After several years of impressive growth and success, independent restaurants face big challenges going forward. There have been a stream of high profile restaurant closings starting in 2017, featuring many respected and established restaurants including Le Cirque, Joel Robuchon, Grace and the Carnegie Deli. Celebrity chefs Marcus Samuelson, Roy Choi, Gordon Ramsay, Daniel Boulod, David Chang, Guy Fieri and Bobby Flay also announced closures. There’s also an increase in closings among large chain brands.
Food industry consultants Pentallect report several key trends and factors indicating a tough road ahead. Key factors include:
Skyrocketing Rents and Property Taxes
There are confirmed reports of up to 500% rent increases, which even the most successful operator cannot absorb. High occupancy costs in desirable locations will continue to be a barrier for independent restaurant operators for the next several years.
Rapidly Rising labor Costs
Labor shortages among both skilled and semi-skilled workers, and legislated wage increases are a major issue for the industry.
Too Many Restaurants
The exploding number of restaurant choices, in a market with very slow growth in consumer demand, makes it really hard to for restaurants to keep customers coming back.
Too Many Similar Concepts
As new restaurants increasingly copy successful trends, instead of creating them, it creates too many similar concept options with nothing “new” available.
Unbalanced Media Attention
Media coverage is heavily focused on openings (and closings) and does not cover successful restaurants sufficiently.
High Investment Costs
Operators are making multi-million dollar investments in décor, equipment, and facilities to appeal to diners. These investments add considerable debt burden.
Chain Restaurant Competition
When a Chick-fil-a opens somewhere in America every 2-3 days, independent restaurants tend to cover the $80k per week it suddenly makes. Chain “winners” have considerable strengths and pose a real threat to independent restaurants.
Nontraditional Channel Growth
Consumer’s food choices are expanding with options such as food trucks, limited assortment stores, and meal kits.
The way that diners want to order and dine is changing in response to new technology innovations. Online take-out ordering and delivery is now a preferred dining option.
Independent restaurants are well-positioned to meet the evolving demands of diners, particularly large independents in prime urban locations. In the current environment new restaurants will continue to open at a rapid pace, but the turnover rate will also accelerate. The bottom line is that having a fresh concept (grounded with consistently high quality food and service), a sound management system, and an effective self-managed website platform are critical parts of a restaurants success.