January 5, 2017

"There's a Massive Restaurant Bubble and It's About to Burst."

I got a lot out of this article by Kevin Alexander in Thrillist. It's long, but there's lots of analysis — cultural and economic. Nice illustration too. I'll just give you an excerpt:
One of the unintended consequences of the Golden Age of Restaurants was unreasonable customer expectations for virtually every eating experience....

"It's self-flagellating chef martyrdom at its best," says [chef James Cullen ]. "Chefs all want to make their own charcuterie and bake their own breads. And if you're wildly talented and you're making exceptional stuff, great. But most chefs know in their heart they can buy it from a local butcher or baker and it'll be at least just as good, but they're too proud. And so you've got these kitchens putting in just as much labor as fine-dining spots, but not charging nearly enough to make it worth their while."

Those elevated expectations now even extend to delivery. And the rising food delivery apps promising local, higher-quality foods at cheap prices (Munchery, Blue Apron, UberEATS, DoorDash, Postmates, etc.) are starting to seriously position themselves as, at best, major nuisances and, at worst, that annoying word everyone in the tech industry throws around: disrupters.

"I think they're the ones pricing out fine-casual dining restaurants," says Anjan Mitra, owner of the DOSA restaurants in SF. "These apps are all backed by hundreds of millions from the VCs (venture capitalists) -- so it doesn't even matter that they're all losing money. They can afford to pay chefs and line cooks and prep cooks more than any restaurant, and though many of them work with restaurants now, the bigger, ambitious ones are figuring out ways to completely cut restaurants out of the picture. And if that happens to take 10% of the revenue from a local sit-down restaurant, that's a massive hit. That could be the difference between staying open or shutting down."

44 comments:

David said...

Come to Beaufort, S.C. We can lower your expectations of restaurant quality.

Mike Sylwester said...

Burger King distributes great coupons all the time. In my wallet I have a coupon for two bacon cheeseburgers, a small order of french fries and a small fountain drink (free refills) for $4. In fact, I have three such coupons.

Also, my local BK accepts expired coupons.

Often Subway, McDonalds, Wendys, Blimpies and Pizza Hut distribute coupons too.

Subways will put your coupon purchases on your frequent-user card, and so you get a free sandwich for about every sixth visit.

If you use the coupons, you can eat lunch in those places for $5 or less every day.

Curious George said...

"Mike Sylwester said...
Burger King distributes great coupons all the time. In my wallet I have a coupon for two bacon cheeseburgers, a small order of french fries and a small fountain drink (free refills) for $4. In fact, I have three such coupons.

Also, my local BK accepts expired coupons.

Often Subway, McDonalds, Wendys, Blimpies and Pizza Hut distribute coupons too.

Subways will put your coupon purchases on your frequent-user card, and so you get a free sandwich for about every sixth visit.

If you use the coupons, you can eat lunch in those places for $5 or less every day."

Now if you could just get a coupon for your cardiologist and mortician.

John said...

What is "fine-casual dining"?

Is that like Chiles-Romanos-Olive Garden-Red Lobster-PF Chang?

I like all those places but don't think of them as "fine" dining.

On the other hand you have Mortons-Ruth's Chris-Smith & Wolenski which I think of as fine (fairly fine, anyway) dining but not particularly casual.

fine-casual seems like an oxymoron.

John Henry

John said...


Is Le Cirque "fine dining"? If so, you can have it. $7-800 for 5 people. Food was probably OK but not really enough to tell for sure. We left hungry and had to stop at McDonalds on the way back to the hotel.

My idea of fine dining is New Jersey diners. The problem is that outside of NJ and parts of NY and PA, they don't exist. I also like Culvers.

John Henry

Lyle Smith said...

I sometimes use UberEATS while at work. No fine dining places are on it, but some moderately expensive restaurants are.

John said...

Curious George,

Lots of bad mouthing about McDonalds but when the VA put me on a diet last year one of my problems was lunch. I spend a lot of time on the street.

They recommended McDonalds. I eat there 2-3 times a week and usually have either the grilled chicken or the McNuggets.

I've lost 35 lbs since last May. Only 35 more to go.

Of course, the VA may have an ulterior motive. If I get a heart attack and die, they no longer have to foot my medical care. They wouldn't do that, would they?

Seriously, I have been getting all my medical care from the VA for 5-6 years now and it is absolutely top notch.

John Henry

Lyle Smith said...

Casual-fine dining, I think, is the non-chain restaurant that is rated at the $$-$$$ range.

tcrosse said...

The $15/hour minimum wage will fix the problems of restaurant economics toot sweet.

Lyle Smith said...

Good for you John. Weight is all about calories and you can eat low calories at McDonald's or anywhere, if you know what it is you're eating. Good luck with it!

Curious George said...

"John said...
Curious George,

Lots of bad mouthing about McDonalds but when the VA put me on a diet last year one of my problems was lunch. I spend a lot of time on the street.

They recommended McDonalds. I eat there 2-3 times a week and usually have either the grilled chicken or the McNuggets.

I've lost 35 lbs since last May. Only 35 more to go. "

You do understand that cardiologist really aren't in the weight control business.

