Are Modular Builds Viable for Retail and Restaurant Use?

Modular construction is no longer a niche solution reserved for temporary classrooms or remote work camps. In North America, modular’s share of new construction starts has grown materially since the mid‑2010s, and the sector has built enough volume to support specialized factories, standardized processes, and (in some jurisdictions) more mature regulatory pathways. At the same time, retail and restaurant developers are precisely the kind of customers modular should serve well: they care about repeatability, speed-to-open, predictable budgets, and minimizing disruption to adjacent tenants and neighbors.

So is it viable? Yes—but conditionally. Modular can be a strong fit for many retail and restaurant projects, especially “prototype-driven” rollouts (pads, drive‑thrus, small-box retail, convenience formats) where the value of opening earlier is high and the design can be productized across multiple sites. The core trade is straightforward: you’re buying schedule certainty and parallelized production by committing earlier to design decisions, logistics planning, and a more manufacturing-like procurement process.

What modular means in commercial space

“Modular” is often used loosely, but for retail/restaurant feasibility it helps to separate three approaches that sit on a spectrum of industrialization:

Permanent modular construction (PMC) uses factory-built modules intended to be installed on permanent foundations and perform like conventional buildings. In most regulatory regimes, the end product is expected to meet the same building codes and standards as site-built construction, even though the inspection pathway differs (with more work verified in the factory).

Relocatable modular is designed to be moved and reinstalled (sometimes multiple times). This can matter for retail because relocatability creates residual value options: redeploy, resell, or “swing space” during renovations—though zoning and permitting still govern where it can go.

Panelized/componentized off-site shifts parts of the building (walls, MEP-integrated panels, pods) to factories while leaving more assembly and integration to the site team. For restaurants, this can be attractive when you want schedule gains without committing to full volumetric transport constraints.

Standards and code infrastructure have also matured. In the U.S., for example, and jointly developed ANSI-approved standards that address planning/design/fabrication/assembly (ICC/MBI 1200), inspection and regulatory compliance (ICC/MBI 1205), and even MEP/energy/water considerations for off-site work (ICC/MBI 1210). That matters operationally: it reduces the “one-off novelty factor” that can slow approvals, particularly when a chain is scaling across multiple jurisdictions.

From a market-traction perspective, the sector is large enough to be investable and to support specialization. summarizes a trend of modular gaining share in North America (from 2.1% of starts in 2015 to 6.64% in 2023, citing MBI). Meanwhile, MBI’s 2025 industry highlights describe a U.S. modular market reaching about $20.3B in 2024 (about 5.1% of total construction activity across key segments), with forecasts extending growth into the late 2020s. Even if those figures are not retail-specific, they indicate modular is not a fringe method—there is a real supply-side ecosystem to work with.

Where timeline savings really come from

Timeline is the headline advantage because modular changes the critical path. Instead of waiting for foundations, framing, MEP rough-in, close-in inspections, drywall, and finishes to happen sequentially on site, modular allows substantial “building completion” to occur in parallel with site development.

The reliable part of the savings: parallelization and factory conditions

Across multiple bodies of research and synthesis reports, schedule reductions commonly fall in the 20–50% range under the right conditions. reports that modular projects have “consistently” been completed 20–50% faster than traditional onsite builds, with the mechanism driven by the overlap of site and factory work. similarly cites MBI analysis indicating schedules can be compressed about 30–50% because of simultaneous site development and factory construction. A –funded field-study summary also characterizes off-site approaches as delivering ≥40% shorter construction schedules in the studied contexts.

Those are broad benchmarks; what matters for your specific retail/restaurant program is which activities are moved off the jobsite and how much “pre-manufactured value” you can realistically achieve. Vendor case studies (not independent research, but still informative as concrete examples) illustrate what high PMV can look like:

• A modular quick-serve store program described modules being set with about 85% of the building already completed in the factory, including mechanical, electrical, and plumbing (MEP).

• describes a modular restaurant being craned onto prepared foundations within hours, delivered with major equipment and finishes pre-installed, and opening less than two weeks later.

• reports completing a modular restaurant in in six weeks end-to-end, attributing speed to a two-week shell install and >80% PMV.

These examples are deliberately “speed stories,” but they demonstrate a core point lenders often care about: the schedule variance narrows when more work occurs in a controlled environment. Factory production reduces weather disruptions, allows tighter sequencing, and supports repeatable QA/QC.

The part modular doesn’t automatically fix: permitting, utilities, and long-lead equipment

Retail and restaurant timelines are not only “construction.” They include site acquisition, landlord approvals (for in-line retail), zoning, permitting, utility upgrades, and equipment procurement. Modular primarily accelerates the physical build—it does not eliminate external gating items.

