Restaurant Industry, Leading Indicator of US Economy Sours, Bankruptcies Pile up

“Very challenging” sales trends.

[Update] On October 3, Garden Fresh Restaurant Corp., which owns Souplantation and Sweet Tomatoes, filed for bankruptcy. The company, owned by private-equity firm Sun Capital Partners, said it will close 20 to 30 of its 124 locations and put itself up for sale.

On September 30, Restaurants Acquisitions, the operator of Black-eyed Pea and Dixie House restaurant chains, converted its Chapter 11 filing to Chapter 7 liquidation. The bankruptcy court order noted the company had shuttered its restaurants and management had resigned.

On September 29, Cosi Inc., a fast-casual chain with 1,100 employees filed for bankruptcy. It closed 29 of its 74 company-owned restaurants and laid off 450 people. The 31 independently owned franchise operations continue operating.

Also last week, Logan’s Roadhouse, a casual steakhouse with over 200 locations, closed more than 10 restaurants, on top of the locations it had already closed in August when it filed for Chapter 11 bankruptcy.

Nine restaurant companies representing 14 chains have filed for bankruptcy since December: Garden Fresh Restaurant, Restaurants Acquisitions, Cosi, Logan’s Roadhouse, Fox & Hound, Champps, Bailey’s, Old Country Buffet, HomeTown Buffet, Ryan’s, Johnny Carino’s, Quaker Steak & Lube, and Zio’s Italian Kitchen.

Restaurants are precarious creatures. They lease costly space and have to invest in equipment and furnishings. It’s a competitive environment, with high expenses and little pricing power. To expand, they load up on debts. Some, like Cosi, always lose money. Customers are finicky and fickle. When new competitors come along, or when the economy tightens, customers thin out and creditors begin to fret and turn off the money spigot.

Some of that is normal. New restaurants come along, and old ones die.

“But the current wave of bankruptcies is definitely unusual, and rivals the chain bankruptcy wave of 2009 and 2010, when several chains filed for debt protection after sales fell,” writes Jonathan Maze at Nation’s Restaurant News, adding:

In this case, the wave of bankruptcies is largely due to a decline in sales at restaurant chains that is particularly harmful to companies that are already walking a balance-sheet tightrope. The companies that filed for bankruptcy recently were already weak.

Some are repeat offenders, including Buffets LLC (Old Country Buffet, HomeTown Buffet, and Ryan’s) which is now mired in its third bankruptcy. Many of them, battered by declining sales and rising expenses, have been losing money for a long time. But now things are coming to a head.

Restaurant bonds moved into fourth place early this year in Standard & Poor’s Distress Ratio, behind brick-and-mortar retailers and the doom-and-gloom categories of “Energy” and “Metals, Mining, and Steel.”

Other restaurants are trying to hang on by cutting costs and shrinking their footprint, which entails more sales declines, and thus continues the downward spiral.

In August, casual-dining operator Ruby Tuesday announced that – after “a rigorous unit-level analysis of sales, cash flows, and other key performance metrics, as well as site location, market positioning and lease status” – it would sell its headquarters and close 15% of its 624 or so company-owned restaurants by September.

Clinton Coleman, interim CEO of Rave Restaurant Group, which operates Pie Five Pizza Co. and the Pizza Inn buffet brand, put it this way on September 23, after reporting that same-store sales had tumbled in Q4 and that losses had ballooned: “Sales trends in the fourth quarter were very challenging for the Pie Five system, as was the case in much of the fast-casual segment.”

The restaurant industry is not a sideshow. About 14 million people work in it, according to the National Restaurant Association. With $710 billion in annual sales, it’s an important part of consumer spending and accounts for about 4% of GDP. If the industry is having problems, it’s a red flag for the overall economy.

Its difficulties are not limited to just a few beat-up restaurant chains. The National Restaurant Association reported on Friday that its Restaurant Performance Index (RPI) for August fell 1% to 99.6 and is now in contraction mode (below 100 = contraction). It was the worst reading since February 2013.

The RPI’s post-Financial Crisis peak was in the spring and summer 2015, when it dabbled with 103. Its all-time peak, going back to its inception in 2003, was 103.4 in 2004. Its all-time low of 96.5 occurred during the depth of the Financial Crisis.

The index consists of two components:

  • The Current Situation Index, which tracks restaurant operators’ reports on same-store sales, customer traffic, hiring, and capital expenditures
  • And the Expectations Index which tracks restaurant operators’ six-month outlook, including on the overall economy – more on that in a moment.

The Current Situation Index fell 1.9% in August to 98.6, the lowest since February 2013. Three of its four indicators declined: same-store sales, customer traffic, and labor.

Only 30% of the restaurant operators reported a year-over-year increase in same-store sales. That’s down from 71% in February.

