Vice president of operations/director of real estate and construction for a major restaurant chain: Hey, boss, we just found a great site for our franchisee in Big Urban City. You won't believe the potential numbers.

The boss: Yeah, where? In one of Big Urban City's suburbs?

VP: Not exactly. But it has all the demographics that fit our concept, and statistical modeling projects show it's going to be a real winner for us.

The boss: Where is it? The airport? Near some shopping mall? A college location?

VP: No. I mean it's in Big Urban City. In fact, it's in Famed Inner-City Neighborhood.

The boss: Are you kidding me? We've never opened a unit in Big Urban City, let alone in Famed Inner-City Neighborhood! Nothing has happened there in 20 years! Are you trying to drive our franchisee out of business before he gets started? Who crunched the numbers? Daffy Duck?

VP: Hey, boss, times are changing.

Though fictional, that conversation might reflect a new reality for some operators who are looking aggressively for the next good site.

What the giant burger brands, KFC, Church's Chicken and some of the major pizza chains have known for decades that money can be made in the inner city is, with increasing frequency, becoming a more broadly embraced driver of site selection.

Chain operators and an assortment of experts and professionals who help them find sites insist that suburbia still is a hotbed of development. Suburban neighborhoods remain vital to restaurant chains, largely because of the generally higher household incomes in those areas; a plentiful population of teenage and young-adult consumers and workers; better and newer roads and infrastructure; and, most important, shopping malls.

But with nearly 20 years of gentrification in old inner-city neighborhoods from Baltimore to Oakland, Calif., and with growing immigrant populations and working-class communities benefiting from government and private redevelopment programs, the great divide in discretionary income between city residents and people who live in the 'burbs has become narrower.

Mounting economic and demographic research, including findings presented by the Initiative for Inner City Development, a research firm and think tank associated with Harvard University, indicates that discretionary income in nearly 100 inner-city communities is more readily available to retailers there than in downtown business and retail districts.

Although inner-city residents might be the working poor or earning a minimum wage, they often have more than one job and live in homes with other working adults or teenagers with more than one job.

Business futurists Herman Trends Alert, answering those chains that might argue that they can't operate in inner cities because there is no business during the lunch daypart in those neighborhoods, recently reported that many large companies are opening bustling "satellite employment centers" in central-city neighborhoods.

In other words, experts say the stark and alluring demographics that divided affluent, suburban America from lower-income and working-class inner cities once making the site investment decisions of restaurant chains seem so easy and sensible are not so clear-cut these days.

Brendan Sharkey, a land-use attorney and president of AmeriZone, a Hamden, Conn.-based firm that specializes in helping restaurant franchisees surmount zoning and permitting obstacles, says he could not confirm that his clients were opening more stores in the inner city. But he says improving economics in big-city neighborhoods would influence their site selection decisions.

"Most of my clients utilize very sophisticated statistical modeling to recognize sites that will help make their franchisees successful," Sharkey says. "They look at the local population, household income, traffic counts, visibility all of that. So you come to realize in time that a franchisee that wants to open in an inner-city location has to meet the same criteria they'd have to satisfy in a suburb.

"It's not so much about the physical infrastructure or the ethnic group of the neighborhood. It's about [answering the question] 'Can you make money?' Does the potential location meet the basic criteria of the chain's modeling to be successful?"

Retail experts and retail stock analysts say one of the main reasons they expect restaurant chains to grow in inner cities in coming years is that they expect a sharp slowdown in suburban shopping-mall development which began to happen several years ago, causing some malls to close.

The trends that fuel those predictions are mergers and consolidations between giant retailers. Last year's marriage of Sears and Kmart and the recently disclosed merger plans of Federated Department Stores and May Department Stores are expected to lead to massive layoffs. Employees will lose their jobs as the new parent companies close popular branches of the Bloomingdale's, Lord & Taylor or Sears chains in order to cut payroll costs, reduce cross-brand cannibalization and dump costly leases.

