Chicago and chains

Does anybody know the reason why there aren't any large type chains in Chicago outside of the downtown area? Far from complaining (I think it's great) but with Best Buys and Home Depots and the like popping up all over it makes me think there is a law prohibiting places like Chiles, Applebeas and Olive Garden. I'd love to believe it's because of a low demand for those places but I find that very hard to believe.

I sort of remember hearing/reading once that such a law did exist but I'm curious as to it's wording (if it does indeed exist).

I suppose I know what you mean regarding Applebees, Chiles and the like, but certainly Chicago neighborhoods are awash in chain dining places -- McDonald's, Wendy's and other fast food spots, Domino's Pizza, IHOP, Dunkin Donuts, etc. And there are the Golden Nuggets and other similar Denny's-like chain places sprinkled all over. I also would guess (but have not researched the issue) that an anti-chain restaurant ordinance would be constitutionally suspect. There would likely be a valid argument against such an ordinance based on Commerce Clause and/or equal protection principles. While it may be acceptable to regulate businesses as a group (e.g., you can require business licenses, submittal to inspections, etc.), all businesses in a category more or less have to be treated equally, not discriminated on based on who owns them -- especially if the way you draw the line is local versus out-of-state ownership argument (which would be the primary distinction between most "chains" and local, Chicago restaurants). That, for example, is the principle applied in the U.S. Supreme Court's recent ruling that State laws banning importation of wine by individuals were unconstitutional in States where similar laws did not apply to in-State wines. One interesting upshot of this branch of Constitutional jurisprudence is that it does not require a State to allow out-of-state businesses to operate in-state, if they also ban the same business activities by in-state businesses. So, for example, as the article linked to above indicates, Virginia is not impacted by the Supreme Court's recent ruling, because they already allowed every resident to purchase one bottle of wine a month by mail, whether from in-Virginia or out-of-Virginia sources. Maryland also was not impacted by the ruling, but for the opposite reason -- in Maryland, it is against the law for residents to purchase any wine by mail, from any source (in-Maryland or out-) -- which while backwards, stupid and draconian is just as acceptable under the U.S. Constitution. So, getting back on topic, if Chicago wanted to ban chain restaurants, it would probably have to ban ALL restaurants, locally owned and out-of-Illinois or Chicago owned. Or at least that's my hunch on how it would come down; I'm no Constitutional scholar, that's for sure. (I assume for this argument that the legal surrogate for "chain" would be "out of state ownership," not just "several restaurants with common ownership and/or franchise system," because the latter approach would wipe out Al's Italian Beef, Golden Nugget, and many other local Chicago restaurants with multiple locations). As George H.W. Bush used to say, "Not gunna happen."

I should have been more clear and said larger chain restaurants.

I agree that it would be constitutionally suspsect. However, it does appear to be the case. It could be done legally, I think, if it fell under zoning and the law was written to keep out ANY place that employs a certain amount of people or has a occupancy over a certain amount. Yes, there are tons of fast food and smaller chains, there aren't any big ones (outside of Mag Mile area). I think operating at a smaller scale is something that these larger business either can't do and be profitable or the risk isn't worth the small potential reward.

And liquor licenses would be another way to stop the chains. As discussed elsewhere at length, the Chicago Mayor's office has a fairly strong aversion to businesses that sell liquor, at least more so than in the past. Because Chile's, Bennigans, Friday's etc. all sell liquor (and probably depend on liquor sales to remain profitable), that's another way the City could slow their growth. By the way, there used to be a Bennigan's in Presidential Towers (across the street from my office building) that went out of business when it lost its liquor license (apparently they got caught selling to minors); so it's not just a theory, the City HAS targeted and eliminated at least one chain restaurant using the liquor license approach.

Right. Which means that the city DOES want to slow their growth, which is great.

I've been doing a bit of research and it does seem a lot easier than one might think to ban chains on all or certain levels in a city or neighborhood. I haven't found anything about Chicago doing it except that it's interested in doing it in Andersonville (not just food related either).

Well, I don't think the City's problem with that Bennigan's was the fact that it was a chain and I don't think that closing one Bennigan's shows the City has taken a stance on the issue of chain restaurants; it really had to do with the sale of alcohol to minors. But assuming the city did want to ban chains, it could do so not by banning chains per se, but by regulating and disallowing the things chains tend to do or certain characteristics of chain stores (e.g., as you suggest, zoning restrictions that disallow stores over a certain square footage or with more than "X" employees). Another way to zap the chains would be to have a "living wage" ordinance that required hourly workers to get at least say, $10 per hour, plus some level of benefits -- but put in a reasonable "mom and pop" exemption for establishments whose ownership has fewer than 50 employees (i.e., not 50 per store, but 50 TOTAL). Make the requirement only apply to the "Big Guys" (who ostensibly could afford it by getting rid of one of the corporate jets, etc.), which sounds like a reasonable regulation. Then, as Allen Funt used to say, Let's watch what happens!