But 53% reported a year-over-year decline in same-store sales. This metric has been deteriorating for months. In February, March, and April, between 19% and 38% of the operators had reported lower same-store sales. Then it ticked up: 42% in May, 43% in June, 45% in July, then jumping to 53% in August.

Operators also reported a net decline in customer traffic: while 21% reported a year-over-year increase, 59% reported a year-over-year decline. August was the fourth months in a row of year-over-year net declines in customer traffic.

And optimism is beginning to wane. The Expectation Index edged down to 100.6: “While the Expectations component of the index remains in expansion territory, it too has trended downward in the past several months.”

And operators are turning gloomy about the overall economy: only 17% expect the economy to improve over the next six months, but 29% expect conditions to worsen:

This represented the 10th consecutive month in which restaurant operators had a net negative outlook for the economy.

Restaurant operators as a group are an optimistic bunch – they have to be, or else they wouldn’t do it. But they also have daily intense contacts with consumers and are thus a leading indicator of the consumer-based economy.

In the beaten-up brick-and-mortar end of the retail industry, the meme has been that Millennials aren’t buying enough goods but like spending money on “experiences” – such as eating out. If that’s true, and not just an excuse by faltering retailers, it appears Millennials are not doing enough of that either anymore. Either way, the restaurant industry has been giving off increasingly loud warning signs about the overall economy, and the state of the consumer.

And the fate of that consumer-based US economy? Read…  “Negative Growth” of Real Wages is Normal for Much of the Workforce, and Getting Worse: New York Fed

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  96 comments for “Restaurant Industry, Leading Indicator of US Economy Sours, Bankruptcies Pile up

  1. AGXIIK says:

    I know I’m going to hate myself in the morning but can I call Buffets LLC the Donald Trump of eateries?

    3 bankruptcies??!! WTF. Someone didn’t get the memo.
    Dixie Dog Choke and Puke and Minnie Pearl’s Fried Chicken should have alerted the Masters of the Restaurant universe that buying and consolidating restaurants that serve meals produced from foodstuffs purchased from the low price bidder are not going to see intended results to the bottom line, unless red ink was the intention.

    Nope, I hate myself now. After just finishing my meal in beautiful downtown Sparks NV at Road Kill Sushi —all you can eat–$10, maybe a purge is in order.

    • Petunia says:

      At least when you go to a cheap place your expectations are low. We spent $200 on brunch a couple of months ago and it was a HUGE disappointment.

      • Harry says:

        I think part of the problem is these chains have increased their prices much much faster than wages in search of more profits. These places are no longer cheap.

        • dave says:

          that too. took a friend for a quick meal at the golden arches without a coupon for 2 combos almost $20CAD.

        • chris Hauser says:

          at a certain price point, packing one’s lunch, and the effort it takes, pays for itself.

          i wonder how the restauranteurs index correlates with the future economy? seems to me for a few years we’ve been seeing more restaurant employment, now we are seeing a winnowing.


      • Mary says:

        £200 for a brunch? And still people complain America is not rich enough.

        • NotSoSure says:

          It’s more like with people spending 200 dollars (not Euros) on brunches, how can this article be even close to true?

          But if it’s true, don’t worry Mama Yellen loves this sort of thing, after all as she said: “the idea of expanding into areas like equities might be “good thing to think about,”

          Amazon at 1500 by next Feb.

        • Mike G says:

          Amazon at 1500 by next Feb.

          Speaking of Amazon, they just had their annual meeting here in Santa Barbara — 15 Gulfstream private jets flew into the airport and they rented out the entire Four Seasons Biltmore for the weekend. Somebody who is not hurting in this economy.

        • Petunia says:

          It was the first time we had done it in years and a huge overpriced disappointment, like I said before. However, the place was packed with families from church services. Some people have a lot of spending money.

    • Mike G says:

      Corporate restaurant chains usually provide a bland experience. Employees are disempowered and robotic, and everything reeks of MBA-micromanaged cost-cutting aka quality-slashing. There are so many better independent local restaurants out there I’d rather patronize where the owners still put their heart into making the operation great.

      • George says:

        Right on, Mike. I’d rather take my chances with a roadside gas stop / cafe whose signage says: “Eat here and get gas” than go to the high priced ‘Chilis’ chain store. LOL

        Seriously though, the independent usually does do more to please in both quality and atmosphere.

        • Just says:

          I’ve recognized a lot of food from Sam’s Club at local establishments.

        • Thomas says:

          Just hope they know what “bacteria” are…

          As someone who has worked in “hospitality” I feel much more comfortable eating at a major chain than at an independent operation. In a professional environment you will have a manager breathing down your neck about health and safety. But when it is owner operators, who knows?