Two timeline realities show up repeatedly in research:

1. Design and decisions move earlier (and can take longer). McKinsey notes modular projects can take longer in design because the approach requires upfront coordination and earlier finalization of details (interfaces, tolerances, sequencing) to enable manufacturing.

2. Permitting friction remains a common delay point. The DOE field-study summary explicitly flags permitting delays as common for modular, even while construction time shortens.

For restaurants in particular, there’s also a practical constraint: the “core building” can arrive quickly, but inspections and commissioning (hood/fire suppression, grease management, health inspections, utility turn-ons, occupancy) can still dominate the opening date depending on jurisdiction and utility responsiveness. That’s not a fault of modular—it’s simply where the true bottlenecks sit for many food-service openings.

Implication: the best modular ROI cases are usually those where you can both shorten the build cycle and de-risk opening delays by standardizing the permitting package, MEP design, and equipment sets across a rollout pipeline.

Cost tradeoffs and why the cheapest option is not always modular

Cost economics are more nuanced than “modular is cheaper.” High-quality sources consistently frame cost outcomes as conditional—dependent on repetition, labor market conditions, logistics, factory utilization, and project governance.

Hard costs can go down, stay flat, or go up

McKinsey’s 2019 report frames the potential as meaningful—citing up to ~20% cost reductions in the right environment and tradeoffs, and providing examples where hybrid 2D/3D or 3D solutions could be materially cheaper than traditional approaches (with variability by project type and context). At the same time, the same report cautions that early modular projects had a mixed track record on cost even while schedule gains were consistent.

Independent and quasi-independent studies show this spread in outcomes:

• summarizes a DOE-commissioned comparison (2020–2023) and reports modular projects finishing ~30% faster on average and delivering ~5% overall cost savings compared to site-built, driven by lower overhead and fewer markups in the projects studied.

• A DOE field-study summary slide similarly cites ~5% lower construction cost for modular in the studied set, while also highlighting modular’s higher transportation costs and facility investment requirements.

• A recent project-simulation case study (research publication) found modular saved time (13% in that modeled case) but cost more (about a 6.67% premium), attributing the premium to prefabrication, logistics, and specialized labor.

None of those are retail-specific, but the underlying drivers transfer directly to retail and restaurants:

• If you have high repetition (prototype buildings, standardized kitchen cores, repeatable fit-out kits), you can amortize the “extra” engineering and early coordination over many sites and push unit costs down.

• If you have one-off architecture (signature flagship stores, heavy site customization), the manufacturing advantage weakens and modular can become a premium solution without enough scale to pay it back.

Soft costs are often where modular wins—especially for revenue-generating sites

Even when hard costs are neutral, modular frequently improves project economics through soft-cost reduction and earlier revenue.

Soft cost savings come from shorter general conditions, less site overhead, reduced equipment rentals, and less carry on land and construction financing. A 2025 economic-viability paper (housing-focused) frames this explicitly: with an average timeline reduction around 38%, it links schedule compression to quantifiable soft-cost savings and improved NPV/IRR because income starts sooner. While the dollar example in that paper is for a large housing project, the principle is even more intuitive in retail and restaurants: a store that opens earlier can start converting fixed costs (rent, corporate overhead allocations, debt service) into cash contribution sooner.

This is why chains often prioritize modular not just as a construction method, but as a speed-to-market strategy.

Financing and cash-flow timing are a real tradeoff

Retail and restaurant developers sometimes underestimate a critical modular “cost”—not in total dollars, but in when dollars must be paid.

A major barrier identified in an NREL financing case study is the need for earlier deposits and cash commitments to reserve factory production lines and procure materials well ahead of on-site work. In that (multifamily) case study, the developer’s equity requirement was estimated to be substantially higher early in the project for modular—up to ~30% higher overall equity needs compared to site-built, with meaningful cash required months before production (line reservation and material deposits).

For retail and restaurants, this manifests as:

• earlier down payments to a manufacturer,

• less flexibility to “stretch” payments through retainage structures typical in site-built contracts,

• and a higher penalty for late design changes (which may require factory rework or scrapping partially fabricated components).

Implication for viability: modular often looks best in well-capitalized rollout programs, or where the developer can secure financing products that understand off-site cash-flow profiles. In thinly capitalized single-site deals, modular can be viable technically but uncomfortable financially.

Long-term ROI and lifecycle performance

For retail and restaurants, long-term ROI has three layers:

• Opening-date economics (earlier cash flows, reduced soft costs),

• Operating performance (maintenance, energy, durability),

• Strategic flexibility (remodel cycles, relocation/reuse, and exit value).

ROI is often dominated by opening earlier

The cleanest way to think about modular ROI for a store or restaurant is not “cost per square foot,” but NPV per calendar day.