Applebees, Chiles and the like

I will suggest in addition to the legal barriers within Chicago, residing within city may not fit within their business plan.

In the suburbs, these chain restaurants are usually on the frontage road edges of malls with lots of convenient parking. The density of the city with expensive land values and property taxes may not allow such roomy and relatively inexpensive sites.

Just this afternoon I was meeting people at Lincoln and Armitage. Hunting for parking was a good 15 minutes. It was quite discouraging to go onto the side streets to find you needed certain stickers to park. I finally found a sticker area with a 6 PM to Midnight prohibition, but hardly vehicle friendly like a good ol'suburban mall parking lot.

Regards,

Cathy2 wrote:
Just this afternoon I was meeting people at Lincoln and Armitage. Hunting for parking was a good 15 minutes. It was quite discouraging to go onto the side streets to find you needed certain stickers to park. I finally found a sticker area with a 6 PM to Midnight prohibition, but hardly vehicle friendly like a good ol'suburban mall parking lot.

Regards,

We try to keep out the suburban riff-raff.

I think that Cathy2's post is pretty close to the truth. I am going to have to be very vague, since my memory isn't always the best, but in an article I read a year or two ago--maybe about Scooter's Frozen Custard--the question of "why no Kopp's in Chicago" was addressed.

Apparently in their business model it was a requirement that they have a certain sized parking lot immediately adjacent to the restaurant, and the restaurant itself needed to be pretty large. I would imagine that this is a requirement for many of those restaurant chains' franchising agreements, or whatever you call those things, and hence the lack of many of those ur-suburban restaurant chains here in the city. Or in any big city. I guess the parking lots that McDonalds and BK get are just too small??

Now that I think about it, there is an Applebee's in St. Louis, but it's in an "urban suburb" and real estate is not NEARLY as expensive there as it is here in Chicago...

Well, part of the problem is, and not to start any city-suburb thing, but when you do not see something, it is more about the demographics of that restaurant, not an aversion to chains in Chicago or even in downtown Chicago (and by downtown I mean the greater downtown area).

We could name a lot of "chain" or corporate places within this zone.

Maggiano's
Bandera
Big Bowl
McCormack and Schmidt
Sullivan's Steakhouse
Roy's
Ruth's Chris
Portillo's
McDonalds
Houilihans
Dave and Busters
Fogo de Chao
etc.

These people take a lot into account when they build a restaurant. It is interesting that there has been a movement out of the downtown area of mid-range chain places such as Houston's, TGIF, Bennigans, etc. But it is simply, I believe, a question of sales per square foot.

PS
Good topic!

So far nobody seems to have noted the brutal competitive situation for restaurants in Chicago. A lot of these chains depend on not having too much competition except for other chain concepts. Hence the tendency to locate in outlots or strip malls in areas where the population is growing rapidly and there aren't many entrenched competitors. Randall Road in Kane County epitomizes this approach. In contrast, imagine what would happen to an Olive Garden plopped on Irving Park Road within a few blocks of Sabatinos even with the new condos.

Quite a while ago The Wall Street Journal had an article on Applebee's strategy of placing restaurants in large towns/small cities where the trading area's population ran in the 10-30 thousand area IIRC and where no other family or casual-dining restaurant existed. These areas could support one and only one restaurant of these types, so the first one there would keep the others out. The article struck me at the time as a good strategy for Applebee's as it was to avoid competition that could do a better job.

Some of the higher-end chains have done pretty well in Chicago while others, such as Spago and Fog City Diner, have bombed. Vital Information includes some good examples of ones that have done well. Execution and value count for a lot when competition as as strong as it is in Chicago.

So far nobody seems to have noted the brutal competitive situation for restaurants in Chicago. A lot of these chains depend on not having too much competition except for other chain concepts. Hence the tendency to locate in outlots or strip malls in areas where the population is growing rapidly and there aren't many entrenched competitors. Randall Road in Kane County epitomizes this approach. In contrast, imagine what would happen to an Olive Garden plopped on Irving Park Road within a few blocks of Sabatinos even with the new condos.

I understand the attraction of the idea that people would not eat at a chain unless there was no other choice, but I do not expect that is at all what is going on here.