Meanwhile, a relatively new kind of shopping mall, called a neighborhood or lifestyle center, that is designed exclusively for urban environments sometimes with green spaces, residential units and professional offices is dotting central-city areas around the country and boasting leaseholds by leading dinnerhouse brands.

IHOP, Chuck E. Cheese's, Wingstop, Boulder Creek Steakhouse and Applebee's are among the major chains that are making U-turns from suburbs to the inner city some for the first time in both stand-alone locations and in neighborhood shopping centers as a result of urban revivals.

Perhaps no other brand is enjoying its urban-pioneering effort more than IHOP, which has a unit in what used to be the much-challenged Harlem neighborhood of New York City. The franchised restaurant, which has been open less than a year and runs 24 hours a day Thursday through Monday, is on track to become one of the highest-grossing units in the chain's history, IHOP says. Despite the success of the branch, it remains virtually competitor-free and stands out as the only full-service restaurant chain outlet in a community of some 480,000 people.

Many fast feeders are bullish on the inner city, too.

"Captain D's would not have let me open this place if I couldn't show them that this site hits the customer demographic we need to be profitable," says new Captain D's franchisee Paul Hubbard about the opening of his first quick-service seafood outlet two weeks ago in a stable, working-class section of Toledo, Ohio.

Franchisors "don't want to see you fail either because it reflects badly on them," Hubbard continues. "And the banks and the lending institutions won't back you up if they have their doubts."

But Hubbard's greatest challenge may be yet to come. Hubbard a onetime Detroit mayoral candidate, the former head of Toledo's office of economic development and a veteran Church's Chicken franchisee intends to open eight more Captain D's in the near future, two of which would be in Toledo's Central City, a socioeconomically tough, black, inner-city stronghold.

"People in Central City are looking for nice eating places because there have not been any for a long time," he says, noting that some of his Church's Chicken outlets already are doing well there.

"Other chains have shied away from Central City because of employee theft, mainly," Hubbard says. "But I believe if you have the right controls and hire the right people, employee theft will be the least of your problems."

With a separate group of partners Hubbard intends to open a Captain D's in a new neighborhood mall in a resurgent inner-city neighborhood of Detroit later this year.

Vincent McCann, co-founder and chief operating officer of Boulder Creek Steakhouse, an 11-unit budget-steakhouse chain that is considered a growth vehicle for the 900-unit Sbarro pizza chain, says his two best units are in inner-city locations in New York City.

The units are in formerly economically challenged communities in Queens and Brooklyn and have average annual sales of more than $4 million, versus the chain's average of $3.5 million.

McCann says he particularly is proud of the Brooklyn unit, located inside the 2-year-old Gateway Center, a huge, inner-city shopping mall anchored by Home Depot and Marshall's stores in Brooklyn's Canarsie section.

An out-of-the-way neighborhood on the easternmost edge of Brooklyn near the Atlantic Ocean, Canarsie had been a racially troubled, economically deprived, predominantly African-American community for most of its recent history.

But all of that changed with the arrival of the Gateway Center.

With Boulder Creek Steakhouse's $20 check average, the Gateway Center branch is performing well despite the recent mall debuts of Olive Garden and Red Lobster, McCann says. He adds that his company's initial research suggested that 85 percent of the restaurant's business would come from outside of the neighborhood, from Queens and Long Island.

But it is turning out that 85 percent of the traffic is coming from the black residents who live nearby, he says.

Inner-city neighborhoods, for all their potential, however, are not always a sure thing, even for chains that specialize in competing in residential, urban enclaves.

Wes Jablonski, executive vice president of Wingstop Restaurants Inc., the Garland, Texas-based franchisor of 225-units that specialize in chicken wings and other poultry products, says a unit recently closed in an inner-city Houston neighborhood that was predominantly Mexican-American.

