Dennis Serpone, New
England Restaurant Brokers

You’d be challenged to provide a brief description of the food and beverage industry in the New England area, let alone trying to put together even a few paragraphs as to what the restaurant industry has evolved to. That evolution is far from static. It actually has never been more fluid. As fast as success is attained by an operator, there’s someone new in the area besting his best efforts to maintain a prominent position. One by one the old standbys are disappearing, replaced by a new shiny, trendy operations with executive talent at the helm.

On the upper tiers, you have the Capital Grille, Legal C-Bar, Davio’s, Del Frisco’s, Mooo, Abe & Louie’s, Grill 23, and the Palm. Perceived by most people to be offering a somewhat pricey experience, they seem to be always at capacity with hour and two hour waits. With the millennials earning significant salaries, and the seasoned executives enjoying the financial fruits of their labor, the upper tier restaurants are seeing year-over-year increases in sales. Unfortunately increasing sales doesn’t always translate into increasing profits. It appears that those that are successful are ‘very’ successful, while others just churn out dollars.

The restaurant in the middle to lower tier restaurants are constantly changing hands. Whether it’s financial issues, personnel problems, partnership disputes, or the inability to attaining the full scope of the intended concept, businesses change hands. The transition is to someone, or some established group, that will take advantage of what you’ve created and bring it to another level. There’s always a buyer who is ‘smarter’ than you willing to gamble on his intuition.

Probably the most notable change in our eating patterns has to do with our daytime eating habits. Everyone seems to find time to stop at Dunkin Donuts, or, now that McDonald’s is offering fast breakfast items, stopping by the drive-thru for coffee and a breakfast sandwich. We’re moving so fast that we don’t have time to go in and sit...’it’s the drive-thru.’

Breakfast and lunch restaurants are in high demand...typically they have a low food cost and relatively higher profit margins. Simple menus make it easy to hire and train cooks, and not having to work nights is a strong aphrodisiac. However, according to research firm NPD Group, lunch traffic fell 45% in the most recent quarter on a year-over-year basis-the fourth consecutive decline, dealing a substantial blow to restaurant’s bottom line. While working stiffs still grab a bite at fast food joints, they’re increasingly unlikely too sit down or get to-go orders at casual restaurants like Applebee’s or Chipotle Mexican Grill. These two categories declined by 5% and 9%, respectively.

The question is, “Who killed lunch?” NPD blames the increasing trend of employees working from home-which has risen by 24% in the past decade-making it easier for them to grab leftovers from the fridge instead of heading out to a restaurant. And with the rise of Internet shopping, people are doing more of their shopping online rather than at the mall, where they might have stopped at  Panera Bread for a bite to eat.

Restaurants, meanwhile, continue to raise the prices of their midday meals, which is only making consumers less likely to eat out. After some recent hikes, restaurant lunches now cost an ‘average’ of $7.66, up 3.5% from a year ago-and that’s a stretch for many consumers. “Historically, food service lunch has been the occasion where consumers didn’t want to invest a lot of time, money, or energy,” said Bonnie Riggs of NPD. Today, it seems that the average price of a hamburger, exclusive of the McDonald-types, or a sub, and a soft drink will take that crisp $10 bill out of your pocket.

What the average person doesn’t see, and most of the restaurant operators who are busy with their day-to-day activities, are unaware of, chains operations are increasing seeking the shelter of Chapter 11 bankruptcy protection. Most recently, COSI, one of the most visible and apparently successful chains have gone that route. Carrying 104-units, the Boston-based chain proved too much resulting in years of financial losses. Onerous government and local regulations, minimum wage increases, escalating taxes, lack of reliable labor, and severe competition finally resulted in taking this step to recovery. The company has hired a Bedford-based turnaround firm that will also act as interim CFO. Everyone hopes that they will return healthier and wiser.

On another, but related note, I want to remind everyone to vote November 8th. The future of our country hangs in the balance. Who will do the best at creating jobs, protecting our families, improving our schools, and reigning in the huge amounts of money we’re spending on providing services and entitlements for non-working people. Pray the God will protect our country and our children.

Dennis Serpone is president of New England Restaurant Brokers, Wakefield, Mass.