I used to know someone who was responsible for acquiring sites for chains, and there are a number of formulae involved. But, in the end, for most of the mid-market chains, a lot of it is just about volume versus the cost of real estate. If you can find a location on route 59, or Randall Road which gives you the same volume as a location in the loop, but your real estate cost is 1/3, where would you build first?

I do not believe it is about competition from non-chain places. Quite the contrary, many of these places look for locations with existing restaurants (chain or not) as proof of the viability of the location. And if one is an Olive Garden, is the bigger competitor going to be Chile's or Sabatino's? I am pretty sure they would say that it is Chile's (is that the right spelling?).

At Fox Valley Mall, or whatever the current name of that place is, there are probably 12 restaurants within a mile, 2/3 chains. 17 if you include fast food places. 1 or 2 close and are replaced each year. I do not think they are looking for a less competitive location, even if I wish I could believe that quality will squeeze out corporate crap. Sadly, it does not seem to be the case. Red Lobster and Olive Garden just chug along.

Just my opinion, though.

I'm not quite sure if the following fits here: (btw: not opening a pizza debate)---

Included in my pizza vocabulary are the Pizza Huts(thin crust), Little Caesars(sadly, I've yet to find a decent one in Chicago), and Papa Johns(somehow not quite pizza, but a yummy pizza-esque product) of the world.

Living in Wicker Park for several years I had easy access to the Division/Ashland Pizza Hut which despite it's seemingly perpetually-stoned drivers and long waits always provided decent fare.

Now on the lakefront my commercial pizza choices dwindle to Chicago-style(which I rarely crave), the execrable Dominos, and the equally abysmal Edwardo's---sidenote: I'm not big on "healthy" pizzas, but Edwardo's really makes me pine for the, speaking of potsmoking staff, actually, pretty darn tasty wholegrain pizzas of my college years. Edwardo's is just meh. I also gained a taste for Papa Johns(which I hated originally) at university in the early-90's.

---my point: no Pizza Huts in/on the Gold Coast, none.
Their website says they'll deliver, but upon contacting them turns out; nope.

Last year it appeared a Papa Johns was going in close by the Near North Library on Division. Mysteriously, frustratingly, it vanished partway through completion. No Papa Johns in the city proper it seems. I'd kill for some of their "garlique" sauce, a craving that possibly won't find much commiseration on this site.

All of which leads me to ponder whether there's some subtle law protecting Chicago's vaunted mom n pop pizza palaces from the big, scary Papa Johns of the corporate forest.

As a retired economist I would be very surprised if chains don't look at existing competition in estimating sales volume for a location. Competition affects both unit volume and dollars/unit. Entrenched competition is a formidable barrier to entry, to use economist speak. In most places in Chicago proper but away from downtown, many of these chains simply cannot get the revenues that they can in a rapidly developing suburban location. Now add higher costs for many things including direct and indirect real estate costs and the projected rate of return on investment looks poor.

Another barrier is that many chain restaurants with company-owned outlets are run by people who live and work in suburbs or smaller cities and who simply don't understand urban markets. The same applies to a lot of other retailers as well. Obvious exceptions are the higher-end chains with city roots. Even that doesn't always translate too well in Chicago: New York prices and attitude can kill.

ekreider wrote:As a retired economist I would be very surprised if chains don't look at existing competition in estimating sales volume for a location. Competition affects both unit volume and dollars/unit. Entrenched competition is a formidable barrier to entry, to use economist speak.

I'm certainly not an economist, practising or retired, so I'm not disputing your well reasoned post as to why a company might not want to locate near an established competitor. As an alternative, though, I thought I had read many years ago that when Wendy's was agressively expanding they shortcut the long research time on locations by simply targeting places where McDonald's had a presence. The theory being that MickeyD's had already done the extensive research and that Wendy's felt they could compete head-to-head successfully against them in what was most likely a quality location (giving a nod to McD's research capabilities if not their food/customer service).

Location is indeed an interesting determinant in choosing an establishment. I know that for gas stations where there are several competing outlets on the same corner/stretch of road I'll frequently pick the one that doesn't require me to attempt to cross traffic even if it isn't my brand of choice or if it costs a couple pennies/gal more. I wonder if people might use similar thought processes when choosing which McHardeesBell to visit.

Kman wrote:As an alternative, though, I thought I had read many years ago that when Wendy's was agressively expanding they shortcut the long research time on locations by simply targeting places where McDonald's had a presence. The theory being that MickeyD's had already done the extensive research and that Wendy's felt they could compete head-to-head successfully against them in what was most likely a quality location (giving a nod to McD's research capabilities if not their food/customer service).

