10 fastest-shrinking restaurant chains
Written by Jessica Clark on April 7, 2010 – 2:45 amThe economy may be thawing, but many families’ budgets are still tight. For many, eating out still means a Big Mac from McDonald’s () or coffee and a bagel at the corner store. That means a squeeze for casual-dining chains, those in-between eateries for families that don’t have tables waiting at white-tablecloth restaurants but like to treat themselves to more than fast food. When the economy is rolling, $8 to $20 entrees are enticing. When money is tight, not so much.
Casual dining is “one of the most impacted segments,” says Keith Gellman, who tracks the casual-dining industry for RestaurantChains.net.
Casual-dining chains’ operations are expensive. They require more dining and kitchen space than fast-food joints, not to mention more people to cook and serve food. At the same time, they lack the premium prices that upscale restaurants use to generate larger margins per table. Caught in between, the Bertucci’s restaurants and Country Kitchens of the world rely on volume, and it’s tough to draw customers consistently during a recession.
“Suddenly, these places with big space and big staffs have to cut prices,” Gellman says.
| Restaurant chains shrinking the most | ||||
|---|---|---|---|---|
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1 |
Black Angus Steakhouse |
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2 |
Casa Olé |
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3 |
Country Kitchen |
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4 |
Damon’s Grill |
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5 |
Carino’s Italian Grill |
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6 |
Western Sizzlin |
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7 |
Fazoli’s |
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8 |
Bertucci’s Brick Oven Pizzeria |
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9 |
Smitty’s |
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10 |
Pizza Inn |
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Same-store sales across the casual-dining chains have declined for four years running, a sign the industry is overbuilt. Yet few companies are closing restaurants in significant numbers. Larger chains figure they’ve got enough assets to ride out a downturn. IHOP, which changed its corporate parent’s name to DineEquity () after buying the Applebee’s chain in late 2007, has maintained about 2,000 Applebee’s and 1,400 IHOP restaurants despite a significant sales slump. The two brands combined for $1.4 billion in revenue last year, down from $1.6 billion in 2008. The company did trim some costs and debt last year to realize a $31.4 million profit, after a $154 million loss in 2008.
Industry analyst Lynne Collier of Sterne Agee says landlords desperate to keep tenants in place have bent over backward to restructure leases. “That keeps a lot of restaurants alive longer than they should be,” Collier says.
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