We’re going to shimmy out on a limb and suggest these haven’t been the easiest of times for the restaurant business. This week brought indications of how it’s getting tougher, from finding affordable sites to getting a few dollars from consumers for a convenience outside restaurants’ usual scope. No wonder the list of casualties from a key market grew appreciably in the seven-day stretch.
Here’s what we mean.
1. ATM fees going away?
A bombshell announcement from a retail giant should have sent a shudder through the unknown number of restaurants that sport a cash-dispensing machine on the premises. Typically those ATMs levy a hefty charge for the convenience, some of which trickles back to the restaurants. It may not be huge, but it’s found money.
It may be lost if 7-Eleven’s announcement is the start of a wave. The convenience-store chain is dropping the surcharge it levies on customers who use the brand’s 8,000 in-store ATMs, a move intended to bolster traffic, as our sister publication CSP reported. Why stop at a place down the street when you can hit a 7-Eleven machine for free?
The c-store chain is working with a supplier that already has some 25,000 fee-free ATMs in the market. If 7-Eleven’s gambit works, expect more establishments to follow suit, including traffic-starved restaurants.
2. Starbucks’ real estate play
The coffee giant has never been a huge proponent of what’s known today as the asset-light approach to expansion. Instead of systematically shifting development costs to partners through franchising, it’s built a sprawling store network that’s about 60% company-operated. The other outlets are licensed, typically to mega-operators like big airport concessionaires and global contract-management firms. This is no Chick-fil-A or Dunkin’ Donuts, offering a few units here and there to mom and pops.
That’s why heads were turned—twice—when Starbucks reviewed its expansion plans this fiscal year for the U.S. market. The chain revealed to investors that it intends to open 900 stores in its home market this year. That’d be like building Jamba Juice, Whataburger, Qdoba or Olive Garden from scratch, in a year.
Noggins were also spun by a breakdown of that 900 number. Half will be licensed outlets, said CFO Scott Maw. “Those licensed stores are unique opportunities for us to get access to real estate,” he explained.
3. Collaborating with the enemy?
Nevermind the accusations flying around Washington, D.C., about shenanigans with Russia. The restaurant industry suspects it may have its own unholy collaboration.
Our story earlier this week about Sonic Drive-Ins’ voluntary cooperation with the U.S. Department of Labor brought guffaws from some readers. As they put it, what was the chain thinking? It inked a deal with DOL that essentially makes the franchisor a representative of the department in dealing with franchisees. The pact obliges the home office to educate franchisees on their obligations, and raised the possibility of booting current franchisees and turning down applicants who aren’t observing the line.
Already, DOL is asking other restaurant franchisors to enter a similar arrangement.
As one commenter put it, isn’t Sonic tacitly confirming contentions that franchisors are joint employers of franchisees’ staffers?
4. Big-name New Yorkers throw in the napkin
Recent days have brought a flurry of restaurant closings in New York City, including the shutdown of one-time institutions like Bouley, Roast, Republic, Blue Water Grill and Daniel Boulud’s DBGB. They follow the exit of such other stalwarts as Schiller’s and Isabella’s.
What’s going on? In almost every case, the motivation is a rent hike the establishment either can’t or won’t abide.
As we noted during one of our editorial meetings, a number of those places are being converted not into other restaurants, but into banquet and meeting spaces, akin to what Cipriani’s did with its bank-turned-restaurant on 42nd Street.
5. Is this why?
Maybe some of those places should have listened to the restaurant advice Donald Trump shared this week with his military staff, according to a story that was first reported by NBC.
Participants at the meeting heard Trump speculate that the 21 Club in New York might have wasted its money in hiring consultants for a past renovation. To stay current and sustain business, all it had to do was listen to its employees and what they suggested for the place, the restaurateur in chief contended.
The president reportedly intended to draw a parallel with the country’s war effort in Afghanistan. He may have more credibility as a restaurateur than he does as commander in chief, having made a buck or two in the business before moving into the Oval Office.