          The urge to be lazy can be overwhelming after all. When there is no one to call you on it re-using the cutting board you just cut poultry on, or ignoring the old pork blood in the sink, is just so easy…

      • Dan Romig says:

        I don’t know if this is happening in other cities, but in Minneapolis & St. Paul we have chains and we have chef/owner ‘brands’ that have a few locations.

        There is always some turnover, but those ‘brands’ that have quality chefs working for a great dining experience do succeed. You can’t really franchise out and mass produce the work of a top chef and prep team.

    • r cohn says:

      Just because 6 of Mr Trumps corporations have declared bankruptcy, it is political propoganda to mention Mr Trump in the same sentence as Buffets LLC without also mentioning his highly successful properties . His collection of golf courses alone are the most impressive of any group or individual anywhere.Why he would ever choose to run for President instead is beyond me.

  2. Thomas Malthus says:

    I’ve had a business plan on my desk for a year now that I have done nothing with.

    But I am thinking it might be the right time to put in play ‘You Won’t Believe it is Cat Food’ Restaurant chain- the demographic that can afford that type of cuisine is expanding.

    The concept is we take ordinary cat food and add some salt and pepper and serve it like pate along with some cheap crackers and pass it off an affordable night out with a bit of tasty fare for the down and out

    A little further down the road and we’ll launch The Boiled Rat.

  3. Old Engineer says:

    Because most of the well paid technical wunderkind are millennial I think we have a tendency to assume that all millenials are well to very well paid. In reality most millenials across the country are struggling with with both adults working, sometimes more than one job apiece. For them eating out is not a life style choice but a time/cost trade that is in a constant state of flux as costs and their own circumstances vary.
    Your data supports my observations from the small sample of millenials that I talk with that increased costs (especially healthcare, transportation, and utilities) and static income have started stressing their finances and one by product is tipping the trade away from the time convenience of eating out.

  4. Thomas Belstler says:

    The very nice lady that owns the breakfast and lunch restaurant where I have breakfast every morning has recently told me that her business has fallen off by 40%. This was a fairly sudden drop, not a slow fade out and it has stayed that way. Even the Church groups that come in on Sunday mornings have a lot fewer members eating.

  5. FluffyGato says:

    If you’re the type who pays attention to the “little things”, the problems come clearly into focus:

    fewer packets of sugar or types
    cheaper napkins
    cheaper disposable cups (some so cheap that the ink runs off them)

    Cost cutting is everywhere in just about every major restaurant.

    • Thomas Malthus says:

      Energy is the fundamental basis of the global economy.

      When costs to produce a barrel increase that means the return margin decreases.

      Production costs have sky-rocketed in the last decade.

      That is why you are getting downsized products – for the same and sometimes higher prices.

      • Chicken says:

        10 years ago gasoline was more expensive than today, I parked my gas guzzler and switched to a used sipper. I’ll keep driving the sipper and maybe do some long-delayed service on the guzzler. I figure it’s worth more now having looked at new car prices, they’ve gone up remarkably.

        • Thomas Malthus says:

          Oil producers are headed for bankruptcy with prices where they are so just because the prices at the pump are lower now than in the past is not relevant.

          Civilization as we know it operates on the energy return on a barrel of oil.

          The reality is that the production costs have skyrocketed – the energy return has shrunk.

          The low hanging fruit has been picked — therefore things will get worse every day – every month – every year

  6. Edward E says:

    I used to eat at some of these pricy buffets and steak houses. Truckers and folks listen up, you can eat like a king and a lot healthier for often half the cost of most restaurants and truck stop buffets. Grocery stores in many areas of the country have excellent salad bars and American & Chinese hot food bars, some with all you can eat. Ingles in the southeast is my favorite, Hy Vee in the upper Midwest, Giant & Wegmans in the Northeast, HEB has some opportunities. Meijer and Wal~Mart are a sad joke, but some Kroger’s and King Soupers are worth it. Winco and Woodmans are where I seriously load up the groceries on the way home.

    Hunny Bunny superstar, I’m coming home with twenty-three Flying Monkeys, …gave my brother one. We are now ready for this fantasyland election presented to us by organized crime. 11 Netherworld’s for sorting through the propaganda and 12 ‘Hoptical Illusion’ so we cannot be blamed for who gets elected, because we’ll proudly cast our ballots for ‘unsure’, it’s all just an illusion anyway. To my neighbors, get your damn tree stands out of my yard, woohoo, I’m heading home!!!

    • Merlin says:

      Guilty as charged: On 2 recent family trips, we ate lunch at Whole Foods in several different cities.

