The death of the American chain restaurant
The mood is anything but laid-back at America's once-mighty casual dining chains. After expanding rapidly in the 1990s, restaurants like Bennigan's, Tony Roma's, Chevys, and Friendly's are now scaling back sharply, or even going out of business entirely. So much for the "school of thought that says the restaurant business is always a good business," says Charles B. Stockdale in 24/7 Wall Street, which recently compiled data on 10 of the worst-hit chains of the last decade. Here, a guide to a dying mainstay of the American landscape:
What chain restaurants have folded?
The most recent chains to declare bankruptcy are Friendly's, which filed for Chapter 11 protection on Oct. 5 and immediately shuttered 63 locations, and Chevys Fresh Mex owner Real Mex Restaurants, which filed on Oct. 4, putting all 200 restaurants up for sale. Other chains that have gone bankrupt since the Great Recession started include: Bennigan's (2008), Bakers Square (2008), Black Angus Steakhouse (2004, 2009), Fuddruckers (2010), and Perkins-Marie Callender's (2011). In many cases, franchise locations have stayed open while corporate-owned stores closed.
Is the recession to blame?
Certainly in part. One in two Americans say they have not dined out during the previous year, according to the Census Bureau's hefty 2012 Statistical Abstract of the United States. Then there are specific recession-related woes: Black Angus and Marie Callender's, for example, were disproportionately located in areas hit particularly hard by the housing bust. But the decline of the casual-dining chain began at least 10 years ago.
So what else is causing the chain restaurant's demise?
Americans have apparently tired of the bland American meat-and-potatoes fare offered by most big casual chains, opting instead for spicier or more exotic food, or cheaper "fast-casual" places like Chipotle. "Traditional restaurant chains are losing relevance," says Darren Tristano at food industry researcher Technomic. Michael Luca of Harvard Business School also pins some blame on restaurant-review site Yelp. In 2007, half of all restaurant spending went to you-know-what-you'll-get chains; as Yelp increasingly makes well-rated independent restaurants easier to find, Luca found, that market share has steadily dropped.
How bad are the numbers?
Bennigan's saw its sales drop by 87.9 percent between 2001 and 2010, and went from 293 locations to 35, according to Technomic data. Ground Round Grill & Bar had a 81.7 percent plummet in sales, and shut all but 25 of its 131 stores; Bakers Square sales dropped by 72.2 percent, and its 148 locations were pared down to 45.
So should we celebrate or mourn the death of the big chain?
Let's cheer "the age of the consumer," says Adam Ozimek in Modeled Behavior. As consumers (at least those who can afford to eat out) find better options than bland chain food, that's a real increase in quality of life. It's not so good for the tens of thousands of restaurant workers who are being pushed into a daunting job market, though — often with no prior warning or severance package. Perkins-Marie Callender's cut 2,500 jobs, for example, and Friendly's fired 1,260 people. "This is my heart," said Helen Smolak, after learning that the Friendly's she worked at for 27 years is closing. "I feel like I was betrayed."