CapitalReal Estate

The State of Independent Restaurants in 2018

In the fall of 2017, NPD reported a 3 percent drop in the number of independent restaurants while the number for chains remained the same. Fast casual chains helped create these numbers with their rise in the ranks by 4 percent whereas full service units fell by 2 percent and quick-service declined by 1 percent.

In the last four years, 8 percent of New York City’s independent restaurants have closed.

Does this mean that independent restaurants are going the way of the Dodo? Au contraire. The future is actually leaning toward independents. Bloomberg predicted that by 2020, independent restaurants annual revenue is expected to grow by 5 percent while chains are looking at a mere 3 percent.

Franchise or Individually-Owned Operation?

Many folks just getting into the business are trying to make the decision to go with a franchise or open their own operation. It’s a tough decision with each carrying their own risks and opportunities. Here are just a few of the considerations:

  • For those with lots of experience and in-depth knowledge of the industry, a restaurant that they can call their own and create their dream without too much input from an established chain may be the best choice. For those without this background, having a “partner” and a template for success may be the best option.
  • While both require their fair-share of capital, a franchised-unit often requires a substantial sum of money before signing on the dotted line. Of course, this depends on the success of the chain and many other factors.
  • Business Know-How. Becoming a successful restaurant owner requires a solid overall view of the big picture. It demands creating systems that are framed by quality and consistency. Owners that get immersed in operations often fail to put the right people in places of management and, in the process, areas such as marketing, additional business opportunities, and strategic planning often get left by the wayside. To operate independently, you’ll need a big dose of business sense along with a love of hospitality and a divine sense of taste.

So, we’ve discovered that there were more independent restaurants biting the proverbial bullet in 2017. But what is 2018 bringing? Team Clark reported that over 600 chain restaurants are closing. Some of the highest numbers come from Subway, Applebee’s, Joe’s Crab Shack, Noodles & