The recession that began in 2007 had a hand in reshaping the US restaurant scene in ways that are still being felt as the economy continues to improve. The number of restaurants dipped 2% last fall from a year earlier, fueled by a 3% drop in the number of independent eateries, according to NPD Group data, as restaurant visits remained flat.
“Big chains can advertise and promote and do a lot of new stuff, while independents often don’t have the financial wherewithal to make it through those times and make a profit,” said Warren Solochek, NPD’s vice president of industry relations. “If a great group of entrepreneurs and chefs think they have a great concept and they open and it doesn’t take off right away, they have to be able to cut their losses quickly. You don’t want to sink good money after bad.”
The good news is that the closures that have happened since the recession have left a stronger field behind, he said. Recently, even chains have begun evaluating their underperforming locations and either figuring out how to grow sales or closing them down.
“I think we have already gotten rid of the weaker players. It all started when the recession hit in 2007 and the ones that have remained are really strong. They’re doing a better job because they’re doing something unique, they’re doing something different.”
The benefits to staying small
While chains have buying power, prospects for employees to advance in their careers and other advantages that come with size, independent eateries have opportunities to stand out on service, uniqueness and the bonds they form with their communities.
Small operators can afford to pay somewhat higher wages to retain staffers, allowing them to get to know the customers, which gives the restaurants an advantage over chains with higher employee turnover, he said.
At Racine’s, a Denver restaurant that opened in 1983 and has become an institution, employees have always made more than minimum wage and many of the 125 staffers have stayed on for years, said co-owner Lee Goodfriend.
Keeping up with minimum wage increases has meant significant raises for front-of-the-house staff and Racine’s has had to raise menu prices over time to keep up with wage increases and compete in a tightening labor market, she said.
The personal touch owners can give when they only have one restaurant to take care of can also go a long way toward cultivating a loyal customer base, said Denver restaurant consultant John Imbergamo.
“It’s often said that operating a second restaurant is the toughest job in the restaurant business. Owners of independent restaurants are accustomed to being on-site and overseeing all aspects of the operation. They can see nearly every plate that the kitchen produces. They can greet nearly every guest,” he said.
While service is key, independent eateries need to stand out with a unique concept or draw that gets people in the door in the first place, especially in a time when consumers aren’t dining out more often, Solochek said.
“It could be unique menu offerings or a unique setting,” he said. “Some restaurants open up in some really interesting places like old factories or warehouses. In Austin, there are a bunch of really cool restaurants there that felt like people just opened in their homes.”
A hands-on owner at one established location also means the flexibility to keep up with trends, try new things and speed the release of new products, Goodfriend said.
“You can pick and choose your trends and see if they work, because you’re an independent. There’ll be a trend and you can run it as a special, and if nobody wants it you don’t have it anymore,” she said.
Goodfriend’s chef is open to trying new things and the eatery has tested everything from street tacos to fried pickles, which proved particularly popular, to green chili mac-and-cheese which didn’t take off, she said.
“Of course we can’t do every trend,” she said. “People want salads and comfort food at Racine’s, they don’t have patience for tweezer food.”
And that connection with what customers want is a key advantage for many small operators.
“Chain restaurant have to work much harder to become trusted members of the community in which they exist. Independent restaurants can be more nimble in reacting to changing economic, real estate, sourcing and innovation trends,” Imbergamo said.
At one time, Goodfriend and her partners operated two other Denver eateries, but she’s happiest running a single restaurant and has never had an ambition to become a chain or start franchising.
“We are so hands on and we didn’t want to lose that. You get to make your own decisions.”
In addition to service and a unique concept, keeping up with the times is key. Independent eateries, while flexible enough to try new things quickly, also must learn to tell a true trend from fad that’s going to flame out in a few weeks or months, both Solochek and Imbergamo said.
It’s also increasingly important for independents to partner with services like UberEats or DoorDash to offer delivery, Solocheck said, to feed consumers’ growing craving for convenience and expand the reach of the restaurant.
One key reason people choose a restaurant is because it’s close.
“Today, if someone’s going to deliver to me, location is no longer an issue because I don’t have to get in my car and go,” he said.
Racine’s hasn’t formally partnered with any delivery services, but the food is popular enough that DoorDash offers it anyway, Goodfriend said.
Indies can also stand out when it comes to social media, Solochek said.
“What we have seen at NPD, and we cover lots of other industries, there’s one common theme. Those retailers that provide an Instagrammable moment, an experience worth taking a picture of, are helping people create a memory that they would like to go back and replicate. At big chains, it’s hard to think there’s so many of those moments. It’s the uniqueness factor.”
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