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Thanks to Wall St., There May Be Too Many Restaurants

PLAINFIELD, Ill. — The way Marcus Mooney saw it, he wasn’t just selling hot dogs — he was selling experiences.

In addition to the classics — a cheese dog and a chili dog — his restaurant, Frank’s Night Out, served hot dogs topped with more exotic ingredients, like a “Surf & Turf Dog” featuring crumbles of garlic-basted Maine lobster.

But the hot dog experiences Mr. Mooney offered were just one choice among hundreds for hungry motorists seeking a quick, inexpensive meal on this restaurant-laden stretch of Illinois Highway 59. His sales dropped. After opening his restaurant in 2013 and putting in seven-day work weeks, Mr. Mooney shuttered it last year.

“There becomes a point where there’s too many choices,” Mr. Mooney said recently. “The more restaurants that opened up, the more it took away from business for us.”

After a prolonged stretch of explosive growth, fueled by interest from Wall Street, experts say there are now too many fast-food, casual and other chain restaurants.

After a prolonged stretch of explosive growth, fueled by interest from Wall Street, experts say there are now too many fast-food, casual and other chain restaurants.

Since the early 2000s, banks, private equity firms, and other financial institutions have poured billions into the restaurant industry as they sought out more tangible enterprises than the dot-com start-ups that were going belly-up. There are now more than 620,000 eating and drinking places in the United States, according to the Bureau of Labor Statistics, and the number of restaurants is growing at about twice the rate of the population.

That trend is evident on a more local level here in the sprawling suburbs southwest of Chicago, where the population is growing fast, but the number of restaurants is growing even faster. Twenty years ago, Mr. Mooney would have been competing against about 600 eateries in the region; by the end of last year, that number had more than doubled.

“Everybody thinks their brand has what it takes to succeed in the marketplace,” said Victor Fernandez, an industry analyst with TDn2K, a Dallas-based firm that gathers data on the chain restaurant industry. “You look at a location that looks good, but everybody is looking at the same place and they all come in, and the result is you get oversaturation.”

The glut of restaurants has increased the pressure on individual restaurant owners. Industry sales are up nationally, but growth has slowed to the lowest rate since 2010.

Continued to the original article.

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