New deals, vacant space, shifting market for liquor define current restaurant market

Feb. 9, 2026

The day the former Railbirds Sports Bar went on the market, Ryan Tysdal reached out to the eventual new tenant.

Less than four months later, the space at 2310 S. Marion Road is set to become Santo Tequila, a concept from prolific restaurateur Reyes Aranda.

Aranda, who also owns La Plaza Fiesta and La Cantina in Sioux Falls, has Santo Tequila in Watertown.

“He made an offer immediately and struck a deal,” said Tysdal, vice president of commercial real estate at Van Buskirk Cos. “I think he’ll do well there because there’s virtually no Mexican restaurants in that pocket of the city at all.”

His colleague, listing broker Autumn Kaufhold, estimates that a half-dozen groups looked at the space.

“It’s a great location,” she said. “And it’s a good thing that’s coming to this neighborhood. It’s needed. There’s a restaurant void.”

The adjacent space now becomes the next one that needs a new tenant. The Railbirds off-track betting facility closed there a couple of months after the sports bar.

The contrast reflects the market as a whole — as one space fills, another becomes vacant. Across Sioux Falls, the restaurant industry doesn’t lend itself to a clear narrative as the year begins.

Some larger spaces have been on the market for more than a year. Liquor licenses, once an intensely sought-after commodity, now are more available. Other restaurateurs have put their businesses up for sale. But still, new players are entering the market, and spaces are getting filled.

Tilted Trophy time

If all goes well, March will bring an opening day for the first Tilted Trophy restaurant in Sioux Falls — a new bar and grill concept from the owners of Lucky’s.

Its first location will be in a retail center at 26th Street and Marion Road.

“It’s coming along great. I’m really excited about the progress,” co-owner Kevin Tupy said. “We’re a recreational sports bar with an arcade that serves cold beer and great food at reasonable prices.”

The menu will be focused on wings, wraps and pizza, although there will be appetizers and entrees too.

“Getting into the restaurant business was a learning curve, but we’ve learned and made a lot of tweaks, and people are really embracing them,” Tupy said.

Once the first location is open, construction will start near 41st Street and Veterans Parkway on the second Tilted Trophy near Harmodon Park at 5701 E. 41st St.

“We’re talking about having a rooftop deck that overlooks the ball diamonds,” Tupy said. “It would be a one-of-a-kind location in the city.”

The plan is to offer green space where people can bring chairs and listen to music, he added.

Inside, there will be arcade games for all ages.

“People are still searching for good food and entertainment at a reasonable price,” Tupy said. “I think the market is starving for high-quality places, establishments to bring their family.”

Space sits

The largest restaurant spaces on the market are proving to be the toughest to fill.

Let It Fly closed at The Bridges at 57th in late 2024, and while various potential tenants have looked at it, nothing has been inked yet.

“We’ve got a 9,400-square-foot restaurant, and most new restaurants are 5,000 to 6,000 square feet and prefer to stay there,” listing broker Scott Blount of Lloyd Cos. said. “That’s certainly trending because of the business itself. The restaurant business has been hit hard on the service level.”

It also has become more costly to dine out, he added.

“It’s kind of a vicious cycle,” he continued. Prices go up, people dine out less, and restaurants sometimes raise prices even more to compensate for lost revenue.

“People have a huge misconception about restaurants’ (margins),” Blount said. “There’s not a lot of wiggle room. And the cost to build from the ground up is cost-prohibitive for some restaurants.”

Increasingly, so is the cost of a liquor license. In the city’s most recent auction for liquor licenses of which there were four, Tilted Trophy offered winning bids of $406,000 and $386,000. Today, Blount knows of someone with a license for sale for about $400,000, and the interest hasn’t been there yet, he said.

“Ten years ago, if you had a liquor license available, I could make two calls and sell it immediately, and it’s just changed,” he said.

Restaurateurs have told him that fewer people consuming alcohol and others cutting back have made the rate of return longer, he added.

Blount also has the former Casa del Rey building on the market and the Titans Tavern building in Tea. A deal is close to being ready forthe former Chuck E. Cheese space on Louise Avenue.

Other available restaurant real estate includes a former Caribou Coffee at 31st Street and Minnesota Avenue.

“The interest has been good,” Tysdal said. “There’s not a lot of drive-thru endcaps. We’ve had a handful of showings and legitimate interest.”

The east-side Fazoli’s remains open but also is on the market.

“I’ve got some interest,” listing broker Marcus Mahlen at NAI Sioux Falls said. “The Chick-fil-A opening next door is causing nationals to lock in on that corridor, so that opens a lot of doors.”

Downtown, Ron Nelson of Nelson Commercial Real Estate is preparing to market the former Glacial Lakes Distillery & Brewhouse space at 200 S. Main Ave., which he originally leased to the business.

“There’s interest,” he said. “You learn in this business not to go into anything with preconceived expectations, because when you do, the market proves you wrong. Restaurant, bar, things we haven’t even thought of are all on the table.”

Restaurants for sale

Other restaurateurs are hoping new owners emerge to take over their businesses.

Intoxibakes and Candy Cloud Factory, which share a space at 701 N. Phillips Ave. at The Cascade, are on the market.

“We’ve had a couple bites,” co-owner Josie Layton said. “If we don’t sell, we plan on staying open, so we’re just seeing how things go.”

She and her co-owner have young children, “and we just already know we’re not going to be able to be here as much as we would like, so that’s why we’re trying to sell it and see what happens,” Layton said.

Interested buyers can contact intoxibakes@gmail.com.

In Harrisburg, Kasey Iverson is hoping to find the next owner of a B&G Milkyway location. He also owns the stores in Brandon and at 721 S. Sycamore Ave. in Sioux Falls.

“We want to go back down to the two, and we’re excited to sell this because we own the land and building for the location, so we’re just selling the franchise portion,” he said. “It’s growing like crazy out there. I think the store will do well. We just are getting strapped a little thin, and I don’t want to get burned out.”

If a buyer doesn’t emerge, the location won’t open for the season, he said.

“Having two kind of eats up all our time,” Iverson said. “I don’t think people understand how much work goes into those businesses. I think we might have to just let it sit idle, but if we can get somebody that’s excited in there and get them all trained up, I think they would crush it.”

The location is listed through Murphy Business.

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