      • Edward E says:

        Embarrassing, I’ve never even set foot in a Whole Foods. Always been meaning to but never found any that looked big truck friendly. Please tell us about them? Also, our gorgeous superstar is a big whig (buyer) for a natural foods outfit down here so she takes care of our eating healthy lifestyle when I’m around home. She stays very busy, they do a lot of business, but she still manages to put together something for the road.

  7. Mary says:

    I wonder how much of this bad news is a reflection of economic doldrums, and how much changes in lifestyle? Correct me if I’m wrong, but sounds like the food in these chain eateries tastes mainly of the sugar, salt and fat used to cover up lousy, cheap ingredients. Given diminishing real income, maybe people are choosing to spend their money on better quality foodstuffs and just cook at home.

    • Kevin Beck says:

      Mary: You might be on to something. But what that means is that the casual restaurant industry is targeting the wrong trends and is going after the customers that won’t visit their locations anymore. And if that’s the case, then there are a whole lot more restaurants that deserve to go bankrupt.

      Not that I wish that to happen, because it affects many people directly. I’ve already lost thousands with direct investments in friends’ restaurant businesses, so I feel their pain.

    • Petunia says:

      More and more of the food now served in restaurants is underwhelming. I find it surprising since I spent years eating in dives in NYC and the food was mostly good to excellent.

      We recently went to a movie theater where they serve you food at your seat, airplane style, with an extensive menu and wine list. I would have preferred not to have the distraction.

      • Thomas Belstler says:

        I agree with you about the food in some NYC bars. Those in the business districts had to serve food during lunch hour and it had to be good to excellent and reasonably priced because the competition was fierce and the variety was endless. Just in one of the neighborhoods that I was familiar with there was Irish, German, Norwegian and American food available at lunch time. Some bars would have hors d’oeuvres that were free if you bought a beer but they were usually so crowded that it was impossible for the bartender to check if you purchased the required drink and I knew people that just ate hor d’oeuvres for lunch every day simply because they were free. The places had to earn much of their income during lunch time because they had few customers from the relatively sparse residences in those districts.

    • Thomas Malthus says:

      U.S. Obesity Rate Climbs to Record High

      America’s Obesity Epidemic Hits a New High

      I suspect fewer people are eating out because they are broke — but that does not mean they are eating healthy…

      No doubt they are loading up on processed garbage food from the grocery store and eating it at home…

    • d says:

      Immigrants that eat our local wild goats, say they are good to eat.

      So we said make the next one, without curry or spice, and then lets see you eat it.

      They did and wouldn’t eat much at all, even the local stray dog thought about it for a very long time.

      Food should taste good, before you put stuff on it. Particularly if you pay good money for it.

  8. AGXIIK says:
    This is the 99 cent store of the known universe.
    Pretty soon you’ll see Amazon flying Kit Kats and Cheetos to homies in the hood by drone, paid for by EBT cards.

    • Petunia says:

      At least all that EBT money gets spent in America on American products, creating American jobs.

  9. Marty says:

    This information can’t be true. I mean, 90% the 50 million jobs created by Obomber over the past 7.5 years have been bartender and waiter. Check your facts, Wolf.

    • Wolf Richter says:

      bartenders and waiters were “90%” of the “50 million jobs created”….????? Good grief, Marty, where or rather how do you come up with this stuff!!!

      Since the Financial Crisis, the total number of nonfarm payrolls has increased by about 14 million (not 50 million…. ).

      and a smallish part of the 14 million jobs were waiters and bartenders.

      Do you REALLY think almost EVERY THIRD PERSON working in the US (YOUR 90% of 50 million = 45 million = 31% of 144.6 million total nonfarm jobs) is a waiter or bartender?

  10. nick kelly says:

    When folks tell me how tough things are (were?) I always say come back when one third of the US food budget is NOT spent on restaurant food.
    All this crying about how great the 50’s and 60’s were- my family was not poor, dad employed as aircraft mechanic, owned our house- but we had one white table cloth sit- down in my entire growing up.
    Take out happened maybe a dozen times in 16 years.

    And the vehicles now! Monster trucks financed over 7 years.
    On the Craig’s List here there are maybe a dozen motorcycles under 250 cc (ex. dirt bikes) and the rest (hundreds) over, mostly over 500. That’s how the category is: under 500 and up.
    The MC license should be graduated- you should have to start with a starter.

    There is a whole lot of excess in the US and Canadian economies and a whole lot of ‘entitled’ kids.

    • Petunia says:

      We eat out or get takeout infrequently. Considering that it is less than a dozen times a year, there is no way we would or could spend one third of our budget on restaurant food. I remember buying a yogurt at the mall, small with some topping and it was $9. When the guy asked me for the $9, I just stared at him because I thought he was mistaken. The yogurt was good but I haven’t been back.

    • MC says:

      I’ve already written in the past about the motorcycle market so I won’t go beyond some basic points.

