Who’s Booming, Who’s Not?
- Well-capitalized large chains like McDonald’s, Chipotle and Domino’s are booming
- Your neighborhood independent restaurant isn’t
The Covid crisis created a Big Divide in the Restaurant Industry
The coronavirus pandemic is splitting the restaurant industry in two. Big, well capitalized chains like Chipotle Mexican Grill Inc. and Domino’s Pizza Inc. are gaining customers and adding stores while tens of thousands of local eateries go bust.
Larger operators generally have the advantages of more capital, more leverage on lease terms, more physical space, more geographic flexibility and prior expertise with drive-throughs, carryout and delivery.
A similarly uneven recovery is unfolding across the business world as big firms have tended to fare far better during the pandemic than small rivals. In the retail world, bigger chains like Walmart Inc. and Target Corp. are posting strong sales while many small shops struggle to stay open.
Chain Reaction
Smaller chains and independents often use local farms for supplies including organic foods.
As independents struggle so does the local specialty farm.
The big chains can get a break or extension from creditors.
Good luck to the locals once Pandemic relief expires (and that happened at the beginning of September).
Mish
Much of this is due to school age children being at home instead of school. Parents have to feed them and no school age kid wants food from a fancy restaurant. They want McDonalds and it’s an easy and cheap solution for the parents.
Easy. Those that are listed in the stock market or owned by private equity vs those that are not. Politicians and insiders can’t front run and inside trade if they aren’t in the market.
I can only do so much for the small businesses if they can’t help themselves. Their enemy is big FAT target.
I feel bad for the restaurantuers and for the country that will lose any gastronomic identity other than a few large chains like Olive Garden and to go /delivery places. Most of the time I will not even consider delivery food, I read an article last year that said 65% of delivery drivers admit to helping themselves to food from orders.
And delivery adds a lot to the cost one way or the other. It is also not good for the environment.
Restaurants will go under, including some big chains because they operate on such a slender margin any disrution will close them, the only way most will be able to reopen is with huge price increases and that will get them by for months, but eventually those increases will do the same thing as Covid in keeping people away.
Bigger chains can go on longer on borrowed money and retained earnings, but eventually they too will have to price themselves out of business. In some locations eventually a restaurant or a few will spring back up like Las Vegas, DC, New York, after Covid, when they are once again operating hotels at good capacity, because where you have hotels you have a captive set of guests that have no cooking ability, but again these hotels may also be pricing themselves out of business as well. Remember that the segment of the population that can afford huge price increases is limited to 10% of us, the other 90% are quite to very price sensitive.
Restaurants are the new factories. Essentially they have been factories assembling processed foods. Just like factories went out of business, restaurants will too. The problem is that the middle class is dead, so restaurants either have to be cheap (taco bell, burger king, mcd, chipotle, etc.) or high end (pick your favorite $20 personal pizza/pasta restaurant that caters to the uber wealthy). The rest are pretty much toast because the economics doesn’t make sense anymore given the cost of real-estate and the % of people that can afford to eat there.
I cannot disagree. And when traveling you get nailed by high prices you would never voluntarily have paid but still need to eat, like the time I paid $16 for 3 TINY “street tacos” in the LA airport en route to Australia. These things were ridiculous, two bites each. With a half pint of beer and tax/tip the tab was like $26.50. You know when you leave a restaurant hungry after paying as if it were movie theater popcorn with thousands of percent markup and feeling utterly screwed. You want to swaer you will never eat there again but of course you never will because how often do you pass through LAX? Well those very high captive pricing experiences just cut into my dining out budget when I get home, I might not go out to eat for months to make up for it. Middle class and lower have a budget, we simply cannot spend unlimited sums the way the wealthy can.
And there is another problem. Indeed, some chains do little more than assembly. The food is pre-made in a factory, and frozen. The restaurant heats it and puts it on a plate, and then cooks some of the addons, such as fries, or makes things like salads.
Interesting how there is no longer any mention as the small businesses as the “backbone of our country” Even the eateries in the ritzy sections of cities are becoming bland generic establishments. We are witnessing a speeding up of the homogenizing of much of if not all of our culture.
Also, every mall in every city looks exactly the same. The local stores used to vary a lot, but there are very few anymore.
“Also, every mall in every city looks exactly the same.”
Closed?
Covid didn’t create trends, but it definitely accelerated them. The small restaurants will be hit again when the national $15 minimum wage kicks in. The big chains can automate, and eliminate clerks and perhaps cooks, but the the small guys can do nothing but raise prices and/or close.
Takes about 3-5 years for a “restaurant” to turn a profit. 60% fail in the first year and 80% before their fifth anniversary. It’s always been a tough business even without Covid
And that is with a skilled/experienced operator at the helm. Lots of folks out there that go “hey, starting a restaurant/pub sounds like fun” with no prior experience other than being a patron.
It’s also a matter of scale. McDonalds can scale hours and staffing to demand, and has the familiarity to supply the bike brigade with eat out food when they’re not allowed to have anyone dine inside. If you have a small staff and don’t have the bike brigade waiting outside, it will be harder to scale your products.
