Is the Chain-Restaurant Recession Becoming Structural?

A 15-month downturn, longest since 2009, and no end in sight.

There’s simply no respite for chain restaurants. Industry-wide, same-store sales fell again in May. The last time, same-store sales actually rose year-over-year was in February 2016. On that basis, the chain-restaurant recession is now in its 15th month, the longest downturn since the Financial Crisis.

In May, same store sales fell 1.1% year-over-year. Same-store foot traffic fell 3.0%. Food sales were down, and alcohol sales were down, according to TDn2K’s Restaurant Industry Snapshot, tracking sales at 27,000 restaurant units from 155 brands, generating about $67 billion in annual revenue. But the average amount of the check per person increased by 2%, and not because they ordered more food and booze, but because prices rose.

Florida was the least bad region, with same-store sales up 0.1% and foot traffic down “only” 1.9%. Texas was the worst region with sales down 2.4% and foot traffic down 4.3%. Of the 196 markets, 140 (71%) experienced sales declines.

The report – as the reports in prior months – is perplexed by the long downturn:

Recently, there has been an upturn in retail spending on most goods and services. That stands in stark contrast to the continued decline in sales growth at restaurants.

This change in consumer spending patterns was identified about a year ago, and how much longer it will continue is unclear.

Now the hope is that year-over-year sales comparisons this year will look less bad based on the “relatively soft sales” last year. That has been the hope for months, and it hasn’t happened yet.

But the pain is not evenly spread in this sector, according to the Restaurant Industry Snapshot:

Dine-in sales have been negative year-to-date, but to-go is up 2.9%. Sales are also up in catering, delivery, and drive-thru.

Breakfast and mid-afternoon sales offer continued opportunities for growth, while lunch and, especially, dinner sales continue to stumble.

While sales in May were “weak across all segments,” the fine dining segment “was able to achieve very small positive same-store sales growth.” Until May, that sector had done well. Now it too is losing its edge.

All segments were weak, but the least weak were at the top of the price spectrum (“dining experience”) and at the bottom (“value and convenience”). Everything in between was particularly weak.

The weakest performing segment in May was casual dining. This was a bit unexpected since the segment showed improved performance during the first four months of 2017 after lagging the industry for several years. Casual dining has added a modest number of new units, but same-store sales declines have contributed to its overall loss in market share.

Despite weak sales results year-to-date, fast casual continues to win the market share battle. It gained the most share in the first quarter of 2017 compared with the same quarter a year ago. Aggressive expansion has driven total sales growth, but increased competition and market build-out have undoubtedly impacted same-store sales for the segment. The only other segment that gained market share year-over-year was quick service.

The chain restaurants’ 15-month travails contrast with overall sales at “food services and drinking places,” according to Census Bureau retail data. In 2016, sales at these places rose 5.5% to $657.8 billion. In April, the most recent data available, sales rose 3.9% year-over-year to a record $56.6 billion:

Since January 2010, nominal sales at “food services and drinking places” (then at $37.5 billion) have surged 51%, in part due to price increases: Over the same period, the Consumer Price Index for “Food away from home” has jumped 19%.

From December 2007 through January 2010 – when employment plunged by 8.6 million – nominal sales at “food services and drinking places” were essentially flat. But the Consumer Price Index for “food away from home” rose nearly 8% over those two years. Hence, on an inflation adjusted basis, sales were down sharply!

So the 3.9% sales increase at “food services and drinking places” in April has to be juxtaposed to the Consumer Price Index for “food away from home,” which rose 2.3% over the same period. So “real” growth in sales was something close to 1.6%, with chain restaurants likely dragging down the index.

Who is to blame for the travails of chain restaurants? The sitting ducks are, as always, the Millennials. There is already a long list of what they have been “killing”: brick-and-mortar retail, democracy, handshakes, America, yogurt…  you name it, they did it.

But Millennials have been around for a while, and the chain restaurant debacle just started in March 2016. So it’s unlikely they triggered it, though their lack of enthusiasm for chain restaurants might not help much either. And I doubt that sending them to chain-restaurant reeducation camp would help much.

Instead, it looks more like the beginnings of a broader structural change. Brick-and-mortar retailers have been getting hammered by a structural change that will never reverse. Chain restaurants too may feel the pressure from a change in where, what, and how consumers eat and drink that will leave chain restaurants that cannot adjust to it by the wayside.

This comes on top of an economy where many potential patrons of chain restaurants simply don’t have enough discretionary income after paying for all essentials – with costs for healthcare and housing surging – to prop up that industry.

After private equity firms spent years asset-stripping their brick-and-mortar retailers, the effects are becoming clearer. Read…  Brick-and-Mortar Retail Meltdown Has a Busy Month

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  110 comments for “Is the Chain-Restaurant Recession Becoming Structural?

  1. Mr. Millenial says:

    McDonald’s just can’t get millenials money when it all goes to that irresistible advacado toast! Why they don’t sell a McVacado is beyond me, and with the way things are going, Advacado trees are a asset class that is way under valued. I fully expect China to move to dump cash into them by 2018, and advacado backed securities are the future. People will let the mortgage fail, but the advacado is here to stay!

