 1,200 square feet at the front of the home-repair stores and will operate during normal store hours. Branded concepts available for both takeout and sitdown will vary by market, as will management companies. The first Depot Diner is expected to open in the Atlanta market in October, according to Home Depot officials.

Mobile, Ala.-based Morrison's Hospitality Group, the contract-feeding division of Morrison Restaurants Inc., will manage several of the Depot Diners.

"We see Home Depot as our client," said I.V. Mashburn, MHG senior vice president. "It's not any different from an agreement with a university or a hospital. We're working for them and with them. They're making the decisions as to the space and the brands."

MHG entered a similar agreement with the 25-unit, Phoenix-based Smitty's Super Valu Inc. chain last fall. The two partners are still testing different brands in different stores, Mashburn said.

"We're optimistic that the non-traditional market made up of grocery stores, Home Depots, Wal-Marts and Kmarts has opportunity for us," he said.

Analysts agree. Such unions build on the management relationships contract feeders have created in recent years through branding in their cafeterias, ballparks and travel plazas and create a new source of revenue.

"What they're doing is trying to bring their expertise into places where people are interested in dining," said Craig T. Weichmann, managing director at Morgan Keegan in Memphis. "Obviously here they have someone else's facilities, so there are no large capital costs. That's the beauty of a food court."

The difficulty with such concepts lies in execution -- finding the right brand mix and generating adequate sales volumes so everybody wins. But foodservice operators are willing to gamble in the search for new non-traditional venues.

"We're pursuing it because it's a new opportunity," said Jane Hulbert, a McDonald's spokeswoman. "We're looking at another way to serve customers."

McDonald's will operate four of the new Home Depot locations and offer basic menu items as well as hot dogs and ice cream.

The fast-food giant entered its first retail alliance with Wal-Mart in January and will have products in several dozen Wal-Marts by summer's end, she added.

Other similar marriages include PepsiCo's Taco Bell and Pizza Hut divisions and Wal-Mart, Nathan's Famous hot-dogs and Calder's and Little Caesars and Kmart.

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