Fast food is closer to break even or turn a profit simply by take-out and delivery. True restaurants need to fill up tables and take out is not the main source of revenue. Completely different business model
Yeah but just because they sell a product that technically can be eaten does not make them restaurants in my opinion, more like feeding stations that charge money. The irony is they may be the only ones to survive in the end because as nasty as they are they will be the best that most can afford.
I know the BLS and Fed say there is no inflation and are about to prove it with our annual COLA increases, but sit down restaurants with actual chefs and menus are mostly going away. Here in Florida the governor has had them all reopen at full capacity as if Covid never happened. But, that does not mean people are breaking down their doors to get in and have a side of Covid with their sushi or chicken Kiev.
And when I see prices like just plain old hamburger which I was buying at $2.49 to $2.79 last December now at $8.99 and a 16 ounce package of bacon now at $11 up from about $3.69 I say it is only a matter of time till it will be all anyone in the 90% can afford to cook plain meals at home.
A few restaurants will scrape by with little or no profit by cutting staff and spreading out dining areas, limiting menu options, but slowly those will shutter as they will have hung on as long as they can.
The only way this does not happen is if they come up with some miracle vaccine that imparts permanent immunity to Covid really soon. But you know, fast food is EVERYWHERE, chain restaraunts had filled even small niches, we could lose half of them and the seating capacity of the rest would still be more than enough. With independent places serving high quality professional menus being so expensive they were only for special occassions for the middle class and better. The chains were and are a curse, I have been outside the country and see what foreigners mean when they say Americans will put anything in their mouths and call it food. Good riddence to most “restaurants.”
Just waiting for Trump to commit to forgive all traffic tickets if he is reelected.
First cuppa at 5 in the morning; you made me laugh. TY. That hasn’t happened in a long time. Look forward to what other clever bon mots you can contribute Roger_Ramjet, what an unuasual handle.
I hardly call chipotle, mcdonalds and dominoes restaurants. seems what’s being described is fast food industry is run by corporations where as restaurants are typically not.
It’s fitting, we’ve been heavily favoring large corps over small business for decades. Recent Fed policy has kicked this trend into overdrive.
Look at the bright side, at least we can all get rich selling real estate to each other while the Fed inflates asset prices with cheap money!
Same old story. The smaller high quality guys die out and the crummy chains do okay.
If Bartlett’s goes bust, I don’t know what I’m gonna do. It’ll be like losing family.
Ferenzy’s and Luciano’s here. I will not go to any of those corporate chains. Have you ever been to Applebees and eaten their “riblets”? – aka hand grenaded pork fragments. That’s why.
The only chain restaurant I like here is in Spring Hill more than 20 miles from my house, The Bonefish Grill. And that is mostly because they serve a warm ciabbata bread with a pesto olive oil dipping sauce I have never quite been able to duplicate at home, once I crack that I will cook my own fish. By the way, never order the special in a fish restaurant, it only goes on special when it is about an hour away from going into the pig bin. Chain places to me always feel like eating in an airport lounge that is really just a wide spot in the concourse. Just a little upscale of a food court in a mall. They have their uses but not often.
For us at ages 72/63, dining is a risky experience.
We have never supported chains.
We are slowly starting to eat in restaurants that have safe practices.
Didn’t the chains get dispensation from Covid by getting themselves deemed to be critical infrastructure?
And, since such categories were created by a large organization (state governments), one would expect the best outcome for large organizations.
Question is: When will restaurants – and food preparation generally – be fully automated?
Economists are more like storytellers than scientists
Economics is not science, that is why “serious” people disagree on basic questions.
“Economics is regarded as a social science because it uses scientific methods to build theories that can help explain the behaviour of individuals, groups and organisations”
The great Richard Feynman: Social Science is pseudoscience link to youtu.be
I should also add the Feynman interview:
You could say that the construction of a building involves or is a science, elementary or otherwise, and so you might apply a similar label to the construction that is productivity. Economics is to my view the management of that construction, which has to combine with social reality given that people are also those being managed. If it was merely study of activity it would be economology or something similar.
So these two are not compatible really, the social and mechanical facets of economy, and economists either spend their time trying to justify existing framework and their own position of management and decision-making by selling points of view that try to highlight the combined positive (your pseudo-social science and politics) , or they are for separation of the themes down to individual choice, which is more Austrian or “laissez-faire” or libertarian.
I don’t suppose anyone is able to claim they have an answer to how anything should be, but therefore we have moral guidelines to allow reasonable functioning of society, and without those we go to either more immediate reprisal as limiter or to total control. Ideally maybe you have a society that is simply respectful to others.
“Eco is a derivation of the Greek oikos, meaning an extended family unit that consists of the house, members of the family, slaves, farmland, and all property.
The oikos was run by the oldest male of the family, whose role it was to tend to agriculture and to ensure that all components of the family unit were running smoothly. Thus, eco now designates a broad, self-sustained unit, as in the terms ecology and ecosystem.
The suffix –nomy is derived from the Greek nomos, meaning management, law, or principle. Thus oikonomos, the original form of economics, meant the management of the hearth and home.”
source:altalang
In other words it is their job to make stories and paint a picture, but it isn’t science and it aims to convince acceptance of the mechanical scientific approach they do take where it comes down to straightforward calculation of productive material reward and the need for societal consent. Most people are dependent on that wider management whether they agree with it or not.