Chains that seemed like they had always been here suddenly aren’t.
Restaurants of all kinds are facing challenges. In fact, the restaurant industry recently logged six quarters of no growth in customers dining out, according to research firm The NPD group. That’s the worst performance since the last recession.
Well-known restaurants get lots of attention when they close, but smaller ones have closed, too. In the Fresno area, recent closures include Las Cazuelas on Blackstone Avenue, Craft Beer Wine Bistro and Dickey’s Barbecue Pit at the new northeast Fresno shopping center, King Buffet at Manchester Center, Zen Wok’s north Fresno location on Palm Avenue and Uncle Harry’s in Fig Garden Village.
There are lots of reasons why restaurants close.
Lack of customers is an obvious one. But some restaurant deaths are part of the normal churn of openings and closings – particularly among mom-and-pop businesses – that happens even when the economy is booming.
We’re going to continue to see restaurants close.
Bonnie Riggs, The NPD Group
Sometimes a lease expires and a landlord wants someone different in that spot (similar to what happened with Uncle Harry’s) or exhausted owners just want to retire.
The restaurants getting hit the hardest, though, are the casual dining chains like Marie Callender’s. These are the places where waiters and waitresses serve you, but customers don’t have to dress up and don’t need a reservation.
Most recently, Elephant Bar and Marie Callender’s closed and Daily Grill’s last day for its only Fresno location will be Oct. 22. Most restaurants didn’t go into detail about why they’re closing – they rarely do.
The industry is strong in Fresno.
Steve Rontell, Colliers International
Daily Grill’s lease was expiring and the restaurant and its landlord couldn’t come to agreement on another one. Although the CEO told The Bee that rent was the issue, the developer said the rent was appropriate and wasn’t a part of their discussion.
Expect more to close, said Victor Fernandez, executive director of insights for restaurant research firm TDn2K.
“There is an oversupply of restaurants out there,” he said. “There’s likely too many restaurant locations and too many brands.”
Also in trouble
Some familiar names are feeling the pain.
Applebee’s and IHOP are closing more than 120 locations nationwide. Valley locations are not a part of that because they’re owned by a different company.
The parent company of Outback Steakhouse and other chain restaurants said early this year it would close 40 company-owned underperforming locations. The Fresno Outback is owned by a franchise so is not included in that.
Business was bad enough at Logan’s Roadhouse and Sweet Tomatoes that both companies filed for bankruptcy last year. They’re still around, but have fewer locations.
There are a few exceptions to the uphill battle. Some casual chains are bucking the trend and doing just fine, like Texas Roadhouse and BJ’s Brewhouse.
And fast-food places and higher-end restaurants are chugging along. Generally, it’s the restaurants in the middle that are getting squeezed the most, Hernandez said.
So what’s going on? Lots.
Casual dining restaurants have not recovered fully from the recession, said Bonnie Riggs, a restaurant industry analyst for The NPD Group.
The more you pay the higher your expectations.
Bonnie Riggs, The NPD Group
Pair that with a glut of restaurants and it’s a problem.
“If you haven’t stayed competitive ... if you haven’t given consumers a compelling reason to visit your (restaurant), they have so many choices they’ll just go elsewhere,” she said.
The competition isn’t all restaurants, either. Consumers are turning to food trucks, UberEATS delivery, meal-subscription services like Blue Apron that deliver ingredients and recipes, and prepared meal services that target athletes or vegans. Even convenience stores are getting in on the action, with 7-Eleven selling a whole pizza baked in minutes.
A recent study found the No. 1 reason for not eating out was that it’s cheaper to eat at home, Riggs noted.
Hoping to grab the next big generation of diners, some restaurants have thrown themselves at millennials, often ignoring Generation X and baby boomers.
But millennials aren’t interested in casual dining chain restaurants, Riggs said.
“Millennials in particular – who they seem to target quite a bit – have no interest in them,” she said. “They find that they’re not a good value. They’re too expensive, and walking into one is just like walking into another, so there’s no real competitive difference.”
In the scramble for millennials, some restaurants have lost their way. Chili’s, for example, acknowledged it couldn’t be all things to all people and shrank its menu by 40 percent. Gone are trendy dishes like the fried cauliflower. The restaurant is focusing instead on its classics: burgers, ribs and fajitas.
Though the term “customer service” is paid a lot of lip service in the restaurant world, it really matters, industry experts say.
Diners expect service that’s on par with the prices they’re paying, Riggs said. So while poor service at a fast food place might be forgiven by customers, poor service at a higher-end restaurant might mean the customer never comes back, she said.
It’s especially tricky given that restaurants are working with fewer staffers due to thin profit margins stemming from rising labor and health-care costs and other factors, Riggs said.
“Service is part of a value equation and it’s been sorely lacking,” she said.
The bright side
Despite big chains closing locations, it’s not all bad news in Fresno, said Steve Rontell, a retail broker with Colliers International who helps businesses and landlords lease or buy properties.
“The industry is strong in Fresno,” he said. “We have a nice variety in Fresno, with national, regional and local restaurants, a lot of different international foods here in Fresno.”
Rent for restaurant properties is affordable here, at about one-third the rent in the Bay Area, he said.
Fresnans are loyal to longtime successful restaurants like Max’s Bistro, Elbow Room, Manhattan Steakhouse & Bar, Yosemite Ranch and others, he said.
“People in Fresno and Clovis are going out to eat,” Rontell said.
And that Marie Callender’s spot is on the cusp of getting a new renter. Rontell, who is marketing the property, is expecting a formal offer from a similar but larger chain he thinks Fresno will get excited about. (But it’s not Cracker Barrel.)