A simplified framing looks like this:

• Incremental value of schedule savings

  
  

  = (Daily operating cash contribution × Days opened earlier)

  • (Soft costs avoided through shorter duration)

    
    

    − (Any modular premium, including logistics and factory costs)

The literature consistently supports that schedule compression is the most reliable modular advantage. And real-world restaurant examples explicitly connect speed to earlier income: Algeco’s Starbucks case states that handing over in weeks meant the site generated income sooner, supporting faster ROI (not an independent calculation, but a direct rationale given for choosing modular).

A practical, lender-style implication is that modular is economically compelling when (a) the location is high-demand/high-sales and (b) the schedule savings are real opening-date savings, not merely earlier “construction completion” while permitting or utility energization delays the opening anyway.

Quality control, defects, and operating costs

Factory construction can improve predictability and workmanship because processes are repeatable, weather exposure is reduced, and QA/QC can be embedded in production lines. The NIBS summary of a DOE study reports that installation quality of modular building envelopes “appeared to be better” than many site-built enclosures in the observed projects, even when overall post-occupancy energy use was similar.

That said, the same body of DOE-related material also points out modular-specific quality risks such as transportation and placement damage and resulting rework—meaning quality outcomes depend heavily on packaging, lifting design, transport distances, and site staging discipline.

From a restaurant’s perspective, quality translates into fewer re-open issues (leaks, cracks, HVAC imbalances) that disrupt service and erode early customer reviews. Modular can reduce those risks, but only with a mature manufacturer and tight interface management at module joints—especially for wet areas, kitchens, and grease duct routing.

Sustainability and waste can translate into cost advantage

While sustainability is not always the primary decision driver for restaurants, it can materially influence costs through waste handling, site logistics, and (in some markets) permitting or landlord requirements.

A UK WRAP case study on volumetric modular construction estimated on-site waste reduction of roughly 70–90% compared with traditional methods and described factory processes achieving very low waste rates (with extensive recycling). Academic and review literature similarly finds industrialized building methods often reduce waste substantially (a 2025 synthesis reports a median waste reduction potential of ~36.5% across industrialised building methods). Measured-project research has also reported large reductions in onsite waste for modular relative to traditional construction in studied samples.

For retail operators, lower waste and fewer deliveries can mean less disruption in constrained shopping centers and fewer neighbor complaints—an operational benefit that is hard to quantify but real in approvals and community relations.

Strategic flexibility: remodel cycles and relocatable value

Retail and restaurants remodel—often on brand-refresh cycles driven by consumer taste, operational improvements, or franchisor requirements. Modular’s relationship with remodels depends on how the building was designed:

• If the modular building is treated as a standardized product platform, remodels can be easier because systems and details are consistent across locations—spare parts, standardized wall assemblies, repeatable MEP access patterns.

• If the building is a one-off modular design, remodels can be harder because module joints and structural constraints limit “after-the-fact” reconfiguration, and some changes may require factory-level components rather than local trades.

The highest strategic upside shows up in relocatable or semi-relocatable concepts (temporary stores, swing stores during renovations, seasonal operations). This is not always viable under local planning rules, but when it is, relocatability changes the exit math: a building is no longer a pure sunk cost—it’s an asset with redeployment options.

Operational, brand, and compliance factors in retail and food service

Retail and restaurant buildings are not generic boxes. Restaurants, in particular, concentrate complex MEP systems in small footprints and operate under strict health and safety oversight. Modular is viable here, but only if you treat the project like a manufacturing program rather than a traditional subcontracting cascade.

Code compliance is “same code, different pathway”

A recurring misconception is that modular is “less regulated.” In reality, permanent modular buildings are generally expected to meet the same building codes and standards as site-built projects; what changes is the inspection sequence and who performs it (often via factory inspections and state modular programs, depending on jurisdiction).

This is one reason standards matter. ICC/MBI 1205 explicitly addresses inspection, approval, and regulatory compliance for off-site components and their assembly at the final site—including roles of state modular programs and the authority having jurisdiction (AHJ). For chains opening across many jurisdictions, this is a real enablement: when you can demonstrate repeatable compliance pathways, the “first-one pain” becomes an investment that pays back across the rollout.

Restaurants benefit from high factory completion—but must manage “interface risk”

The Domino’s modular program case explicitly highlights factory completion of MEP and a high percentage of overall completion before the building is set. This is directionally attractive for restaurants because kitchen MEP is where schedules commonly slip in conventional builds (coordination, inspections, and change orders).

But restaurants also create interface risk at a higher rate than many retail boxes:

• hood and exhaust integration,

• fire suppression coordination,

• grease duct routing and clearances,

• rooftop equipment, penetrations, and curb details,

• acoustic and vibration control,

• and drainage/sanitation detailing.

