Why Restaurants Keep Closing Workstyles and Lifestyles
Over the past few months we have seen many long-time established restaurants close in the Boston Region including Metrowest. This situation is not exclusive to our area; it’s a nationwide trend that is driven by specific industry challenges, rapidly changing lifestyles and the economics of doing business today.
From legendary 40 year-old L’Espalier closing on New Year’s Eve to Durgin-Park closing on January 12th to Papa Gino’s closing many of their locations in two separate waves over the last few months, these high-profile closings have drawn attention to what many of us have known for years; even during a period of unprecedented economic growth, running a restaurant is not for the faint of heart.
In Metrowest it was odd that Papa Gino’s chose to close their Ashland, Marlborough, Milford, Needham, Newton, Walpole, Westborough and most Worcester locations while leaving Framingham, Natick and Sudbury locations open—and then only three months later, close the Framingham and Natick locations but still leave open one in Sudbury and one in Worcester. They’re clearly not seeking geographic economies of scale in Metrowest.
In Framingham alone, the City has averaged three restaurant closings a month in 2019 so far. Sabrina Wong III, the Cracking Crab, The Tavern, Niko’s Pizza and Roast Beef and 2 Papa Gino’s locations.
Many dining industry challenges have been driven by changes in other industries. At the high end of the restaurant industry, they were “expense account” restaurants which used to have a strong lunch business which covered a large portion of their financial overhead. Now with companies doing more and more business with conference calls and video conferences, there is less and less opportunity to wine and dine a corporate client or business partner. Very often these days the same restaurants receive a lot of their core business from once or twice a year special occasion visits.
Very often these days, face-to-face meetings during the day, are catered or delivered take-out working meetings. And when people are traveling, expense accounts in real dollars are much less generous than they were in the past. This has further cut into the higher end restaurants’ revenues.
Personal lifestyle changes have also led to upheaval in other parts the restaurant industry. Many people are trying to eat healthier, a need that many restaurants can’t economically satisfy within their existing business formulas. Additionally, real wages have not kept pace with the true costs of living, families are over scheduled leading to less time to go to sit-down establishments, and the list goes on.
Compared to 20 years ago, there are also so many competitors to sit-down restaurants providing prepared food alternatives. Whole Foods and other grocery establishments including Wegman’s and others have large salad bars, hot food stations, prepared roasted chickens, fresh soups, design your own barito stands, fresh pizza and other options formerly not available for people to grab for lunch at their desks or bring home for dinner. Even gas stations are now offering hot dogs, soups and sandwiches. And the latest change I noticed was Walgreens adding a prepared food cooler in some of their locations. And let's not forget all those fast food chains with drive-thru windows.
There is also the growing business of in-home meal kits that make preparing a nice meal at home much easier and faster than it used to be. This too cut’s into restaurant revenues.
Sit-down restaurants have tried to adapt by making take-out easier with on-line ordering options, dedicated take-out parking spaces and other trends.
Take-out increases sales, but the bags and containers necessary to properly package take-out add to the cost of the meal and aren't environmentally friendly. Additionally, take-out means there is no beverage revenue, nor impulse ordering of coffee and dessert which increases revenue for many establishments.
These are some of the reasons we see so many restaurant closures. My next article will focus on some of the other reasons: food, location, management and most important of all, the math.