Of course, the VA may have an ulterior motive. If I get a heart attack and die, they no longer have to foot my medical care. They wouldn't do that, would they?

Seriously, I have been getting all my medical care from the VA for 5-6 years now and it is absolutely top notch.

John Henry"

If you look at MS's post, he's talking about two bacon cheeseburgers and fries. Do you really think you can lose weight eating that? Really? It's 1,000 calories with a diet drink (which is terrible for you, and tricks your body into retaining fat). High fat, high calorie, high sodium.


In any event my comment was about heart health, not weight. Granted being overweight is bad for your heart, but you can be thin and still have major issues with a high animal fat diet.

khesanh0802 said...

Competition. Some win, some lose. It's how we move forward. No one should get away with the above mentioned $7-800 for five.

I ithink we are going to relearn a lot about competition during the Trump presidency. Many pigs will squeal!

Michael K said...

The $15/hour minimum wage will fix the problems of restaurant economics toot sweet.

I was wondering how long before this came up. It is the death knell for restaurants.

"you can be thin and still have major issues with a high animal fat diet."

You are a few years out of date. Unless you define "high" as too many calories but carbohydrates are pretty well established as the cause of the diabetes epidemic.

dda6ga dda6ga said...

"Casual-fine dining" is an oxymoron. want fine dining better bring a heavy wallet or a Platinum card...

Curious George said...

"Michael K said...
"you can be thin and still have major issues with a high animal fat diet."

You are a few years out of date. Unless you define "high" as too many calories but carbohydrates are pretty well established as the cause of the diabetes epidemic."

I didn't say anything regarding diabetes.

Fernandinande said...

"There's a Massive Restaurant Bubble and It's About to Burst."

In the sense of "Eat and Get Gas" ?

rehajm said...

This is largely meaningless to big swaths of the country. A well written piece but relevant only to larger metros with foodie cultures.

That said it's a very accurate description of the economic challenges of the business though I'd take exception to the notion the 'disrupters' are bursting the restaurant bubble. It will happen because of oversupply, poor concepts, the thinning of creative talent, changing tastes, changing demographics.

Anglelyne said...

MichaelK to tcrosse: The $15/hour minimum wage will fix the problems of restaurant economics toot sweet.

I was wondering how long before this came up. It is the death knell for restaurants.


Cracking down on illegal immigration in any meaningful way would also upend many a restaurant's "business model".

rehajm said...

Michael K, it's even starting to sink in to those who have resisted it most...

I should say before I go any further that all of the restaurant owners and chefs I've talked to are compassionate humans who support better coverage and livable wages, and seem on the whole progressive by nature, but restaurant margins are already slim as hell. There are no political agendas here -- they're just genuinely worried about how to afford to pay extra without radically changing the way they do business.

Wilbur said...

Where I live, Morton's used to put coupons of a sort on online, even during peak winter season, where you could get two dinners with several choices for a low price. Low, of course, is relative.

Haven't checked them in a while, maybe they still do.

My favorite steakhouse choice is still chopped steak, i.e., high grade hamburger steak fixed how you like it. The most flavorful beef there is.

rehajm said...

David said...
Come to Beaufort, S.C. We can lower your expectations of restaurant quality.


Drive to Bluffton. I'm a snob but have very good experiences there.

madAsHell said...

In the Soviet of Seattle, the city clowncil has raised minimum rage to $15/hour.

Yes, I see the typo.

Rance Fasoldt said...

I was in the Low Country for property claims after Matthew. How 'bout LT's? Does that count as Beaufort? Make sure fried chicken is on the menu.

tim in vermont said...

I agree with you guys! Nothing worse than going to a 'fine dining' restaurant and finding out they don't serve Mountain Dew.

tim in vermont said...

Had shrimp and grits in Beaufort once. They were great. I wish I could find as good around here.

Hammond X. Gritzkofe said...

Lessee. The business owner:
..locates away from a "restaurant district," not where he can draw customers from a big "dine-out" crown, but rather where customers must trouble to seek out his place;
..does a major redecorating every three months;
..does a major revision of the menu every three months
..is BFF with the paid help;
..flies across the continent for a NYC vacation a year after opening.

When we started a business (not a restaurant) we did not take a salary or a vacation for at least three years.

In our present town, most restaurants (except the two major franchises and the Stop-n-Robs that have a taco line) stay in business about two years. They go under mostly because the owners get behind in payroll taxes.

Wilbur said...

The second Mrs. Wilbur, a beautiful black woman raised in rural Louisiana, would never order grits in a restaurant unless she could look back in the kitchen and see who she described as a "Miss Corrine" doing the cooking.

rebel deuce said...

I was reading the fine print on one of the food delivery web sites, and it said that you shouldn't be alarmed if the meat had a funny smell to it.

This, they said, was due to the plastic sealing, and the smell goes away after unpacking and resting on the counter before use.

Umm, I'll pass...

n.n said...

Value and variety. Next!

ALP said...

I was reading up on the food kit delivery service phenomena (Blue Apron, etc). There are over 250 of these services! I began to wonder who these services appealed to - people who wish to cook but can't tackle a cookbook, video or Food Network TV show directions?

