Tough Times For Restaurant Chains?

This is an excerpt from an article in yesterday's LA Times (free registration needed to read the entire piece):

"...P.F. Chang's China Bistro Inc. recently reported a nearly 20% decline in third-quarter profit from a year earlier. Panera Bread cafes predicted that fourth-quarter earnings were unlikely to surpass those of 2006. Brinker International Inc., owner of Chili's Grill & Bar and other chains, reported a 21% drop in fiscal first-quarter profit.

IHOP fell short of Wall Street expectations last month when it reported an $11.6-million third-quarter loss, contrasted with an $11.3-million profit a year earlier. Its conference call with analysts and investors included repeated references to the "difficult economic climate" faced by the restaurant industry.

Sales at eating and drinking establishments grew 5.6% during the first 10 months of the year, the Commerce Department said, the slowest pace since 2002.

"We are all facing the same pressures," IHOP Chief Executive Julia Stewart said in an interview. "There are things you can't necessarily control: the rising cost of gas, commodities, concerns about the war, concerns about layoffs. What usually winds up happening is that people look more selectively at their trips out of the house, and we are fighting for the same dollar."

National restaurant chains aren't the only ones feeling the pinch. Some smaller, local chains complain that business is even slower than it was in 2001, when the 9/11 terrorist attacks brought dining out to a crawl for about two months...."

Heck, I'm doing my part eating out.. although not as much with the chains.

I've posted before about the zone in Niles where a Ponderosa, Red Lobster, Arby's and Burger King became (respectively) Korean, Greek (Periyali), Middle-Eastern (Pita Inn) and Mexican (El Sueno).

That's a good sign, from my point of view.

If anything, the mid-end chains are the ones likely to have problems -- the Family Dining segment such as TGIMcWhatever's up to the pricier options like PF Chang's, Wildfire, etc. At the top (Ruth's Chris-style steakhouses) and bottom (Jimmy Johns, Steak and Shake) they seem to be doing well. Just another case of the rich getting richer and the poor getting poorer setting up strata.

Some Corporate Wanker wrote:"There are things you can't necessarily control: the rising cost of gas, commodities, concerns about the war, concerns about layoffs. What usually winds up happening is that people look more selectively at their trips out of the house, and we are fighting for the same dollar."

This may indeed be contributing to the problem, but perhaps the fact that the food sucks could (hopefully) be a big part of the reason for their business' nosedive...especially in areas where good mom & pop options exist. Maybe the chains will learn their lesson and up their game or (better yet) perish.

I hope Brinker disappears off the face of the dining scene. I recently viewed their website and annual report. Here are some choice tidbits:

From the front page of the website:
"We have been called the "mutual fund of casual dining" - stemming from our powerful and unprecedented portfolio of outstanding concepts which includes Chili's Grill & Bar, Romano's Macaroni Grill, On The Border Mexican Grill & Cantina,and Maggiano's Little Italy."

The front page does not mention anything about serving good food. As a matter of fact, the word food is completely absent from the page.

In their 2007 Annual Report we get this tidbit on rethinking Casual dining:

"In addition to the wide variety of food and atmospheres our restaurants offer, we’re also working to enhance value, convenience, and speed
for our guests. These are three key factors driving our guests’ dining decisions today. And of these, value may be our most important differentiator. After all, value isn’t just about the price of the food – it’s about the total experience."

Value, convenience, and speed = important. Taste of food, apparently not so much.

Kim

stevez wrote:This may indeed be contributing to the problem, but perhaps the fact that the food sucks could (hopefully) be a big part of the reason for their business' nosedive...especially in areas where good mom & pop options exist. Maybe the chains will learn their lesson and up their game or (better yet) perish.

Also, the stupid chains are all offering basically the same stuff - isn't differentiation covered in Business 101? I mean, they all (even Red Lobster) offer "steak" covered in goo (either mushroom-goo, or blue-cheese-goo, or both) they all offer blooming/blossom onions, questionably topped nachos, spinach-artichoke dip, cheese sticks, chicken caesar salad, margaritas, ethnically screwy egg rolls etc, etc, etc. If you closed a third of the southwest/steakhouse/pub clones, the remainder would probably survive.

It is called the sign of a slowing economy. No more, no less.