      Here in Europe in the 90’s it used to be about 80% cash and 20% finance. Mind we are not talking small mopeds: I remember people buying Kawasaki ZZR1100’s and Yamaha FZR1000’s with wands of cash. Not only it was 100% legal back then, but considered absolutely normal.
      Right now I’d say the market is 15% cash and 85% finance, albeit dealers of some brands (BMW for example) are strongly incentivating cash purchases again.

      The big transition happened around 2003, when the euro arrived and made loans as cheap as never before. Honda was the first brand to embrace a business model based on lower middle class models aimed squarely at people buying on credit. In fact Honda actually ordered their dealerships to discourage cash purchases and push people into loans, something that ironically helped BMW grow as much as they did as their dealerships started capturing disatisfied Honda customers by the dozen.

      I actually remember Honda dealers lamenting to me they were “living on rice paper thin margins” and being forced to embrace a model based exclusively on very low margin models which was wholly dependent on high sales figures. Honda ensured these dealerships growth on the saturated European market would continue to be in double digit territory well into the 2010’s.
      In 2008 sales weakened and literally fell off a cliff in 2009. Honda dealerships were literally slaughtered as they had grown dependent on those massive figures and Honda steadfastedly refused (and still refuses) to reintroduce high margin models people would actually buy.

      These days the insanity is back, albeit it’s even worse than last time around as the market is smaller (we aren’t getting any younger nor healthier and youths are largely disinterested) and leverage ratios are already very high.
      Rebates in the past few months have gone from large to clinically insane, even on top of the line, fully decked models. People paying cash are especially welcome and can land extra-large rebates and special conditions these days.

      My US friends have told me marketers for motorcycle markets there have taken to targeting military personnel, as they are young, fit and with larger than average disposable incomes. When a unit gets rotated you can usually tell by the large number of sportsbikes being advertised on Craiglist…

      • nick kelly says:

        In Uruguay motorbikes are everywhere. The 125 CC is the mainstay. One time we were out in the ritzy area and the landscapers turned up- two guys on a 125 pulling a little trailer with the tools.
        Out in front of one little corner store the owner had his ride- a 50 cc Honda moped 1970.
        But I’ll tell you- Uruguay is very flat and those 125 scream right along often with passenger- but often young light folks.

      • nick kelly says:

        The power/ weight ratio of a 250 with 160 lb rider exceeds most cars.
        The PR of a 1000 cc exceeds almost any car.

        Segue: you will flunk yr driving test if you hold wheel from inside with fingers wrapped around -considered not safe.

        The ape- hanger handle bars on choppers are an accident waiting to happen. Imagine if I wanted you to exercise careful control over a power tool where there might be a sudden requirement for a strong exertion, but I want you to hold on and direct it at a point far above your shoulders! You’d think I was nuts.
        It works until it doesn’t.
        Lately we’ve had a few bike fatals here- single vehicle, dry hiway,
        just lost control in a mild curve.

  11. Pubfish says:

    How Red Robin exists at all is a mystery to me. Chain store dining is the apotheosis of a banal, bland, semi-toxic experience.

    I’ve know countless youngins who have informed me with great amusement how they spit, urinate and do unmentionable things in your food in such places.

    If you ask to have something changed or ‘reheated’ expect your request to have the worst possible outcome for your poor food (and later your digestive tract).

    I don’t know much about the chains mentioned in the article, but I still see the parking lots of TGIF and its clones full.

    Gentrification in my area seems to demand an endless supply of new ‘wood fire’ specialty pizza places and gourmet burger shops.

    Funny thing is I’ve watched one storefront go through 3 different burger joints in five years! How is that possible?

  12. Prototype Girl1 says:

    Plus we have millennials living with family, not dating, playing video games, or chatting/reading online. They don’t care about going to restaurants. So mom or grandma are still cooking dinner.

  13. farmboy says:

    It would seem to me that the larger family units of earlier times allowed for more of somewhat specialized roles to be filled in-house such as income providers, gardeners, daycare, food preparation, laundry, etc. Whereas with the single parent family units that are more common today it becomes impossible for all these roles to be filled so that many roles end up being farmed out, which tends to give us an increase in GDP, taxes, and legal cases.

    It might be time we become more sociable and start to again form larger family, and neighborhood/village units. The gardener of an extended family unit/village has a real incentive to grow the most nutritious food. This incentive is not even part of the picture for today’s produce grower in California.

    It is quite shocking to me how poor 90% of americans really are, they can not even afford decent/nutritious/chemical free food for themselves, let alone for their kids. So much of their money has already been spent in healthcare, insurance, taxes, interest, and trucks.

    • d says:

      “It might be time we become more sociable and start to again form larger family, and neighborhood/village units. ”

      Saying things like that will get you into trouble with the globalised vampire corporates, currently allied with china.