    • jb says:

      Lets’s extrapolate further : A crypto currency backed by avacados; ‘avacadocoin’ or ‘Pitcoin’. green gold of the future . /sarc

      • r cohn says:

        Your currency example at least was backed by avocados;it would have some value.Bitcoin and its competitors are backed by absolutely NOTHING .Their movement reminds of a line from Macbeth.

        “It is tale told by an idiot,full of sound and fury,signifying nothing”

        • Dave says:

          The US dollar is essentially backed by nothing also, and once the Petrodollar system collapses it will be backed by nothing.

      • Wolf Richter says:

        A cryptovocado?

        • e markus says:

          That Avocado refrigerator I was going to put at the curb……I’m now thinking Ebay Vintage for a mere $1200.

    • two beers says:

      Mr M: spell check in aisle 1, please.

    • Christin says:

      To explain this on a Macro level.. I think we have started to hoard our cash… Do you know why ??? because inflation is ripping us a new one! Food has gotten high as shit!! So, it’s high as shit for restaurants as well. I went to buy a 1/2 gallon here in FL it was $5.89 .. it was organic, but damn last year it was $4.89..

  2. Kf6vci says:

    Well, i’ve thought about the “value” of recent restaurant visits. Fine dining and SUBWAYS (in the UK, often at outlets inside gas stations).

    About 8.80 € for a footlong with a cup for soda drinks (refill).
    What’s the alternative? KEBAB places or supermarkets. They stock delicious “mix yourself” salads with cheese flakes, cumbs and dressing besides sandwiches. Add a 1.5 liter bottle of sparkling water with 60% apple juice for 0.74 € (0.25 refundable recycling fee included). ** Food prices are shockingly low in Germany and the UK compared to The Netherlands! I guess those supermarkets near Rotterdam would kill to buy retail at ALDI and LIDL). Water? 0.19 € – vs 0.79 €. Own brand soda 1.5 liter 0.39 -vs- 1.09. Juicy oranges 1.5 kg 1.79 € -vs 3?

    Makes one wonder how good the EU’s common market works?!

    Q: how do you spend your money? Do you just eat out and not mind the budget? I hate to cook and warm up something at best. Like a pizza Funghi (2 x 375 gr for 2.49 €).

    Mc Donald’s in big cities has a woman at the toilets, collecting money. And yes, they do have $ 1 classic burgers but they are too dry.

    Yesterday, at a KEBAB outlet in a small town, I observed young teenagers buying small soda cans @ 1.75 € each. Supermarkets & shops have to stay closed in Germany. But on a working day, they could have gotten about 6 x more Coke for the money.

    One thing is for shure – I’ll be eating out less and less to save $$s.

  3. Mc says:

    They first need to be sent to brick and mortar reeducation camps, after that auto industry is next. Followed suit by Wall Street, and then it would be the chain restaurants turn to EAG Kate doe be sent to brick and mortar reeducation camps, after that auto industry is next. Followed suit by Wall Street, and then it would be the chain restaurants turn to re-educate the millennials.

    • Erik M says:

      That’s RIGHT ! Those darn millennials need to worship at the foot of baby-boomers bloated “assets”. I mean, all that perceived value. If some fool doesn’t step up and buy mcmansions, and big screen tvs, and gas guzzlers; boomers may realize they aren’t the “special” generation their parents said they were.

  4. John Griffith says:

    The prices at the chain restaurants, at least in middle America, do not justify the experience – food, service, ambiance. Fast food we can take home, or a high end experience we can afford as a unique once in a while time is what is left.

    • Meme Imfurst says:

      That is an excellent point, actually all your points. “fast food” joints and chain restaurants are boring and there is no satisfaction outside of ridding you of hunger pains. It is very sad that Wall Street has plastered this crap wall to wall in America and perhaps the world, even in exclusive tourist towns.
      The grocery has fast food, the gas station has fast food (yuk), it is everywhere you want to be or not.
      The sad part is we are actually food poor.

  5. MC says:

    I remember before the 2008 Subprime Crisis a common saying was even in booming economic times a restaurant had 50% chances to close its door in the first two years of operation.
    This is due to the extremely competitive and even brutal nature of the business: competition abounds, trends and fashions change and you are a sitting duck for changes in legislation (just one example: labor laws) which may chew into your already thin margins.

    The last few years seemed to have changed that. I read in the article a single index traces 155 nationwide restaurant chains… even in a country with as large a population and as much disposable income as the US that seems excessive. In a normal, growing economy the total would have been closer to 100 as the least competitive chains would have been long eliminated through acquisitions and bankruptcy and institutional investors would have looked somewhere else instead of blowing money on yet another seafood restaurant chain.

    To quote Malcom X however “the chicken are coming home to roost”.
    All those nationwide restaurant chains have to compete not only among themselves but with a host of small establishments and local chains owning a handful of locales in a single State. Competition, lulled to sleep by financial repression which allowed unprofitable establishments to stay afloat longer than they deserved, is once again rearing its “ugly” head.