Modular can handle these, but the decisions must be locked earlier and the “prototype detail set” must be correct. McKinsey explicitly notes modular requires different design thinking to account for production efficiencies, transport/assembly constraints, and early design incorporation. The DOE summary underscores the same theme: minimal flexibility to design changes, with changes needing to be incorporated early.

Brand standards and customer experience

Retailers often worry modular will look “modular.” That is increasingly outdated: both McKinsey and industry bodies emphasize modular can produce aesthetically pleasing, sound structures using standard materials; it’s a method, not a style.

For restaurants and retail, the customer experience is heavily driven by the last 10%: finishes, lighting, signage, and the “feel” of the space. Modular is viable when the factory scope includes enough of this last-mile work to preserve speed and quality (as claimed in the Portakabin McDonald’s example where finishes and equipment were pre-installed, enabling rapid opening). If you shift too much of the final fit-out back to the site, you can lose much of the schedule advantage—and still pay for the modular system.

Decision framework and execution model

A useful way to judge modular viability for retail/restaurant is to treat it as a portfolio decision rather than a single-project novelty. The question is less “Can this store be modular?” and more “Can we operate a modular supply chain for this store concept?”

Where modular is most viable

Modular tends to be most viable when several of the following are true:

A repeatable prototype exists (or can be created) with limited site-to-site customization. This aligns with MBI and McKinsey’s emphasis on standardization/productization and with the observation that replicable plans suit chains.

The operator values speed-to-open because early revenue is material and/or competitive pressure is high. This is reflected in both broad modular analyses and the restaurant case rationales cited by suppliers.

The market has high on-site labor costs or labor scarcity, making it valuable to shift work into a controlled environment and reduce site labor exposure.

Sites are logistically constrained (tight urban infill, sensitive neighbors, limited staging). Modular can reduce on-site duration and deliveries, a benefit highlighted in the Starbucks Derby case narrative.

A pipeline is large enough to support reliable factory throughput; otherwise, you can end up paying a premium without unlocking manufacturing learning curves. The DOE field-study summary explicitly notes high fixed costs and the need for stable production flow, with the risk that modules can’t simply be stored between project cycles.

Where modular often disappoints

Modular frequently underperforms expectations when:

The project is truly one-off (custom architecture, uncertain scope, frequent late changes). Modular is less forgiving of design churn because manufacturing and transport require earlier commitment.

Approvals are highly uncertain or fragmented across jurisdictions, and the project team has not invested in repeatable permitting playbooks. Modular can still work here, but the first deployments may not realize headline schedule gains.

The site is far from the manufacturing base, making logistics and craning dominate. DOE materials highlight transportation cost and distance limitations as significant issues for volumetric modular.

Capital structure is tight and the sponsor cannot absorb earlier cash requirements (deposits, line reservations). NREL’s financing case study explains why this can be structurally challenging under conventional lending patterns.

A practical execution model for retail and restaurant programs

To make modular “work like it’s supposed to,” the execution model typically needs to change in four ways:

Manufacturer selection moves to the front. In modular, the factory is not just a subcontractor; it becomes a critical-path partner. Most of the value is created by designing around manufacturing capabilities and locking scope early.

Prototype standardization becomes a financial asset. Instead of treating each store as a mini-custom project, you build a standardized kit-of-parts and iterate it with discipline. This directly aligns with McKinsey’s “projects to products” framing.

Interface engineering is managed like a product. Your joint details, utility tie-ins, roof penetrations, and kitchen MEP approach need “version control.” That reduces rework, permitting friction, and operations surprises.

Financing and contracting must reflect off-site cash flow. If lenders and contracts assume a site-built payment curve, modular can look cash-hungry and risky even when total economics are good. NREL’s work gives a concrete explanation of why modular can require more equity earlier and why retainage structures may differ for manufacturers.

Bottom line: viability, with a clear “when”

Modular builds are viable for retail and restaurant use when the deployment is treated as a scalable operating model—prototype standardization, early decision-making, disciplined interface management, and a financing plan that matches off-site realities.

Timeline savings are the most consistently evidenced advantage, with credible synthesis and field-study materials repeatedly showing large schedule compression potential (often 20–50% in the right contexts). Restaurant and retail examples illustrate what is feasible when PMV is high and site work is prepared to receive the building quickly.

Cost tradeoffs are real: modular can deliver savings (including soft cost savings and sometimes overall cost reductions), but it can also carry premiums if logistics, customization, or early-stage immaturity dominate. Long-term ROI is typically strongest where earlier opening translates directly into earlier cash generation, and where a multi-site pipeline allows learning curves and standardization to compound over time.