A plunge into the dynamics shaping upstart restaurant brands yielded bits of good news for the chain builders attending this week’s Restaurant Trends & Directions conference, including predictions of better macro conditions for 2017’s second half. But speakers also warned of potential dangers for the industry, noting that it’s not benefitted proportionately from general improvements in the economy.
“Fundamentals are as solid as they’ve been since I’ve been talking to this crowd,” said Arjun Chakravarti, the IIT Stuart School of Business marketing professor who’s addressed the annual RT&D event for 10 years. “The macro trends are on track. You have to ask yourself, why are things so depressed right now [for restaurants]?”
He and others cited an upswing in competition for restaurants as a key reason, with rivals coming in a variety of forms. Chakravarti revealed how he now eats a prepared steak lunch during the week from Mariano’s, a Midwestern supermarket chain, because it costs only $7. How, he suggested, can a restaurant compete with a deal like that?
And that’s in addition to stepped-up competition within the restaurant business itself. “The growth in chain restaurants, what you see is about 2% over [the] last year,” said Victor Fernandez, executive director of insights and knowledge for the research firm TDn2K. “That’s a net gain of 2,400 establishments.”
In addition to that dilution of traffic, he and other speakers noted, several other risks are potentially looming for emerging chains. Here are six of them.
RT&D is presented by Winsight, the parent company of Restaurant Business, with data provided by Technomic.