    No matter how much disposable income a person has, he can only eat at a single restaurant at a time. Unless one is St Anthony of Padua, of course.
    If before there were 10 restaurants jousting for his money, after several years of “Damn the torpedoes! Full steam ahead!” there are now 15 or even more. As foot traffic decreases for obvious and not so obvious reasons, some of them will be tempted to gut their margins a bit more to gain customers. Local legislation changes (minimum wage hikes, soda sin taxes etc) may gut those margins even more.
    Servicing debt is at an all-time low but not everyone is Tesla or Uber, meaning sooner or later its financial backers will lose patience when the promised scrap of yield will struggle to materialize.

    • Hiho says:

      Right, but I do not think that people in the usa have as much disposable income as you say, with health care, education, debt overhead, big pharma, privatized utilities and real state bubbles extracting you rents like no tomorrow

  6. George McDuffee says:

    Where’s Jon Taffer now that we need him?

    • DH says:

      Lol. We were laughing about this the other day. A nearby place has changed it’s name 3x since Taffer “fixed it” a couple of years ago.

    • MC says:

      And today I learned a profession called “bar consultant” exists.

  7. Kenny says:

    In the LA area eating at a restaurant will cost you 9% restaurant tax and 15% gratuity and that’s on top of price increases.

    • Enquiring Mind says:

      Many restaurants provide helpful tip amounts on bills, starting at 18% (18%!). That is one way to shift the personnel cost further toward the customer, while rationalizing no benefits, shorter hours and lousy wages.
      Here is a new twist. I was in a chain restaurant last week that had a little automated order/pay device. That included a tip function, and the math didn’t add up. Their 15% tip was more like 30%. I tested out the endpoints (0%, 100% tip) to see if there was some clever algorithm, but no such luck, just a big markup.

      Now I am tempted to return to that restaurant, sit in a different booth and see if the next device also has that fault. If so, are other restaurants perhaps peddling some phoniness, or maybe their rogue device vendor is getting a piece of the action? Who knew that there was vigorish on a meal out!

      • Pavel says:

        Some restos pull the same trick in MTL when one pays with a card. There are “suggested” tip levels e.g. 18%, 20%, 25%. What is really cheeky is that they seem sometimes to be adding the tip to the meal fee plus the local taxes (about 15%). Am I supposed to be tipping the government tax collectors as well?

        Yet another reason to pay cash.

      • prepalaw says:

        I always give the tip in cash – never more than 15% and mostly 10%. The waiters have never shunned cash and are always glad to see me.

    • jb says:

      that’s an eye opener : 9 % restaurant tax . is that imposed by the city or county ? is it charged on fast food or certain types of food establishments ? ANY other areas in the US that have the tax? how about the food truck ?

      • Mike G says:

        It’s sales tax. 9% in LA city.

        • Pavel says:

          Not sure about in LA, but as I noted in an earlier Wolf posting when I was in San Diego the restaurant added 3% charge to make up for the increase in minimum wages. That was along with the sales tax of course.

          Of course to be realistic they do have to raise their fees to cover their increased wage costs. The flip side is that an already-stressed consumer is going to find another reason not to go out, or to go somewhere cheaper.

        • Mickey says:

          My daughter was married in cook county 7 years ago. The sales tax was 11.25% on the catering bill.

          No tax on the band.

      • Meme Imfurst says:

        Florida…. my town has two. One for eat in and one for carry out.
        Anything that has value added, has a tax. Peal me a grape, that is value added.

    • tony says:

      Many restaurants in california have a restaurant tax to cover new increase in minimum wage law.

  8. unit472 says:

    I think the change from mall shopping to on line shopping has some impact too. If you went out to the mall for some shopping going to a restaurant to eat was part of the deal. It was no accident that restaurant chains clustered around the mall. Now many malls in terminal decline those restaurants are going to be hurting too.

  9. Dave says:

    I am not a big fan of casual dining chain restaurants, quality is mediocre and menu is predictable. If I am going to eat out I do an internet search of best places to eat in the particular region I am visiting. I usually focus my search on specific types of food as well, such as Mexican, Thai, etc.

    I find that this results in a much better dining experience then a TGIF or Applebees, as there was a time in the past where I did go to those types of places and always felt I had wasted my money while I was eating!! Hence why I changed my approach.

    With the internet you can find good eats at non chain restaurants with less risk of getting a bad meal.

    • DH says:

      Absolutely. It’s one thing to grab a bite on the run, but, if I’m sitting, I’m gonna try to actually find a good restaurant.

    • Mary says:

      A diminishing customer base for those big restaurant chains sounds like good news to me. Their profits lie in menus tilted towards carbs, salt, sugar and fat. In the process they’ve habituated many Americans to a diet that virtually guarantees obesity. Walk through any big mall and note the number of overweight kids and teens especially–truly depressing.

      Restaurant chains flourished because they provide a predictable, consistent product. But with Yelp, etc. reviews, you can discover local places where you are likely to get much better food for the same price. If Dennys, TGIF, etc. went broke tomorrow, we’d end up being a healthier, better-fed country.

  10. Val says:

    Completely agree that Yelp etc are partly to blaim. The strength of chains is that you know what you’re going to get. But millennials want to be surprised? We’re more willing to take small risks like tacos El grullense over ho hum chains…

  11. Boo Randy says:

    I worked at a family-owned restaurant all through college, and saw first-hand how the big restaurant chains and their lobbyists rig the game against the little guys. After that I only patronize the chains when I travel, and only then if I can’t find a locally-owned joint.

