24/7 Wall Street: Consumers Abandon Some Chain Restaurants

Wednesday, 18 Dec 2013 11:36 AM

By John Morgan

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Some of what were once among America's largest chain restaurants are now shells of their former selves, losing as much as 50 percent of their sales and closing hundreds of their locations.

Perhaps proving that what is not new is old hat, at least in the world of food franchises, 24/7 Wall Street concluded some of the chains simply have not adapted to changing times and tastes.

Darren Tristano, executive vice president at Technomic, a restaurant industry research firm, said many of the struggling restaurants are victims of harsh competition. The majority of them are full-service restaurants.

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The declining restaurant brands suffer from an aging image and business model, Tristano told 24/7 Wall Street.

“Today, if you’re not updating your restaurant within, say five to eight years of the previous update, you’re falling out of favor.”

Topping the list in shrinkage from 24/7 Wall Street — or perhaps hitting bottom the hardest — is Bennigan’s, which had posted a 90.4 percent drop in sales to $62 million by 2012, in the process shutting down 250 restaurants.

24/7 Wall Street said the pub-themed chain suffered from an “increasingly outdated brand” and at one point after filing bankruptcy closed all of its restaurants, and has since opened some new ones on a selective basis.

“They have tried to rebuild the prototype that’s more contemporary and on-target with trends,” Tristano said. “But to date, it really hasn’t blown the doors out or grown. They just continue to see some of the weaker links in the chain fall off and close down.”

Steakhouse chains have been hit especially hard in the chain restaurant category.

Lone Star Steakhouse, Ponderosa/Bonanza and Black Angus Steakhouse have all seen sales drop by more than 50 percent in recent years, 24/7 Wall Street reported.

Lone Star has shuttered 140 restaurants, Ponderosa/Bonanza has closed 238, and Black Angus has shut down 63 locations.

The restaurant chain struggle have not been confined to a particular cuisine. Other prominent decliners include TCBY, Tony Roma’s, Fazoli’s and Don Pablo’s.

The Financial Times reported the broader U.S. retail category also faces difficulty at the chain level.

“It takes two sides to make a transaction and at the root of retailers’ problems is a supply glut they have created themselves. They have built far more shops than Americans need,” the Times reported.

The Times said data from the International Council of Shopping Centers showed that in terms of shopping mall space per capita, Germany has 2.7 sq. ft. per person, Japan has 3.9 and the United Kingdom has 5. But for every American shopper, there is 23.8 sq. ft. of mall space per person.

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