The Last Stand of the Independent Restaurant
Last month, The Wall Street Journal ran a front-page article about how difficult it is for independent restaurant operators to compete against the onslaught of national restaurant chains. The piece focused on David Schy and his eight-year-old, downtown Chicago restaurant, Hubbard Street Grill, which closed in June. Schy’s 200-seat grill performed well until Smith & Wollensky, Rock Bottom Brewery and a host of other national chains began to surfacing all around him.
Despite a valiant effort to fight off the chains, Schy eventually threw in the towel, telling the Journal, "We’re [independent restaurants] a dinosaur. It’s all going to be chains."
His concern is legitimate, though likely exaggerated by his dissappointment. Last year, for the first time ever, chains captured a majority share (50.6%) of the $269 billion restaurant market.
It’s clearly a tough time for independents, particularly those in tourist-heavy towns like Chicago. The struggling economy and the decline of business travel after September 11th hurt everybody, but particularly the small guys. Chains, with dozens and even hundreds of units, can carry struggling units until a recovery comes. Not so for independents.
There is little hope for average or weak independent restaurants. The national chains are doing well because they have lots of money, economies of scale and, most importantly, they’re good at what they do. They’ll bury so-so independents within months.
But there is hope. Most of the big chains are good, but they’re not great. Superior independents can survive. Even Shy concedes that the chains could not hurt his lunch business because he was able to craft a menu designed specifically for his regulars. An independent has the ability to make adjustments to the market much quicker than the large chains.
On other fronts, independent restaurants are beginning to band together to form collectives that allow them to buy goods and services at lower prices.
And there’s plenty more they can do. How about takeout and prepared foods? There isn’t a day that goes by when I don’t receive some bit of information about how people just don’t cook at home like they used to. The latest comes from a survey conducted by Madison Direct Marketing, which found that 82% of parents with kids under five eat takeout or delivered meals at home at least three times a week. Madison also reported that this group loves semi-prepared meals from supermarkets and specialty food stores.
Many of these adults were likely your customers before they had kids. Have you lost them because you did not adjust to their lifestyle? It’s something to consider.
I’m sure many of you independents have strategies that help you compete against the big chains. Whaddya say you share them with your fellows in arms? Send me an e-mail and I’ll pass them along. I had more than a couple good meals at Hubbard Street Grill over the years. I’m sorry it’s gone. If you’re an independent, it’s time to take a stand.