Friday, January 11, 2019

Tough times for chain restaurants

Bloomberg predicts 2019 will be a tough year for chain restaurants with rising labor costs and falling consumer demand.  I live in a section of Cary where Carrabba's, Five Guys, Romano's Macaroni Grill, and TGI Friday's have all closed their doors within the last year.  What gives?

Overall demand for food continues to grow with population, income and other factors.  Chain restaurants are getting a smaller share of a growing market.  Also there is no evidence of a surge in visits to the fresh produce and meat aisles of groceries.

The prepared food market has become more competitive thanks to grocery store delivery, meal kits by mail and food trucks.  Food trucks have a particular competitive advantage in their lower fixed costs and ability to relocate to meet customer demand.  We also could be seeing a shift in consumer preferences away from mass-market menus.  The generation that disdains Bud Light in favor of microbrews could very well be giving the same treatment to chain restaurants.

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