In my search, I found the following NYT article and the most precious paragraph I've read in a long time. In fact, I wish to submit this paragraph for Most Inane of 2016.


http://www.nytimes.com/2016/04/06/dining/meal-delivery-service-subscription-boxes.html

“There is a feeling of a lack of accomplishment, especially among millennials who feel like it’s a solid effort just to get frozen ravioli cooked and a bagged salad together,” said Melissa Abbott of the Hartman Group, which researches eating patterns. “They say these meal kits are teaching them how to cook so they can participate in the conversation and feel empowered.”

Reminds me of those RONCO commercials et al that begin by showing us a person trying to do a simple task, yet failing with near fatal results: nearly choked by a garden hose (buy that RONCO Expanding Garden Hose) or strangling themselves trying to wrap themselves in a blanket (buy that Snuggli product before its too late).

Frozen ravioli and bagged salad = a solid effort. My. Fucking. God.

Sean E said...

Fast food gets a bad rap - deservedly so in many cases - but I think you're likely to do more harm to your health at an Olive Garden than at McDonald's. Honestly, most recently food isn't particularly great for you unless you make an effort to make healthy choices - which you can also do at most fast food joints. The big problem with fast food is that it's more likely to become a routine part of someone's diet than a pricier sit-down restaurant is.

And I completely agree with Michael K that demonizing animal fats is based on dated and discredited information. A lot of people have done very well on primal/paleo/LCHF/Atkins-style diets. If you have a bacon cheeseburger, the least healthy part of the meal is likely the processed white-flour bun. Unless you have a Coke. Then it's the Coke.

Sean E said...

Typo alert: "...most RESTAURANT food isn't particularly good for you..."

tim maguire said...

Alp, Blue Apron and those services appeal to people who prefer a home cooked meal but are busy and don't have a lot of time to cook or shop. When I go out to eat, it's at least as much because I don't feel like cooking as because I'm in the mood for a dish I can't cook. The actual experience of dining out I find pretty unpleasant.

Eric said...

What the articles say is that people in the restaurant industry overdo things in terms of decor, staffing, and food offerings and preparation and then find that their costs exceed the willingness of their customers to pay. The source of the "bubble" is that Princeton graduate real estate analysts yearn to own celebrated restaurants without thinking things through.

Michael K said...

"I didn't say anything regarding diabetes."

The fact is still that diabetes and obesity are much more correlated with carbs than animal fat. Maybe you were referring to heart disease. The whole cholesterol thing began in the Korea War when autopsies of young KIAs showed a lot of early coronary disease. This was blamed on red meat while it was probably related to smoking.

Atkins was vilified for years sort of like the vilification of Judith Curry in the climate wars.

Cholesterol is being exonerated,.

Titus said...

I have been using Ubereats recently for some higher end food.

Love it.

It would be awful not living in a city with a "hot" food scene.

furious_a said...

I've never seen a Chinese restaurant go out of business.

buwaya said...

"It would be awful not living in a city with a "hot" food scene."

We live in a city with perhaps the "hottest" food scene in the US.
We rarely if ever have anything to do with it.

Food is food. Its nice at $15 a plate or $200, but a marginal plus of "nice" is not worth the delta.

This is a big deal for the sort of people we don't easily relate to.

Our speed for San Francisco restaurants -
http://originaljoessf.com/westlake/
http://originaljoessf.com/wp-content/uploads/2016/05/OJWestlake_DINNER_CURRENT-04.25.pdf

The classic bourgeois 1950's place, these still exist in the "real San Francisco".
As close to fine dining as we want to try.

Tank said...

John said...

What is "fine-casual dining"?


The food is fine and you don't have to dress up.

Sydney said...

Isn't there usually a lot of turnover in restaurant world? It's a difficult business, always has been.

Christy said...

Regarding the delivery services: The challenge is to come into work with the best story of what you did last night. Haricots Verts Lyonnaise is so much better to report than fried green beans. Class signaling, but even better, virtue signalling, if it's all locally grown or from an organic service. The Republican War on Women is nothing compared to the passive-aggressive war other women fight against other women.

Danno said...

Blogger Titus said...I have been using Ubereats recently for some higher end food. Love it.
It would be awful not living in a city with a "hot" food scene.

I thought you rated cities by the number and quality of their glory holes.

ALP said...

Christy:

The article I linked to mentions the "pressure" to have every meal Instagram-worthy. Some of the comments in response are worth reading. My favorite is along the lines of:"What's wrong with a sandwich?" for those who don't want to think too much about cooking.

I agree with your post: this less about simply dealing with hunger and more about the "social" aspect of cooking. To which I say: What is wrong with a sandwich or takeout? The takeout option would at least put more $$$ into your community.

Am I the only one mainly disturbed by the fact that we are producing a generation that can't handle a simple recipe and consider frozen food and pre made salad "an effort"? For fuck's sake, a high school graduate should be able to follow a basic recipe.

GRW3 said...

I think this is beyond a first world problem, I think this is an Elite World Problem.