| Survey: Shaky economy thins out industry ranks
By SARAH
E.
LOCKYER
TAMPA, Fla.
(May
25,
2009 )
—The difficult operating environment inflicted extensive damage on the restaurant industry last year, according to a recently released report. In a survey of 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.  | | In 2008 S&A Restaurant Corp. closed about 200 locations of the Bennigan’s and Steak and Ale casual-dining restaurant brands. |
“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 out 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. Additionally, S&A Restaurant Corp. closed about 200 Bennigan’s and Steak & Ale locations.  | | In 2008, Brinker International shuttered 18 units of the Italian casual-dining chain Romano’s Macaroni Grill. |
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 smaller expense accounts, less 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. In addition, as guest traffic slowed, costs in those areas remained just as high, if not higher than in past years. Landlords, especially those that manage high-rent locations in major cities, did not immediately look to relax rent terms to help operators through the lean times. “There was unwillingness among landlords to renegotiate rents,” Helman said. “Some landlords were taking a short-sighted approach, saying, ‘Pay rent or get out.’” Finally, as the financial sector began to crumble, credit markets froze, shutting out many businesses from the needed lending and debt financing they use to operate, remodel operations or expand. While some sources have pointed to a recent thawing of the credit freeze, it is still difficult in 2009 to secure financing for many restaurant operators. Number of restaurant operators forced to close in 2008  | Click Here to get more in-depth analysis.
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| HIGH-VOLUME INDEPENDENT | CHAIN | TOTAL |