I heard the same story about 10 years ago, except I heard it was Burger King. At the time, I did notice a larger number of BK's that were built across the street from McD's.

Tim

FYI: there is a Chili's on Ontario at State. there's also a Red Lobster, California Pizza Kitchen, P.F. Chang's, Rock Bottom, Houston's and a Buca di Beppo, among other chains within a short walk of this area. So, it's not that downtown or the Gold Coast is devoid of these types of places. I think that they stand out less because (1) they are less noticable than when located in standalone suburban strip mall locations and (2) they are not the only options when spread among that area's concentration of "less-corporate" places.

Frankly, I think what we'll see is that higher tourist traffic will generally mean more sit-down chains available. Like Simon said, gold coast/river north have a fairly large number of chains, both large and small... they just aren't as obvious.

I think places like the Hard Rock Cafe, etc, have shown us that most tourists prefer the familiar when on vacation. This is why you can have an Olive Garden in Times Square that is, apparently, thriving. I believe the NYTimes did an article a few years ago about that exact location, but I'm sure I won't be able to find it.

Edit: I found the article, and they actually are still giving it away for free. Whoda thought.

Chains Bring Strip Mall Flavor, Or Lack of It, To Manhattan

-ed

The article in the NYTimes also said, though, that chains were popping up in other, less-touristy, places. I wish I could find the article too. If I remember correctly, the reason for big national chains (Chile's, Olive Garden, etc) were moving into New York was that there was a demand for them based on the amount of non-New Yorkers living there who grew up on these chains. Since it was in the food section there was plenty of commentary on this and how strange it was for people to want to live in the city and pay more money to eat inferior food at places like Olive Garden.

CMC wrote:If I remember correctly, the reason for big national chains (Chile's, Olive Garden, etc) were moving into New York was that there was a demand for them based on the amount of non-New Yorkers living there who grew up on these chains.

And now that I've found the article and re-read it, you're absolutely right. A lot of them are popping up for recent immigrants from suburbia, and a lot are for locals who just, well, want the consistency of the fare -- even if it's consistently watered-down. (edited because I apparently made up the midwestern suburbia part)

One other factor driving the phenomenon of chains in NY, especially in the midtown area is the preference for tourists to eat somewhere familiar, non-attitudinal, non dive where they are comfortable.

As a recent migrant from the NY area, I've found it interesting to see the number of local "mini chains" in the Chicago area, something I never saw back east.

It's not about chain restaurants, per se, but about the business planning driving locational decisions. In Sunday's NY Times, there was an article about the first CostCo to open in Brooklyn, how CostCo didn't see the underlying demographics to support the location, but were convinced by city officials drawing their attention to the large numbers of immigrants employed in the underground economy in the catchment area.

CostCo took the plunge, and apparently it's now one of the highest grossing locations they have. Census data has its limitations......

I'm going to have to look up that NYT article re: Costco. My understanding is that the demographic mix Costco looks for does not lean to (presumably lower income) immigrant communities. On the contrary, I remember reading that the average Costco member has a median family income in excess of $80,000. I suspect that gentrification in Brooklyn was a primary force in deciding Costco's location.

Edit: the following article supports my assertion: http://www.icsc.org/srch/sct/sct0703/page1b.html

"The median age of Costco’s members is 51.8, and they have a median income of $85,000. That’s well above the U.S. medians of 35.6 and $41,000. More than 42 percent of Costco members earn upwards of $100,000 yearly, versus just 12.2 percent nationwide."

Simon wrote:I'm going to have to look up that NYT article re: Costco. My understanding is that the demographic mix Costco looks for does not lean to (presumably lower income) immigrant communities. On the contrary, I remember reading that the average Costco member has a median family income in excess of $80,000. I suspect that gentrification in Brooklyn was a primary force in deciding Costco's location.

Obviously, Costco needs a "footprint" as the realtors would say that would not fit in Manhattan. I think the feeling is that people would come to them, not so much that the locals would support it.

I think the same thing happened in Chicago several years ago. Target opened its first Chicago location near Logan Square. Hearsay was, this became the highest grossing Target store in the nation. Like Costco, Target targets a different demographic than say Sam's Club or K-Mart (even though price wise each is close to each). But Target also needed a larger spot for its store.

I think all we are saying in this thread is, that no band of consumers is resistant to chains, smarter than chains, or otherwise more sophisticated.* It is rather that there is a chain for all purposes, the chains no this, and settle accordingly.

Rob

*One could write ad nauseum about all of the chains that are in Manhattan both now and historically.