Chain-Chain-Chain…Chain of Fools!
You’ve done it! You’ve opened a successful restaurant or café and survived into profit-making time. Congratulations!
Now, your next step is likely to involve optimizing this success, the success of your brand and products, as much as possible. This generally means expanding, becoming a chain so that your loyal customers can get your brand wherever they are so that people across all the lands can get your excellent products, and so that you can become a national and possibly global entity the likes of Starbucks or Chipotle.
My advice right now, however, is simple and will probably be disappointing to you; that’s because my advice is: Wait.
The Trouble With Expanding Too Fast
Despite tremendously bad publicity in the past couple of years, Chipotle has been growing and adding stores continually, following the trend throughout the restaurant industry of rapid and exponential expansion. This is, in part, in response to previous statistics that showed that people were dining out significantly more than they ever historically had. As the recession receded, the restaurant industry seemed to be heading into a steady but noteworthy boom. That is, until 2016, when that incline turned tailed and started to become an ever-so-slightly noticeable decline. This trend seems to be continuing into 2017 as well.
Are There Too Many Chains?
Now, the real problem may not be that people are eating out less. In fact, it may just be that there are too many restaurants. It’s no wonder, with everyone expanding at the rates they have been that there may now be more restaurants than there is a need for them.
Now people have countless options when it comes to eating out, versus just a handful perhaps a decade ago. The decline in restaurant demand is showing itself already in restaurant closings nationwide. One of the biggest chain restaurants, Subway, closed several hundred stores last year and McDonald’s has even declared approximately 200 fewer stores than it had in 2014.
In addition to the overpopulation of restaurants in relation to actual demand, experts are citing other factors that are likely influencing where, when and if people decide to dine out. One, in particular, is another trend in much of the foodservice industry: the reliance on part-time workers. Part-Time employees are cheaper labor, generally; they are also on-the-rise because of the booming freelance economy. That being said, having a business that is populated mostly by part-time workers means having a business that is more likely to have less engaged employees who have less of an idea of what is going on. It also can mean far less consistency in the day-to-day operations and services provided by the business.
It’s Just Cheaper to Eat At Home: “Honey Pass, The Trader Joes Everyday Seasoning, Please.”
Further, it is becoming less and less expensive to invest in groceries and prepare food at home than it is to go out to eat regularly. The price of eating at home has started declining for the first time in almost a decade whereas the price of eating out is increasing; in fact, it is rising at a higher rate than the cost of eating at home is decreasing.
Grocery stores are jumping on this trend and upping their competitive capabilities when it comes to restaurants by offering more and more prepared food options. That way, buying groceries does not necessitate that someone is able to cook (or cook well) to benefit from the lower prices. Even my niche vegan cheese shop has jumped on this prepared food wagon, offering pre-packaged vegan foods in higher numbers than the sandwiches we workers have to prepare and the plain old ingredients someone would have to compile together to create a meal.
2017 so far has seen places like Chili’s lose over 6 percent of their traffic; and, while Starbucks and McDonalds saw an increase in overall sales, they also saw a decrease in total traffic. Sit-down chains like Outback and Carrabba’s have also seen guest attendance numbers sink already in 2017 as well.
Supply & Demand Kicks Back In
The number of restaurants is growing significantly faster than the number of people eating out at restaurants, which is probably actually holding steady, or just barely starting to decline.
All that being said, some businesses are still thriving, and experts say that is likely because they are the ones among all the competing noise which are the best hearing and serving their customers’ needs. Domino’s, for example, has actually seen an over 10 % increase in guest attendance and sales in 2017’s first quarter.
Starbucks to hire 10,000 Refugees. Starbucks Cups in a row at a Starbucks Coffee Shop.
How Are Businesses Fighting the Decline?
One thing to consider is that corporations and businesses are getting into the political conversation more and more. Starbucks, with its increase in sales, if not in traffic, can be noted for outwardly resisting the anti-immigrant and anti-refugee rhetoric of the new US president when its owner, Howard Schultz, announced that he would actively seek refugees to employ at his stores. Starbucks is also, anecdotally, the coffee shop I frequent most when working my freelance jobs because they consistently have outlets, wifi, a restroom and products I’m familiar with, as well as seating.
Domino’s, on the other hand, has seen a huge increase in stock value since 2008, when an infamous scandal rocked the chain nationally. Since that year, the company has focused on transparency and authenticity in its marketing and its relationships with consumers. In 2008, Domino’s stock was $5 per share; as of May 1st this year, it was $180 per share. Keep that in mind if you’re starting a fresh new business, considering expanding, or strategizing for the foreseeable future. The expansion is not always the best way to expand profits; consider focusing on what you’re doing right in your present situation, and investigate the market phenomena that you’d be dealing with if you did expand.