Young and Hungry

Expect 20,000 Restaurants to Close Over the Next Three Years

Somehow Y&H missed this story when it was originally published, but earlier this month the New York Times' Business section reported that 20,000 U.S. restaurants are expected to close over the next three years. Much of the downsizing is due to a specific mania that affected many during the E-Z Credit Era, namely overbuilding.

Times staffer Andrew Martin reports that the casualties will hit all levels, but that the ax will fall hardest on casual chain restaurants, like Applebee's:

In a recent note to investors, John Glass, an analyst for Morgan Stanley, said the casual dining industry – midrange restaurants like Applebee's – needed to shutter about 1,200 of its roughly 18,000 locations to regain financial health.

"The chain casual dining industry has been overbuilt since 2005," Mr. Glass wrote, noting that was the last year the industry posted positive numbers for customer traffic. "It may take two or more years to reach equilibrium."

Others said the pruning of restaurants would extend beyond casual dining to all types of restaurants. Bob Goldin, executive vice president at Technomic, a Chicago consultancy for the restaurant industry, predicted that more than 20,000 restaurants would close over the next three years.

"I think 20,000 is a minimum," he said. "We probably need more than that. There are a lot of marginal players out there."

Y&H will not shed a tear over losing another Applebee's in the suburban D.C. market, but he fears that this trend will continue to affect even those independent restaurant operators who haven't accumulated a ton of debt. Hate to say it, or even predict it, but look for more of the high-end places like Le Paradou to bite the dust.

Photo by NNECAPA

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