    • Paulo says:

      I always try and hit a locally-owned place when I have to eat away from home. The last chain resaurant I stopped at was to meet an old friend for a visit. He picked the place. I made sure I ate at home before I left for town; fresh eggs from our hens, home made bread/toast, bacon, V8, good dark roast coffee. mmmm. Then, we met up later at 10:00. I had a poor bulk coffee for 2 bucks and he had swill….some sort of egg mess in a bowl with flacid toast. He couldn’t finish it the meal was so bad.

      The first clue it’s going to be terrible is when you walk in. It’s a chain for God’s sake, but there is a hostess to lead you through a nearly empty room to a gaggle of captives waiting for service. It’s always by the kitchen to save their walk time. At that point it would be best to just walk on out the fire escape door and save the gouging.

      • Pavel says:

        Paulo: you sound like a scholar and a gentleman. (Or “gentleman farmer”).

        My general philosophy is to try to avoid restaurants with plastic menus. They are the absolute opposite of the small e.g. European independent places which create daily menus based on what is available fresh at the market.

  12. Mickey says:

    The gov reported 30,000 new restaurant jobs last month, when traffic is down and carry out is up.

    That means fewer servers and lower gratuities.

    • Gershon says:

      In our Obama-Fed-Goldman Sachs “recovery” since 2008, most newly created jobs have been low-wage, no-benefit waiter and barista jobs, while living wage jobs were offshore or disappeared. Now even the server jobs are going away.

      Heckova job, Ben & Janet.

      • TJ Martin says:

        Correction . Most ‘ new ‘ jobs since 2001 have been contract labor , low wage , part time etc jobs both in the service industry as well as across the board .

        If its a scapegoat you’re looking for and blame you’re needing to place then place it firmly upon the shoulders for whom it belongs . GWB & Co and their misguided attempts to mitigate the immediate financial effects of 9/11 rather than allowing the market ( and the country ) to recover naturally and normally from the tragedy as it would of on its own … not to mention then lowering taxes in the midsts of starting two eternal futile wars

        Suffice it to say everyone from the Intelligence community right on down to the financial sector said there’d be hell to pay for GWB’s ill conceived ‘ recovery ‘ … and here we are . Right in the depths of every mistake they made

        But hey … betcha y’all completely forgot about that one now .. didn’t ya ;-)

        • Kent says:

          I’ll take it back to whomever appointed Greenspan.

        • Brian M says:

          The problem really dates back to the early 70s and the Powell Memorandum class warfare program.

          That and the reality that the “American Dream” of mass consumption based on industries facing no real competition was impossible to sustain. Especially when the elites decide to play casino gambling games rather than run real industries.

  13. DK says:

    The graph is amazing to me. Even during the Great Recession , sales only flattened out for about 18 months. Almost looks like a graph of gov hiring.

    • Wolf Richter says:

      Remember, it’s not adjusted for inflation. During the two flat years, inflation in that sector was 8%. So in real terms, sales declined by something like 8%.

      • DK says:

        8% of $38B would drop the graph down to about $35B. Graphically, that would still look pretty stable given that dining out is a luxury.

  14. Mickey says:

    That restaurant report indicates 28 straight months of declining traffic. Thats getting to be a long time.

    That has consequences.

  15. James says:

    I paid 99 bucks for a full year at planet fitness with no annual fee. PF never advertises this special at all. Once a month they give out free pizza and free bagels and gourmet coffee. If you eat a few slices and wait right around 7pm they will give out whole pies.

  16. TJ Martin says:

    Here’s the piece of this ‘ report ‘ that has me flummoxed ;

    ” Recently, there has been an upturn in retail spending on most goods and services ”

    Really ? Where ? In someone’s delusional wishful thinking dreams perhaps ? Suffice it to say here in the Rocky Mt region retail spending has hit the skids from from high end to low .. from cars to appliances right on down to the local TJ Max bargain basement bin . Everybody’s desperate for business . And one look at the national ads what with all the deals – zero interest – free this or that etc says everyone else is in the same boat as well

    Honestly .. is it any wonder these analyst wing nuts are perplexed and confused ? Perhaps if they spent a little more time on the ground and a little less hiding behind a screen their confusion might be abated a bit .

  17. Pavel says:

    What about the gig economy food delivery services? It is a huge thing in London and when I was on hols in France recently the city we were in (Lille) was swarming with Deliveroo and Uber Eats cyclists. The cyclist makes a minimum wage (though lots of exercise at least) and the customer gets the food but the restaurant doesn’t get the profits from the booze. The kitchen chef is busier than ever but the wait staff don’t get the tips. Ultimately a recipe (ha ha!) for disaster.

    Re Kenny above and LA prices — they really are piling on the taxes, aren’t they? Always a bit of sticker shock when the bill comes with the restaurant charges, taxes, etc and then a tip on top.