Even with a $12 check average for a family-sized portion, Jablonski says, traffic patterns were not strong enough to keep the 2-year-old outlet viable.

"We play well with all ethnic groups, but in this case, we think, as first-generation immigrants, they had this tradition of sending their extra cash back home," he says. "They liked us a lot, but we needed their discretionary dollars. You can't run these things without money."

Jablonski says the company has just started using the statistical modeling services of a company called Quantitative Analysis, Hoboken, N.J.-based retail and demographic statisticians who use the historic performance of successful units to fashion a model for identifying good sites.

From such a model Wingstop learned that its franchisees need to locate in neighborhoods where the median household income exceeds $50,000 in order to turn a profit, he points out.

"When we compete in neighborhoods where the median household income is $50,000, 100 percent of the restaurants did $10,000 a week," he reports. "If the median household income fell below that, only 58 percent did $10,000 a week.

"We also know we can't operate in places where 10 percent of the population within a mile of the unit is below the poverty line [$18,000 in annual income for a family of four]."

Those are the kinds of numbers and scenarios that may make some chains remain forever shy about dealing in the inner city, says Paul Fetscher, owner of Great American Brokerage, a commercial-retail real-estate brokerage and consulting company based in Long Beach, Long Island, N.Y.

Fetscher says there are some brands whose business models forever may preclude them from opening in inner-city neighborhoods, even if those areas are rebounding.

"I don't think we will ever see a Cheesecake Factory at 145th and Lennox [in Harlem]," he says. "You'll see one in Piccadilly Circle before you'll see one there."

But Fetscher says outdated assumptions have both positive and negative effects for those companies looking to open in the inner city.

"There are no longer any bad neighborhoods, at least as far as Manhattan is concerned, and things have become very, very blurred price- and income-wise between the suburbs and the city," he says. "Wall Street is always going to demand growth, and with chains already paying $250,000 an acre along the I-95 corridor to Boston, doing business in the inner city is going to look better and better to many."

Dennis Lombardi, executive vice president of Columbus, Ohio-based W.D. Partners, an international retail design and development firm, says chain restaurant expansion to inner-city developments in working-class neighborhoods is yet another example of national chains taking their leads from independent operators.

Lombardi, a former trend spotter for the foodservice consulting firm Technomic Inc., says local independent operators are drawn to such areas by tax breaks for developers and by yuppies' acquisitions of historic fixer-upper homes in once-blighted neighborhoods or occupancy in new condos in once-downtrodden enclaves. And the success such independent restaurants find in those areas then attracts the chains to make similar moves, he says.

At the same time, local residents who remain in an inner-city area have found their incomes rising in recent years, leading to an exponential increase in aggregate demand for restaurants in urban centers, Lombardi explains.

"No one invests in these kinds of neighborhoods if they don't have the expectation that the neighborhood is on an upswing," Lombardi adds. "And no one stays if the revenues are not there to turn a profit, even if you have the labor advantage of having your workers living nearby."

However, he points out, "there is no doubt that suburban growth has slowed down considerably since the 1970s. As the baby boomers start retiring and start rethinking their expenditure patterns, will they eat less, or will they eat at places that are less costly? I think we're going to see a new category come out of the inner city in the coming years called 'family-casual.' "

Despite the projections that restaurant growth is on the upswing in working-class, inner-city neighborhoods, Anne Habiby, co-director of the Initiative for Inner City Development, says table service dinnerhouse brands have been the most sluggish to mine the potential of the inner city, unlike other segments of retailing.

But, she says, the dinnerhouse brands that are avoiding inner-city locations do so at their peril.

"What is so surprising when you look at all the data is that of all the retail categories, [dinnerhouses] are the only ones that are undersupplied in relation to consumer demand," she asserts. "A question I'd ask is, 'If you roll the tape forward 20 to 30 years from now, when whites are a minority, when in fact all minorities become the majority, how are these restaurant chains going to make it, if they don't now figure out how to serve the communities of the future?' "