| Many restaurants failed in '08 as economy worsened
By Sarah E.
Lockyer
TAMPA, Fla.
(May
15,
2009)
The difficult operating environment inflicted extensive damage on the restaurant industry last year, according to a recently released report. In a survey of more than 9,500 restaurant operators, Chain Store Guide, a retail and research firm based here, found that 388, or 4.1 percent, went out of business in 2008. While the firm conducts an annual census of restaurant operations, the notable number of closures prompted CSG to tally that figure for the first time.
CSG, which is owned by Nation’s Restaurant News' parent company, Lebhar-Friedman Inc., researched for the report 4,530 high-volume independent operations and 5,003 chain operations, for a total of 9,533 restaurant operators.
More than 70 percent of the 388 shuttered operations were high-volume independent restaurants, which are classified as restaurants that record at least $1 million per year in revenue, CSG said.
Among chain operators, 114 went out of business, or about 2.3 percent of the segment, CSG found. Those chain operators ran a total of 613 restaurants. Nearly 64 percent of the out-of-business chain operators were smaller businesses that ran fewer than 10 locations, and more than 50 percent of them were franchisees of major chains.
“What struck me was that the power centers — New York, Chicago, Los Angeles — [were] where high-volume independents took the biggest hits,” said Linda Helman, senior editor at Chain Store Guide. “Among chains, it was more proportional.”
Among the notable independent closings of 2008 were Anjou in San Francisco; Copperblue in Chicago; Monkey Bar, Grayz and San Domenico NY, all in New York; and French 250, Tula and Via, all in Denver.
Chains also shut off the lights at several units during 2008. Among them, Brinker International closed 18 Macaroni Grill stores, Roadhouse Grill closed all 21 units, Shells Seafood Restaurants Inc. closed all 22 units, and Starbucks shuttered 250 of the 600 units it had slated for closure.
Helman pointed toward three major culprits behind the number of closings in 2008: reduced corporate spending, high rents and the credit crunch, which cut off business lending.
When big businesses, from Wall Street banks to pharmaceutical giants, cut back on corporate spending as the economy soured last year, restaurants were hard hit by the smaller expense accounts, decreased travel, and fewer client meetings over lunches and dinners.
According to Chain Store Guide’s research, the majority of restaurants that went out of business were clustered in parts of the country that also are home to the largest banks, mortgage companies and insurance providers.
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