  18. Bee says:

    Oh jee-whiz now it’s the Millennials’ fault that sh/tty restaurants are losing sales. But whose fault is it that the Millennials ain’t got no money? The GD Boomers! Who shipped the d@mn jobs away? Not the d@mn Millennials.
    Oh man, we even killed democracy. I kinda thought that went away before we were even old enough to vote……………………………….
    To quote H. Ross Perot, “Hear that giant sucking sound?”. It ain’t a nasty side-effect of the food poisoning at the local *any-name chain restaurant*!
    Like I said before, I feel my generation is kind of like that of the Depression. I’d rather eat a healthy, home-cooked meal rather than showing off my new sweater/ring/Escalade at a big-chain, no-taste joint.

    Was that sarcasm, Wolf?! If so, a real knee-slapper!

    • Petunia says:

      My son is willing to drive across town to eat at Chipotle, so not every millennial is anti chain restaurant.

      My biggest problem with the casual dining places is the staff. They are not well trained and you can tell they don’t really care about their jobs. I miss the days of a professional wait staff and I can say the same about retail sales staffs. Most of them spend all their time on their smart phones. Maybe this is why people just get take out.

      • Bee says:

        Isn’t that the place with the well-publicized food poisonings? Lol.

        A Boomer relative invited two of her Millennial children and me over for a visit/games—they all were glued to their phones for nearly the entire time; it took all of me not to chew them out. I really have no desire to go back after that. The cell-phone thing is affecting all of society (*just* watched a Yukon XL-driving mommy on some big phone thing plugging away).

      • Pavel says:

        I agree 100% about the smart phones point. It really irritates me when I’m trying to be served in a restaurant or bar and the staff are all staring into their phones and updating their Facebook page or whatever. Apart from anything else it is just depressing to look at. I was at a place the other day, where two waitresses were sitting at the counter *literally* for 30 minutes, each staring into her phone and without saying a word. I guess they were on their break, but it was pretty sad. And this was a pretty stylish place.

        • Paulo says:

          Definition: A mobile phone jammer is an instrument used to prevent cellular phones from receiving signals from base stations. When used, the jammer effectively disables cellular phones.

          Add: Jammer…The Price of Silence

          In Canada…$300 :-)

          I plan to get one and use when required. They fit in your shirt pocket and look like a phone. Just flip it on and presto!!!

        • nick kelly says:

          Re: jammer. I have no idea how this thing works but most
          jammers work by transmitting on the same wave length as the signal they wish to jam.

          If so with this device, beware of unintended consequences, including legal ones.

    • OutLookingIn says:

      It seems the “blame game” is alive and doing well, in most comments about this subject.
      Follow the KISS principal:


      Dig down into the data, no matter which economic sector you choose to pick, at the base you will find a stinking, rotten pile of indebtedness.

      For society to turn their anger inwards against each other and commence inter fractional war with each other, is the ultimate ‘wet dream’ for the controllers. We all live in glass houses – so STOP throwing stones!

      • Bee says:

        Hey, my response was just self-defense. You expect us all to sit here like wounded puppies taking abuse year after year? It’s not like I called for raiding your 401k…………yet. Haha :)

    • Wolf Richter says:

      Yes, it was sarcasm – including the bit about sending Millennials to “chain-restaurant reeducation camp.”

      • Bee says:

        I figured it was somewhat tongue-in-cheek, but you did link to a BuzzFeed article, so didn’t know what to think of the Millennial paragraph…

  19. nick kelly says:

    Report in the Globe and Mail a week or so ago recommending against shares of Restaurant Brands, the mother ship of Burger King, Tim Hortons (Canada) and Popeyes. Buffet is a major investor.

    There is a lot of unhappiness among franchisees. In Canada it is an organized group called Great White North.
    They claim the franchiser is pushing costs on to them while lowering quality of ingredients they must purchase from former.
    Some of the old Hortons guys look back fondly on the old days when they baked from scratch instead of getting dough delivered, but the newer guys are likely more upset at their cost per donut.

    Burger Kings’ complaints were about very aggressive promos from HO that they couldn’t make a profit on.

    This doesn’t surprise me. In this city BK is always cheaper than McD.
    The 2 Whoppers for 6 $ C has just been replaced by 2 Big Kings for $5.
    The latter isn’t that big but each is a double burger.

    I appreciate these as a consumer, especially the Whoppers, but it doesn’t look very profitable.

  20. Hiho says:

    Millenials would go to restaurants provided they had enough money. It is not a cultural problem, it is an economic problem.

  21. r cohn says:

    Actually this trend is not a surprise
    Prices are rising faster than the officials stats from the government.
    While the top %20 have done well enough in the stock and housing markets to offset this overall price rise,most people have not directly benefited significantly from the increase in the prices of these assets.The lowest %80 have no choice but to decrease discretionary purchases.

  22. beadblonde says:

    Any self-respecting millennial will avoid chain restaurants if at all possible. It all depends on available funds. It’s well known that chains are for rubes. Big food, big advertising. Perhaps an exception for BW3 on game day

  23. Jarhead John says:

    My experience with chain restaurants is that meal quality has deteriorated to the equivalent of nothing more than a glorified MRE…Which, by the way, can still had for a $10.00 bill…

    • TheDona says:

      Jarhead, almost all meals in chains are out of a bag or a bucket from Sysco…so they are MREs.