      They have invested a huge amount, in breaking up what we call “Extended family living”. So that they sell three times as much unneeded stuff, as there are now three small households, where there used to be one much more efficient and economic one.

      Along with many unsupervised children, in the afternoon, and early evening.

    • r cohn says:

      Although there seems to some disagreement on how these numbers are derived,here is a to tool to determine the various income levels .
      But these numbers do not include taxes .At $102,000,which is the %90 level ,Fica taxes would run $7,800,Federal and state taxes would run ~$15,000
      leaving ~$78,000 in after tax income.

  14. KeithF says:

    Millennials are broke, yes, but even (or perhaps especially) when they have money, they hate chains. It is a huge secular shift in the restaurant industry that is only going to increase over the coming decades. The era of interchangeable Appleby’s, Chili’s, TGIF, Ruby Tuesday, etc. has peaked.

    • Wolf Richter says:

      I’m not a Millennial, obviously. But I cannot even imagine going into a place like TGIF that I thought was cool when I went there three decades ago. Who still goes to a TGIF?

      • Ivy says:

        You’d be surprised at how many people show up in business attire to drink through the afternoon at places like TGIF (query: who hires those people, and what about the delivery drivers drinking along side them?. They filter in after the 3:00 pm start to happy hour and overlap with the barflies that linger after lunch. Even with that select demographic, the local TGIF, and other chains, are hurting as shown by their emptier parking lots.

      • Mary says:

        Who still goes to TGIF, etc.? People who live outside of major urban areas, particularly in the Midwest and South.

        Wolf, you and I live in California where farmers markets abound and good, inexpensive ethnic restaurants are thick on the ground.

        When I visit my family in the South, dining out means a choice between MacDonalds and Applebees. There are a few seasonal farm stands, but mostly fruits and vegetables come packaged in plastic at the local supermarket. Whether the difference is economic or cultural, I don’t know.

        • Wolf Richter says:

          Thanks. That makes sense. I lost perspective. I don’t even think there’s TGIF in San Francisco.

        • Ricardo says:

          Our San Francisco TGI Fridays closed about 15 years ago. I used to go there too when it was still cool about 20 years ago. I don’t miss it. Then the one by the airport closed suddenly with zero days notice to all of the staff. I think one still exists at the airport.

          I don’t eat out anymore due to serious increase in ferral ……….. “teenagers”.
          Too damn dangerous.

      • Ehawk says:

        Well, you live in Frisco. People in California, living in SF and Silicon valley and even west LA,.. don’t like those chains much.

        we millennials are into Taco Trucks and Brewing companies and we go to pizza joints to watch the games, NFL, NBA, MLB games.

        that’s about it.

    • Roy says:

      As an independent restaurant owner and a former franchisee owner, this comment hits the mark. The kids don’t want to eat at the restaurants that their families ate at while growing up. The wave of bankruptcies here are really just starting. As FLSA kicks in for many of thse chains, their business models will be exposed that really they’re exploiters of labor through having exempt “managers” doing production work that, if tallied in hours puts them below minimum wage. The ones to watch as likely to go next have PE involvement that have stripped them tninking they could flip to an IPO that did not happen. PE guys have their money but the chains have the debt. Won’t end well for most of them.

      There is one concept out there that is really being set up as a real estate play where the PE firm is dressing the properties up with operating tenants but they only care about it until they can flip the property.

  15. VegasBob says:

    Wait till the Obamacare rate hikes show up next year.

    My monthly premium is probably going up about 60%.

    Guess what’s going to happen to my restaurant budget?

    • Vespa P200E says:

      Yep you nailed it VB.

      Restauranteurs are caught in the middle with rising wages (min wages in big cities where DNC calls the shots), healthcare (SF restaurants pad another3- 4% to bills!), rising rent & utilities & insurance, etc. not to mention food inflation all equal losses galore on razor thin margins to begin with.

  16. Gregg Armstrong says:

    The only thing that matters is that Alan Greenspan, Benjamin Shalom Bernanke, Janet Yellen, et. al., make the rich richer and richer by taking from those who can least afford it and giving to those who least deserve it. It’s the American Way, in the Neofeudal United States of America, where the banking gangsters completely own the government gangsters.

    • Kasadour says:

      State-runned or state-owned enterprises (SOEs) comes to mind. We are inching ever closer to North Korea style of labor and govt ownership. Gesus, scary times.

      I’ve noticed that restaurant quality has declined in the past couple of years and if I’ve noticed it I’m sure others have too. I ate a meal at Red Robin not long ago and 1) the dining room was maybe 1/3 full at peak dinner hours and 2) the food was barely a step up from airplane food. The only restaurants you can rely on are super high end, and who can afford it (except those that least deserve it)?

