Independent Restaurants Decline
CHICAGO ─ According to a recent survey, the number of independent restaurant outlets in the United States dropped by three percent compared to a year ago. That shrinkage brought total U.S. restaurant outlets down by one percent to 630,511 units.
The total restaurant count decrease was offset by a one percent increase in chain restaurant units. Fast casual chain units increased by 7 percent, based on NPD's Spring 2015 census of U.S. commercial restaurant locations compiled in the spring and fall each year, which includes restaurants open as of March 31, 2015.
The drop in independent restaurants was concentrated in the full service segment, which includes casual dining, midscale/family dining, and fine dining. Full service independent units were down 3 percent while quick service independent units remained stable.
The overall decline in restaurant counts is a reflection of the stalled traffic growth experienced by the foodservice industry over the past several years. Independent traffic, quick service hamburger, and full service restaurant visit declines, particularly at midscale/family dining restaurants, are contributing to industry traffic not growing. Visits to total restaurants were flat in the year ending May 2015 compared to same period prior year, according to NPD's ongoing foodservice market research, CREST. Over a five year period, traffic has declined by 3 percent at quick service hamburger chain restaurants and at midscale/family dining restaurants (includes hotel midscale restaurants), respectively, and by 2 percent at independent restaurants. Quick service restaurants, which represent 79 percent of total industry traffic, were up 1 percent and casual dining restaurants were flat after several years of decline in the year ending May 2015 period compared to year ago.
"It's a tough road for independent restaurants particularly in a down or even 'soft' economic climate," said Greg Starzynski, director- product management, NPD Foodservice. "Independent operators do not have the resources of a chain to sustain themselves in slower times."
Fear gone amuck
<p>Visitor writes: "I am not sure I buy the basic argument. I have divested myself of my entire portfolio restaurants, not because of declining guest checks...but simply because of the government regulatory environment"</p>
<p>You have an error. It isn't that GUEST CHECKS are down in the report but rather that restaurants have had flat TRAFFIC. The article stated: "The overall decline in restaurant counts is a reflection of the stalled traffic growth experienced by the foodservice industry"</p>
<p>Most of the food researchers have been telling restaurateurs that traffic has been soft, fast casual being one exception. The law of supply and demand says less costumer demand (traffic), then less restaurants (supply).</p>
<p>Visitor writes: "this ridiculous push for a $15 minimum wage etc is the reason many independents have ceased operations and redeployed capital"</p>
<p>I wasn't aware that there is anywhere in the country right now that has mandatory $15 minimum wage. I thought parts of Los Angeles will have $15 by 2020. Seattle in 2017. No?</p>
<p>People divest themselves of businesses for all sorts of reasons. If someone in Dallas divests himself of his businesses because of fear that the federal government is coming to regulate and the possibility that there is a possibility that a federal $15 minimum wage might come in a few years, well, that's his problem. One of the strange things I've seen from the last Recession is that some people have acted dramatically and irrationally out of fear that the world is coming to an end. It didn't. I know an intelligent, well-educated small business owner who panicked. He sold everything at the wrong time, when the Recession hit its bottom, because he thought the United States and its economy would cease to exist tomorrow. We were all about to live Mad Max style.</p>
<p>We managed to come out of it.</p>
<p>Keep your cool. If you are a lucky one with restaurants that have rising traffic as well as checks for the last few years, keep on going. Something is going right.</p>
I don't buy it
"Successful Indys tend to be shrewd people of business, your average franchisee is sold a b o zo concept"
Interesting theory. Do you have any proof to support your assumptions?
It is all based on my
It is all based on my experience. But read what I wrote carefully. The key word was successful and being equated to shrewd. I really do not know any successful small business owners who were successful through dumb luck or the law of large numbers. I do know a number of zees who call themselves successful who I think are successful through sheer dumb luck though. It has to do with the ability of a franchise to get an A location over an indy. However I also know a number of very shrewd zees.
My other observation is that in general franchises are sold. The sales process is very well defined and regimented. Indys start on their own and create their own reality, Zees are buying into a reality that was manufactured to look good to them without regard to the actual merit.
<p>BROAD STROKE VISITOR: "I really do not know any successful small business owners who were successful through dumb luck or the law of large numbers."</p>
<p>I do. I remember my father's first partner. He struck oil on his family's plot of land in Texas. Sadly, the harder the millionaire worked after money hit his family, he just couldn't create profitable businesses (in this case, independent retail outlets) elsewhere with his oil money. I know many business founders like that who were at the right place at the right time but who never managed to replicate their "shrewed" money-making magic elsewhere. I know a naive middle-school drop out, who drifted from one failed project to the next. He eventually founded a major American brand. Or, a shrewed rocket engineer, who worked 16 hour days since he was 10, fail at his attempts. Don't you?</p>
<p>Luck is way under appreciated.</p>
Real top reasons people become entrepreneurs
BROAD STROKE VISITOR: "Zees are buying into a reality that was manufactured to look good to them without regard to the actual merit."
Independent restaurateurs do the same thing. They buy into a dream. Here are a few reasons why restaurateur entrepreneurs start their independent restaurants:
1. Man my chicken tastes good. Others must like it!
2. I was just fired. I gotta do something to make money but no one else will have me.
3. I can't believe my nincompoop of a boss. I have to tie his shoes for him so that he can walk. If he can own 7 restaurants, I can.
4. I love the smell of fresh coffee in the morning. Gotta surround myself with some of that.
5. What am I going to do with my life? Nothing's working. I gotta do something. Hey, I can be my own boss at this here restaurant I start up.
6. Go back to school? Are you nuts?
Real top reason #7
#7. If I own my own bar, I get endless supply of complimentary beer? Then I'm starting up a bar!
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I am not sure I buy the basic
I am not sure I buy the basic argument. I have divested myself of my entire portfolio restaurants, not because of declining guest checks (they actually were up overall) but simply because of the government regulatory environment. You try and only hire those legally eligible to work here and/or try and favor citizens over visa workers and you get threatened with discrimination suit. Health insurance, this ridiculous push for a $15 minimum wage etc is the reason many independents have ceased operations and redeployed capital. I sold a few units but repurposed the ones where I owned the real estate.
The advantage independents have always had is ease of exit. Indys are not penalized by FA that demand royalties for the duration of the contract. My view is many are voting with their feet due to the regulatory and cultural environment of entitlement of unskilled workers. Successful Indys tend to be shrewd people of business, your average franchisee is sold a b o zo concept by a professional sales team. That is likely why you see growth in the franchise space, people are simply being fleeced by con men.