Posted on 10/03/2016 4:08:17 PM PDT by TigerClaws
On October 3, Garden Fresh Restaurant Corp., which owns Souplantation and Sweet Tomatoes, filed for bankruptcy. The company, owned by private-equity firm Sun Capital Partners, said it will close 20 to 30 of its 124 locations and put itself up for sale.
On September 30, Restaurants Acquisitions, the operator of Black-eyed Pea and Dixie House restaurant chains, converted its Chapter 11 filing to Chapter 7 liquidation. The bankruptcy court order noted the company had shuttered its restaurants and management had resigned.
On September 29, Cosi Inc., a fast-casual chain with 1,100 employees filed for bankruptcy. It closed 29 of its 74 company-owned restaurants and laid off 450 people. The 31 independently owned franchise operations continue operating.
Also last week, Logan’s Roadhouse, a casual steakhouse with over 200 locations, closed more than 10 restaurants, on top of the locations it had already closed in August when it filed for Chapter 11 bankruptcy.
Nine restaurant companies representing 14 chains have filed for bankruptcy since December: Garden Fresh Restaurant, Restaurants Acquisitions, Cosi, Logan’s Roadhouse, Fox & Hound, Champps, Bailey’s, Old Country Buffet, HomeTown Buffet, Ryan’s, Johnny Carino’s, Quaker Steak & Lube, and Zio’s Italian Kitchen.
Restaurants are precarious creatures. They lease costly space and have to invest in equipment and furnishings. It’s a competitive environment, with high expenses and little pricing power. To expand, they load up on debts. Some, like Cosi, always lose money. Customers are finicky and fickle. When new competitors come along, or when the economy tightens, customers thin out and creditors begin to fret and turn off the money spigot.
Some of that is normal. The restaurants come along, and old ones die.
“But the current wave of bankruptcies is definitely unusual, and rivals the chain bankruptcy wave of 2009 and 2010, when several chains filed for debt protection after sales fell,” writes Jonathan Maze at Nation’s Restaurant News, adding:
In this case, the wave of bankruptcies is largely due to a decline in sales at restaurant chains that is particularly harmful to companies that are already walking a balance-sheet tightrope. The companies that filed for bankruptcy recently were already weak.
Some are repeat offenders, including Buffets LLC (Old Country Buffet, HomeTown Buffet, and Ryan’s) which is now mired in its third bankruptcy. Many of them, battered by declining sales and rising expenses, have been losing money for a long time. But now things are coming to a head.
Restaurant bonds moved into fourth place early this year in Standard & Poor’s Distress Ratio, behind brick-and-mortar retailers and the doom-and-gloom categories of “Energy” and “Metals, Mining, and Steel.”
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Other restaurants are trying to hang on by cutting costs and shrinking their footprint, which entails more sales declines, and thus continues the downward spiral.
In August, casual-dining operator Ruby Tuesday announced that – after “a rigorous unit-level analysis of sales, cash flows, and other key performance metrics, as well as site location, market positioning and lease status” – it would sell its headquarters and close 15% of its 624 or so company-owned restaurants by September.
Clinton Coleman, interim CEO of Rave Restaurant Group, which operates Pie Five Pizza Co. and the Pizza Inn buffet brand, put it this way on September 23, after reporting that same-store sales had tumbled in Q4 and that losses had ballooned: “Sales trends in the fourth quarter were very challenging for the Pie Five system, as was the case in much of the fast-casual segment.”
The restaurant industry is not a sideshow. About 14 million people work in it, according to the National Restaurant Association. With $710 billion in annual sales, it’s an important part of consumer spending and accounts for about 4% of GDP. If the industry is having problems, it’s a red flag for the overall economy.
Its difficulties are not limited to just a few beat-up restaurant chains. The National Restaurant Association reported on Friday that its Restaurant Performance Index (RPI) for August fell 1% to 99.6 and is now in contraction mode (below 100 = contraction). It was the worst reading since February 2013.
The RPI’s post-Financial Crisis peak was in the spring and summer 2015, when it dabbled with 103. Its all-time peak, going back to its inception in 2003, was 103.4 in 2004. Its all-time low of 96.5 occurred during the depth of the Financial Crisis.
The index consists of two components:
The Current Situation Index, which tracks restaurant operators’ reports on same-store sales, customer traffic, hiring, and capital expenditures And the Expectations Index which tracks restaurant operators’ six-month outlook, including on the overall economy – more on that in a moment.
The Current Situation Index fell 1.9% in August to 98.6, the lowest since February 2013. Three of its four indicators declined: same-store sales, customer traffic, and labor.
Only 30% of the restaurant operators reported a year-over-year increase in same-store sales. That’s down from 71% in February.