  24. Kent says:

    I have a friend who inherited a Cuban/Mexican restaurant which is a gold mine. Place is always packed. Food is decent. But the real key is the big $2.00 margaritas. $3.00 for a double-shot. The second margarita costs the same. The third costs $8.00.

    His goal is to get you in with Margarita’s, feed you, and get you out before your drunk. The City made him expand parking because cars were parked down the street messing up traffic. Chains could never pull that off.

  25. TJ Martin says:

    Wolf . Refocusing on the automotive side of things . You read this yet ?

    Holy cow pies Wolf ! Gotta tell you being a long time AW reader .. when AW does a negative article like this … it really is time to start worrying

    • TheDona says:

      TJ, wow that is a frightening article! 84 month loans?! And upside down to begin with?! Would love to see a breakdown of demographics of who these idiots are.

      • Petunia says:

        We are the demographic that went 84 months with $4K negative equity and it was a good deal for us. Old car had a 24% interest note which we were able to reduce by more than half, mileage was almost 100K which we reduced to 0, and payment was even a few dollars lower. If we had kept the old car we would have had to put over $2K of work into it and it would not have outlasted the rest of the old note.

    • Wolf Richter says:

      People ridiculed me a year-and-a-half ago when I was warning about these things


    • nick kelly says:

      RE: consumers want ‘new vehicle technology’

      Like Bluetooth, back up cams. more cup holders?

      This is not new auto technology, it is selling bells and whistles because there is no new technology. Unless you count the proud announcement on US cars a couple of years ago that the fuel injection was ‘Multi-point’ like German etc. for last 20+ years.

      Latest BS styling item: the rear lights continue into the trunk lid. This requires wiring it too, with flex harnesses for each side.

      In the latest Civic, who you’d think would know better, they’re really run amok with this idea. The rear lites are shaped like two horns that start on the fender, and arc into the trunk lid ending in points like antlers.
      Butt ugly!

      • Brian M says:

        Japanese design has become just horrible. The new Prius has to be the ugliest vehicle on the market. It makes the old Pontiac Aztec look graceful.

        No wonder the Koreans (and Chinese) are slowly taking over so many market segments.

    • Dan Romig says:

      OK, so I want a new car that costs $60,000, and I buy it on credit for a seven year loan. After a year or so, the car is worth maybe $40,000 to $46,000??? To me that does not make sense.

      My folks on the other hand go to the Lexus dealer and pay cash for a clean three-year lease back still under warranty, and trade up every two or three years. That makes sense to me.

      In the Twin Cities, many of the chain restaurants in suburban malls are hurting. While the completion is definitely there, the restaurants that are chef owned and run are succeeding because the quality per dollar is a hell of a lot better than TGIF or Applebee’s.

      Buffalo Wild Wings, headquartered in Minneapolis, just had a shareholder meeting and ousted the CEO Sally Smith.

  26. Lotz says:

    Nasty food being served at the USA places. Transfat and diabetic hangouts. Among the worst is “doctor owned” subway with the MSG problem (fake chicken scandal), Waffle sh*thouse with the transfat and sugar overload, jersey mike who sold out his sandwich franchise to become a bread dispenser with tiny toppings. The list goes on…..

    The experience isn’t there either so who wants to go to these outhouses for CEO pay.

  27. Roman T. says:

    Maybe it depends where you live but I know a few people that avoid eating out due to health concerns. They don’t trust the health dept. to protect us from poor sanitation, poor training on cleanliness and actual spreading of disease from low wage workers that are often not citizens in some cases. It’s a real thing and talk to a retired health dept. official sometime. Problems are rampant and most depts. are under staffed.

    But this demographic may not even register on the charts.

    • Rg says:

      That’s an age old problem. I lived in the D.C. area back in the 80s. I would get food poisoning about every six months due to the food handlers that had just “gotten off the boat.”

  28. Erik M says:

    Guaranteed Minimum Income for Everyone is necessary.
    In a few years, there will be millions unemployed as we won’t need truckers any longer, due to self driving trucks. Retail, we’ve all seen the numbers of unemployed, and with automation it’s only going to get worse/better.

    Guaranteed Income for EVERYONE is necessary.

    • Bee says:

      Bring it back down to reality, Elon.

    • Jarhead John says:

      Sign me up @ $250,000K per annum… :-)

    • Ethan in NoVA says:

      With basic income prices will just rise on basic needs to take that money too. Like the rise in house prices when women joined the workforce.

      • Erik M says:

        Houses didn’t rise in price because women joined the workforce, or rather increased in volume. Houses or Real Estate has been in an irrational bubble for the last 35 years. But not in all places. Look at Japan, even many places in the U.S.

        Without a rational reason for a rise in prices, people don’t put up with it.
        If everyone, that means everyone, started receiving $24,000 a year and prices for a groceries went up 10 fold with no reason , people would not put up with it.

        • George McDuffee says:

          It appears there is some misunderstanding of the mechanics of the “basic income” as proposed by most advocates, and the amount of “new” money released into the economy will be significantly less than first appears. It will however redistribute a significant portion of the free cash flow, at least initially, into the less fortunate/affluent social strata before it inevitably trickles up to the 1%, with the side effect of stimulating consumer spending.