  17. Ptb says:

    Who frequents these lower end eateries? I’d guess the lower earning sector of the economy. When I lived in SF and made very good money, I almost never ate at home. Nowadays, living on a retirement budget , I eat out maybe once every 6 months. I’d say the customer base is not doing so well.

    • Vespa P200E says:

      My family loves the $12 OG and $20 or $25 for supper for 2 with starter at Applebees (cheaper with $40 for $50 gift cards deals from fleabay). I use Ent books and all over Groupon 20% off sale for restaurants too.

      My fave is local Chinese restaurant with $8 (used to be $7) lunch specials and $10 early bird special – all takeouts in East Bay.

      And I splurge when I travel and the company picks up the tab. Used to go to Budapest often and ah the cheap Michellin-level restaurants for pittance…

  18. Wolf Richter says:

    I just updated the article with the bankruptcy du jour:

    Today, Garden Fresh Restaurant Corp., which owns Souplantation and Sweet Tomatoes, filed for bankruptcy. The company, owned by private-equity firm Sun Capital Partners, said it will close 20 to 30 of its 124 locations and put itself up for sale.

    • TheDona says:

      Nooooo! Sweet Tomatoes was the best salad/soup bar in my area with seasonal and changing menu. What the fork?

      The rest of those restaurants deserved to die.

  19. Chicken says:

    Hooray for affordable healthcare, does this mean the 99% pays more or just the 1%?

    I’m not sure what that is they’re serving at restaurants, as expensive as it is it must be high definition.

  20. Merlin says:

    For true verification of opinion in this blog, I think Wolf and Mary need to go to TGI Fridays in Union City, CA and report back to the rest of us. Bon appetit!

  21. Jon Sellers says:

    Rarely post here (enjoyable site though). My experience is these big chains have been bought out by PE funds. After purchase, they spin off the real estate and make the restaurant lease back all the plant. The restaurants profits fall to zero, because the PE fund is sucking them out through the RE.

    The restaurant has to cut costs, leaving poorer food and service, and increase prices. The PE fund flips the restaurant to an even stupider PE fund and a once decent business beckons for bankruptcy.

    • Chicken says:

      I think you nailed it, the mergers and takeovers have led to debt levels that’s hard to service without having to raise prices and cut every corner substantially.

      • TheDona says:

        The same thing is happening in retail. Their debt service is unsustainable.
        Less dollars to go around from our “consumer driven society” whom is being squeezed on basics. Why is this not being talked about as it is so obvious?? Instead the CEOs are still blaming the weather, rising minimum wage, and the fickle Millennials on declining sales. We are not going to go out and waste what little discretionary income we have on crap….crap food or crap clothes. H&M, who has been the darling of fast fashion for the Millennials and whom the majors stores and brands have been calling out as a huge reason for their declining sales has been tanking recently. Game over.

        Next year should be interesting. Debt service is going to kill a huge portion of grocery, retail and restaurant industry.

        • Jon Sellers says:

          Even worse, this is starting to happen with hospitals and medical groups.

    • Roy says:

      Yes. This is what has and is happening to many of these chains. The PE guys thought they could strip and flip to an IPO but the market soured on them before they could. Now they have over indebted, under invested concepts.

  22. prepalaw says:

    I refuse to dine out on mediocre food. My wife can cook better than 90% of chefs.

    If we go out, I want outstanding food, for which I am prepared to pay up. Forget the “experience”.

    In our town of 20,000, we have 25 eateries. Only 8 have a liquor license (the town will issue no more). The rest are BYO. Those places have to make their profit from just selling food.

    The trend here is to buy prepared food at supermarkets. Sushi, fresh and well-made, from a supermarket at 60% of the cost of restaurant cuisine.

    No wonder the mainstream restaurant can not make it. Ok, I live a rich man’s NYC commuter town. The high end places are packed every night. Figure an entrée without soup or salad or desert and one glass of wine for $60, including tip.

  23. ru82 says:

    There seems to be a big growth spurt of restaurants the past 3 to 4 years. Established chains are using low interest rates to expand and then you have a few new IPOs. Like Shake Shak, Papa Murpheys, etc. that use this IPO money to build out new restaurants.

    I think there is a saturation / over supply of resturants. I live about 1 mile from a major interstate but at the exit ramp of this interstate is several strip mall. So within a 2 mile radius from my home there are 35 restaurants I can eat at. Every year a few go out of business but the building is quickly replace. Zoes’s kitchen just built a new building on top of the current 35. Crazy.

  24. ru82 says:

    Quickly off the top of my head here is a list. I was wrong there are 50ish within 2 mile radius of my house. I live in a suburb so this is not a high density area. The are a few big apartment complexes.