But 53% reported a year-over-year decline in same-store sales. This metric has been deteriorating for months. In February, March, and April, between 19% and 38% of the operators had reported lower same-store sales. Then it ticked up: 42% in May, 43% in June, 45% in July, then jumping to 53% in August.
Operators also reported a net decline in customer traffic: while 21% reported a year-over-year increase, 59% reported a year-over-year decline. August was the fourth months in a row of year-over-year net declines in customer traffic.
And optimism is beginning to wane. The Expectation Index edged down to 100.6: “While the Expectations component of the index remains in expansion territory, it too has trended downward in the past several months.”
And operators are turning gloomy about the overall economy: only 17% expect the economy to improve over the next six months, but 29% expect conditions to worsen:
This represented the 10th consecutive month in which restaurant operators had a net negative outlook for the economy.
Restaurant operators as a group are an optimistic bunch – they have to be, or else they wouldn’t do it. But they also have daily intense contacts with consumers and are thus a leading indicator of the consumer-based economy.
In the beaten-up brick-and-mortar end of the retail industry, the meme has been that Millennials aren’t buying enough goods but like spending money on “experiences” – such as eating out. If that’s true, and not just an excuse by faltering retailers, it appears Millennials are not doing enough of that either anymore. Either way, the restaurant industry has been giving off increasingly loud warning signs about the overall economy, and the state of the consumer.
” Some dairy products have seen big declines.”
Tell that to butter.
Thank you.
This was the juiciest chicken I’ve ever had. And that includes the breast meat.
I forgot to say leave the skin on, it will hold in the moisture. Start checking the temperature after about 45 minutes. With a hot fire it’s easy to over cook and dry it out.
I posted a (not very good) photo on my facebook page:
https://www.facebook.com/john.pizzuto.90
I have that exact Wok.
But, without the cat!
Gotcha
Chunky Soups are one of a few things I miss while living in Norway. Potato/Ham and New England Clam Chowder. Yum. I waited til they went on sale at the local grocer. Even got them before they were put on the shelf and still in the plastic wrap.
Is 3% before the owner pays himself a nice salary or after?
If you consider the time involved it costs more to eat in that to go out.
That's going to piss off the Free Traitors™.
The problem is that food costs too much and cooking at home is not economical as it should be. Additionally the restaurants get BETTER quality of food than available at most supermarkets. They get the good stuff.
I nice thick rib eye steak costs 12 bucks at the Food Dog, how much is a What-a-Booger?
Before participating in the discussion, you might familiarize yourself with the categories. What-a-burger isn’t fast casual. It’s fast food.
And it sounds like you are paying too much for meat.
On average, your local grocery store will sell ribeye steak for $7 to as much as $15 per pound. For instance, a thick Angus ribeye could cost $12 to $15 a pound, while a USDA Choice steak can cost less than $10 per pound.
Read more: http://www.howmuchisit.org/ribeye-steak-cost/#ixzz4M7hO21OX
And a half pound hamburger at 5 Guys will cost you $6.99 at the local outlet. So almost $14 a pound for hamburger at fast casual. If you are paying more than $14 a pound for steak, you need to find a new market. Of course, 5 Guys will throw in some free peanuts.
So I’ll stick with my original comment:
“I can eat steak at home for what a hamburger would cost me at a fast casual restaurant.”
Did he get it back?
I don't know.
A boring franchise is also much much higher chance of success
I know folks who own McDonald’s and Chik Fil A
Both have net margins 20-30%
It’s location and brand in that order slightly
It depends on where people shop for groceries. If one lives in a smallish town, then the options are few. Conversely, if one is urban, one has more choices. Big cities also now have "urban gardens."
Restaurants might get better food in YOUR town but they don't in mine. One CAN get "better" meat and produce but one must pay for it. I imagine that in New York, for example, one can get ANYTHING, the BEST of everything, if one
1. knows where to go and
2. one is willing to pay for it.
How "good" do broccoli and spinach have to be?
Meats can be hamburger and stew meat. Nothing better than stew. I lived in Mexico two years and when I would return to the U.S. border every six months, I would ask my aunt [my uncle--my mother's brother, who worked on the Line] for BEEF STEW! Yum! Nothing better than good ole home cooked stew.
We Americans are spoiled with our choices in most urban areas. Those who home cook CAN come up with FABULOUS food if they choose. The T.V. cook shows are all about that and THEY abound.
NOT TOO MANY women don't know about Rachael Ray, Martha Stewart and the Hispanic cook shows. There is also Lidia, who specializes in Italian cooking. Lol. Obviously I do watch them.
There's also Ree Drummond, who cooks for her husband, children and a bunch of cowboys on their Oklahoma cattle ranch.
We Americans are also OBESE, as a nation, from WAY, WAY too much food. We also don't exercise as we did when we were a bunch of farmers and fishermen.
We can only blame ourselves for our problems. NO ONE forces us to cram down all that food and SIT on the sofa.
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