          IIUC the 24,000$ (or whatever) annually is not in addition to the current social safety net cash and most “in kind” payments but in place of them. The need for some social safety net costs, such as subsidized housing and medical care (unless a single payer plan is adopted as in Canada), will continue, but with the GAI [guaranteed annual income] much of the current administrative burden, such as “means testing,” will be eliminated. [It should be noted however that the impact of the elimination of these social service jobs does not seem to have been considered.]

          Operationally, given the multitude of social safety net and economic readjustment programs that currently exist, in many ways we in the U. S. already have a GAI. However it is highly inefficient/effective, and requires grossly excessive numbers of personnel to administer and “operate.”

          The implementation of the GAI is an overt admission that increasingly large numbers of people are not needed in the existing socioeconomy, as it is currently structured, but must be provided for somehow if we are to avoid permanent and increasing civil unrest, e. g. Chicago and Detroit.

          More than likely significant amounts of “social work” and “social workers” will still be required, but will be able to devote most of their time to (re)education/(re)socialization, counseling, interventions (e. g. minimizing child/spousal abuse), teaching the self control of anti-social behavior such as anger management and avoiding excessive drinking, and how to constructively (or at least non-destructively) participate in society instead of “bean counting.”

          This will be a “Brave New World,” far different from the current one based on the age-old “scarcity” model, and will have its faults and problems, but the future is [rapidly] coming no matter what we do, as artificial intelligence, robotics, and automation are upon us.

    • Petunia says:

      Get ready for the Wall Street parasites to garnish every bit of that guaranteed basic income. Charles Murray, of classic bell curve fame, has written on this topic, so I can already feel the boot on my neck.

  29. Ehawk says:

    I see a lot of people complaining about the increased cost of going out and the extra fees… and the 15 mo. lag. Just wait till the $15 /hr wage. Do you think our burger will cost the same?

    Also.. some restaurants add like a 2.5-4% to the bill to pay health care costs…
    Why don’t they just add it to price of the meal?
    Why should I pay extra if they are not MY employees?

    Never going back to any of those places that charge that.

    • Hiho says:

      Yeah your burguer might cost the same, who knowns. Since dinning out is such an elastic product, owners won’t be able to transfer the cost to the customers.

      Be that as it may, when it comes to wage increases, they are pointless if you allow the fire sector to keep this rate of rent extraction.

      • Ehawk says:

        Nope, They WILL transfer the cost to the customer. You can take that to the bank.

        They can’t afford not to do it. People adjust to prices in increments…

        Their wallet won’t notice since they all pay with credit card. Most people are thousands in debt anyway.

    • Erik M says:

      That’s how irrational pricing works. We won’t pay it.

      • George McDuffee says:

        We already pay those prices. The difference being that the difference is much of the cost is not paid at the register but when we pay our taxes (plus a “small” handling fee ;-( ).

        • Erik M says:

          If something is too expensive, the majority won’t pay it.
          That’s a HUGE thing for manufacturers. The last thing they want is a backed up inventory system and sinking revenue. Consumers have more sway than they think.

          Look what’s happening with the Auto industry. As has been pointed out in other articles, the changing dynamics is causing large stockpiles of unsold new cars. If the dealers can’t convince people to over pay for these piles of petroleum burning scrap metal, and that’s happening, there’s going to be many more problems there.

  30. Mark says:

    There’s a great book called “Coming Apart” by Charles Murray that I think covers a part of this. His central thesis is that America is segregating itself into separate cultures based on class and income, where the new upper middle class lives a lifestyle that’s so different from that of the working class they no longer can really relate to the working class.

    The death of fast food and mass market casual dining fits his thesis: the new upper middle class culture and above are the only classes with disposable income, and they do not visit these places – period. They may have fast food on a blue moon as a treat, but certainly not frequently or even occasionally. And they wouldn’t be caught dead in an Applebees, Fridays, Red Lobster, or Olive Garden. Among my cohort of late 20s – early 30s, urban, well-educated, professional friends, these restaurants are a laughingstock. Nobody would eat there unless they’re the only place open in an airport at midnight or some similar situation.

    • hiho says:

      The members of this elitist upper-middle class are going to learn the hard way that they also belong to the working class.

      In fact, there is no such a thing as the middle class. It is just a hoax to prevent working people from realizing that they are just that: workers.

      On top of that, at the end of the day they might be even more screwed than ordinary blue-collar workers given the debt burden they have in order to be able to afford this pretentious life-style.

      It’s just hilarious to see these “professionals” looking down on ordinary workers and making fun of them (as though they were not, lol).

      The lifestyles of both these groups (workers and workers who do not see themselves as workers) are going to converge must faster than you think, and it will be poetic justice.

      • Cynic says:

        Very true: the Great Delusion, which is now coming apart.

        If truly upper-class, one has to screw-up big time with drugs and drink in order to fall.

        Even then it will probably be arrested without hitting the stony ground below.

        The ‘middle class’, however, are in fact just a few life events away from disaster, however prudent they may be.

        They belong, temporarily, to an economic category, not a caste.

        Big difference.

    • Smingles says:

      “The death of fast food and mass market casual dining fits his thesis: the new upper middle class culture and above are the only classes with disposable income, and they do not visit these places – period.”

