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.
“I can eat steak at home for what a hamburger would cost me at a fast casual restaurant.”
May I add: And cooked exactly the way you want it, you know the quality of the meat, what the sanitary conditions are to mention just a few of the conditions you have full control over.
My best reason is, cooking at home pretty much guarantees you won’t get that rushed urge to go to the bathroom 10 minutes after you’ve finished eating.
I didn’t say all millennials... I said the dregs thereof.
Unless I am alone and at the bar... the food is always cold. Except at the Olive Garden. Service there is always exemplary. The food, eh, it’s ok but not the best. But I will take hot over taste every time
A few minutes later, another couple were by us at a table that also had things waiting to be removed. I got up and moved the items off that table, onto another table waiting cleaning, and I then I wiped their table with a handi wipe, and again the waitress was laughing, and they got served right away also. It was a fun night.
Only Trump understand how to fix this partly by bring back the companies and factories that Clinton chased away with NAFTA
Trump will also reduced government regulations on companies so that they come back to America.That is a conservative plan. Only Trump can make America Great Again. If Hillary is elected the USA will become a 3rd world hell hole where poverty crime and disease are rampant as they are now in democrat party controlled inner cities.
The media has Americans brainwashed so that they don't understand that the country that has all the factories has all the production capability wealth and power. and Look at the rise of China to see this proven
work to get Trump get elected in battleground States like Florida and Ohio as if your life depended on it because it does.
I’ve seen one waffle house get boarded up and it has been for decades.
It’s by the Charleston Naval Hospital.
A friend of mine practically went broke there.
Only Trump understands how to fix this partly by bringing back the companies and factories that Clinton chased away with NAFTA
Trump will also reduce government regulations on companies so that they come back to America.That is a conservative plan. Only Trump can make America Great Again. If Hillary is elected the USA will become a 3rd world hell hole where poverty crime and disease are rampant as they are now in democrat party controlled inner cities.
The media has Americans brainwashed so that they don't understand that the country that has all the factories has all the production capability wealth and power. and Look at the rise of China to see this proven
work to get Trump get elected in battleground States like Florida and Ohio as if your life depended on it because it does.
I’m the guy who gets burgers at steak places. Steak is ok but I have never been wild about it.
A lot of theft must be going in these restaurants as well. There was a super busy place near me and it boarded up.
I am a security guard at a power plant. It does not pay much per hour but it is higher than other security work. The employee turnover is terrific and gets me a lot of overtime which my employer officially forbids but the positions must all be staffed 24-7. Most of the turnover seems to be younger folks who are only in it because they need a little money for something in particular or to pay off a bill they can’t get away from. Or they quit when they get tired of working for so little and go to another job where they wind up working for less. I try to point this out to some before they actually leave but it makes no difference. Once they have a little money they quit. I don’t try to talk them out of quitting any more. It gets me more O/T. Now when I hear one of the others threatening to quit because this job is so much hassle I encourage them to go find something more interesting. The “hassle” of which they complain is sitting at a desk or driving a truck around the perimeter at 5 mph. I walk a good part of the perimeter so I don’t get fat and weak.
The restaurants described in the article are mid-level chains. It could be that the dining dollars will migrate down market to fast food as they did in the acknowledged recession of 2008.
It wasn’t in the most affluent stretch of N. Charleston.
Ohmigosh, I made fabulous BBQ last night.
I big chicken from Ralph’s at $1.79/lb, less than $6. Spent a few minutes on youtube learning how to cut it in half.
Wet rub:
1 tablespoon each:
Kosher salt
Black Pepper
Garlic Salt
McCormick’s Lemon Herb Seasoning
Olive oil
Worcestershire sauce
Balsamic vinegar
I teaspoon each:
Dried sage
Marjoram
Thyme
Tumeric
Juice of one large lemon
Mix all together, should be a thick slurry.
Shmear generously all over both sides of chicken, and under the breast skin for those wienies that insist on skinless breast meat.
Let marinate while you light a chimney of charcoal. When ready, bank the coals at the back of the grill. Bake the chicken on the front of the grill, lid closed. Should be 375 to 400°F. Mine wasn’t hot enough since I tried to cheap out on the coals, so instead of adding more charcoal under the grate (hard to do), I added a double row on top of the grate at the rear. They lit quickly and brought it to 400.
Rotate chicken after twenty minutes. Cook until breast is 160-165°
Know a guy who does security cameras. He did a bunch of installs for a chicken place (think KFC).
On average they saved $13,000 a month installing the cameras by stopping employee theft.
Apparently the ‘workers’ were calling up relatives, friends, cousins and saying,”Come on get yo free chicken!”
$13,000 a month per location.
Another restaurant owner I know installed a camera on his meat locker. Had too many steaks disappear.
Almost as bad as an Uber Driver's net.
The lawsuit factor has exploded in recent years. People, especially... (ehem)... people of color are always looking for an easy score, encouraged by parasite culture encouraged by the Marxists in charge.
I’ve watched them intentionally step in a small amount of liquid on a restaurant floor and TRY to slip. The lady I saw started letting out a loud, artificial declaration: “You’d better mop that up... You’d better mop that up!!!” Just a set up for a lawsuit.
Most humans in history lived near farms or WERE farmers. People grew their own food. MY ancestors were farmers. Whose weren't? Not everyone lived in a "Rome."
People pickled, canned, salted, dried and/or preserved their food SOMEHOW to use for the winter. They also hunted and fished; made their own bread and had chickens for eggs and then for meat.
We also DON'T need all the kitchen gadgets for cooking. We don't need to BUY a wok to cook Chinese food a few times a year. We don't need the blenders, mixers, beaters, strainers, filters, sieved spoons, specialty spatulas...AND SO ON to cook.
By the way, if one can read, one can cook. Recipes are there in books and online. The cooking shows are a WEALTH of information on how to cook ANYTHING, bake, do leftovers, cook Mexican, Italian...WHATEVER.
In this country we can have the dream kitchen with double ovens, 6-burner stoves, microwaves, crock pots, Dutch ovens...you name it, we can buy it.
SOME people even LOVE to cook. Imagine that!
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BTW, it's MY read that everyone may work, but it's NOT for "survival." They want
*a nicer, bigger home with more land;
**private schools for their children;
***new, newest cars for everyone in the family every year, motorcycles, Vespas, fancy bicycles, WHATEVER takes their fancy;
****new clothes because;
*****lessons for singing, playing an instrument, learning another language, dancing, painting, etc.;
******tickets to concerts, ballgames, races, etc.;
*******breakfast, lunch, dinner out or brought in.
The list could get longer.
Survival? We are so far PAST that. Even our poorest of our poor are FATSOS. They are overfed and under-worked. Imagine, we have OBESE POOR PEOPLE. ONLY in America.
Really? I didn't know that their profit was so pitiful.
That's a shame.
I remember when I was young and strong and it was difficult to lift $40 worth of groceries. Now I am old and can lift that much with one hand easily.
A joy of inflation.
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