    15 Super Fast Food:
    Little Ceasers
    Burger King
    Pizza Hut
    A&W / Long Johns
    Steak n Shake
    Taco Bell
    Freddy’s Hamgburgers
    Panda Express
    2 Jimmy Johns ( 1 mile east and another 1 mile west)

    39 Little more upscale:
    Local Sports Bar
    Noodles and things
    Jamba Juice
    Ruby Tuesdays
    Pie Five Pizza
    Local Subway shop
    5 Guys hamburgers
    Firehouse Subs
    Muscle Grill
    Papa Murpheys
    Local Greek resturant
    Twin Peaks
    Zoes Kitchen
    Olive Garden
    Red Lobster
    Local BBQ joint
    Small Local Mexican
    Big local Mexican returant
    Local Chinese buffet
    Local Chinese restaurant
    Ginger Sue’s Breakfast Dinner
    Spin Pizza
    Buffalo Wild Wings
    Texas Road House
    UNOs Pizza
    Sushi Bar
    Long Horn Steak
    Jason’s Deli
    Cracker Barrel
    Taco Via
    Granite City
    Joes Crab Shack
    First Watch Diner
    Whole Foods Tap Grill
    Thai Resturant
    Local Burger Joint

    4 High End:
    Johnny’s Steak House
    Local Japanese Restaurant
    Upscale Asian Fusion
    Local restaurant upscale

    • TheDona says:

      Similar here but we have a lot more high end. One thing for sure is that Chic fil A is hands down always the busiest place in town (we have 2 within a quick drive). Packed from the time they open until they close. They have traffic cops on the last day of school (or when they do free meal if dressed as a cow) as it gets so congested as to block traffic. They must be doing something right.

      • Petunia says:

        I don’t eat there but I heard they are doing a voter registration drive. It’s a big deal in Florida and the dems are screaming like they are serving little children on slices of bread.

    • nick kelly says:

      This is what I was referring to: it’s a fact one third of US food budget is restaurants- mostly fast food of course.
      I will say however that Burger Kings 2 Whoppers for 6$ Canadian is a not bad fast food deal.
      BTW: if you ever want a cheap fast food meal that resembles real food- Wendy’s baked potato and an order of chili is not bad.

  25. EVENT HORIZON says:

    The concept of a sit-down restaurant, with a server, etc. and which you leave a tip at the end was basically the result of a cultural expression of a particular demographic.

    As the demographics of an area changes, the culture must change.

  26. Grumpy says:

    OMG! I have never such a stack of comments. It would seem that food drink naturally take precedence over such unnecessary activities as elections. Way to go America, no wonder your obesity rates are skyrocketing.

    • Wolf Richter says:

      Did you look at the “stack of comments” on the preceding article? Nearly twice as high and full of government and politics. Check them out.


    • TheDona says:

      Here Grumpy….let me fix this for you:
      Vote Hillary- no more obesity and all insane corporate debts are given a second chance to keep the economy growing.
      Vote Trump-obesity is an American choice and screw the idiot companies.
      Vote for whoever….the actual economic handwriting is on the wall with the debt/theft factor. I personally prefer Trump because of his non status quo. Whoever wins is in for a bad History chapter.

      And by the way, the obesity rate is happening world wide as “Capitalism” creeps in. Or should I say Corporationism.

  27. Ben says:

    The restaurant industry has also overbuilt. In my area of South AL I’ve seen way too many new chains pop up over the past few years. Unsustainable.

    I work in the oil industry and have seen my wages drop 30% since 2014. Eating out has been one of many things I’ve had to cut back on.

  28. Funny, the only one on the list that I know is Ruby Tuesday, and I have never visited…. What are they all west coast? Mid west ?

  29. ML says:

    In London, UK, there are approximately 17,700 restaurants – not counting pub food and eateries wherever. Add in the thousands more that can be found elsewhere in the UK and it all adds up toma heap of generally over-priced junk

    Amongst my favourites was a local pub whose chef prided himself on using locally sourced ingredients. That I discovered meant buying them from a local supermarket, Tesco. As I told the chef, I wouldn’t buy food from Tesco so how you’re expecting me (people) to pay several times the price just because you’ve cooked it. The pub closed down not long after.

    I agree with a comment above. My wife can also cook better than 90% chefs so when we (occasionally) go out to restaurants to eat we expect the menu, the ambience, the service and most important the food to be considerably better than we have at home.

    • polecat says:

      I just picked a bunch of saffron crocus flowers … from my yard ….

      … snipped the stigmas from the blooms …and are now drying as I type …

      saffron …the most expensive spice by weight !!

      but easy to grow ….. just ONE example of what one can do to enhance a future meal, instead of buying mass-produced formulaic pseudo-food !!! ;’)

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