      I have a hard time believing that.

      Walk into a 5-Guys, and I’m pretty sure your thesis gets blown apart. Plenty of “have-nots” paying $14 for a burger, drink, and fries. Why? Because they have a good reputation, despite being a chain.

      There are too many other factors to pin the “death of fast food and mass market casual dining” on income, alone. It just simply doesn’t explain it all.

      I’d bet you that a graph of soda sales in the US would fit pretty nicely over a graph of mass market casual dining sales since 2000. Soda sales peaked in 1999. Are people not buying soda because they have no more discretionary income? Or are there other factors at work, and are some of those factors partly responsible for the dent in casual dining sales?

      • TheDona says:

        Other factors responsible for dent in casual dining:

        Fresh ready to eat pick up items in the grocery stores. Meal to go for a family of 4 with flank steak, sautéed veg and salad for 10 bucks for one example.

        Cheap whole in the wall restaurants that do one thing well. Non english speaking place close by has $1.50 tacos that are so big I can only eat one. Finally tried their chicken enchiladas and for 6.99 it fed 2 people. Four enchiladas stuffed with what looked like a whole chicken. Pho place only charges $7 for noodle soup bowl but it will feed 2 people.

        Convenience stores. Eight quesidillas for $4.00, Sausage hot dogs for $1.50 (and they have a fresh toppings bar), sandwiches for 2 bucks, subs for 3. They also have decent looking packaged salads and fresh fruit. I notice it is not just lawn and road crews buying. Lots of teens, and sales people it appears.

        That will put a dent in fast food chains and fast casual.

  31. raxadian says:

    The US has one of the worst healthcares in the world, and is just getting worse. People can’t afford to go to eat out because they fear losing their jobs and they fear getting sick and not being able to pay the health bills. That leads to people more and more saving money not for a rainy “day” but for a rainy “year”. The US has more and more old people dying richer than when they retired because of their fear of rising heathcare costs.

    What’s the worst nightmare for the current US economy? Is not a bubble popping but the current president screwing things so much that big companies will move out the US.

    If the Euro zone starts a policy of making things easier for said companies that the president is making angry, they could move there.

    Of course realistically speaking that’s very unlikely to happen with the Euro zone current trend of chasing tax dodging companies, but is something to keep in mind.

  32. Lee says:

    After I retired I suddenly discovered that if I ate at home I didn’t have to pay 9% tax, or a 20% tip.
    Sometimes I even fix an expensive, time consuming meal just so that I can save myself even more.
    Who woulda thought that home cooking could be empowering?

    • Wolf Richter says:

      Lee, there’s another “Lee” commenting here frequently. Could you add an initial or something else to your name to help us keep you guys apart? Thanks.

  33. LT says:

    Some of the news and footage on the internet over the last few years brought to my attention that some restaurant employees “will act out” against customers due to nothing more than how they look. At the risk of being “politically incorrect”, what I’ve read and seen online have made me permanently more aware about who is preparing food for me and my family. There are some restaurants that I will not go to ever again, and many of those are chain restaurants. So for my household, yes it is structural and no I’m not a millennial. Surely I’m not the only one.

    • Petunia says:

      I know exactly what you are talking about. The employees think that bragging about mistreating one customer doesn’t turn off the rest of the customers. They are killing off the businesses they work for and their own jobs.

  34. Ehawk says:

    The thing that gets me the most is that they (service personal ) a 20-25% tip on top of the bill…Lol

    I went to Buffalo wild wings on a Tuesday night. things to note:

    a) They sat us down right away but they took forever to take our order.
    b) They screwed up our order (our order went to another table)
    c) They corrected it by bringing the wrong flavors
    d) It took forever to get a re-fill for their ($3.80) lemonades
    e) I ask for water and it took 10 mins to get it… I was choking) too late
    f) I asked for more dressing she forgot.
    g) they’re apology was… “sorry about that”
    h) so… f… you. I left (one) $1 dollar tip!! on a $45 tab.

    So of these chains trade in the stock market… and they want me to supplement their employee pay… uhhh nope not gonna happen.

    I will tip around 10% for small mom and pop sit down restaurants (think Mexican or Thai family operated.

    People have tried to Shame me for not leaving a tip on these chains…( with psychological talk) blahh

    I pay the price + tax… tip is optional for me.

  35. Kevin Beck says:

    My personal suspicion about the decline of casual dining is that it is trapped in a bad place.

    The fine-dining restaurants (some) will survive, because they provide an experience, in addition to just the food, which is difficult for the home cook to replicate.

    The fast-food restaurants will survive, because everything with them is about cost: Not much cost for basic calories.

    This leaves the casual-dining restaurants, which are in a no-man’s land, where you get food that any good home cook can emulate at three times the price of getting the ingredients in a grocery store. Along with the noisy kids running around the dining area. And the noisy rock music blaring out against the hard surfaces, making for an uncomfortable experience.

    Does anyone really want that? You get marginal food at a high cost, along with terrible atmosphere.

    This theory was based upon James Howard Kunstler’s book, The Long Emergency, where he predicted (back in the 1990’s) the death of Suburbia. It already seems to be working its way through shopping malls; I just followed it along to the casual-dining restaurants.

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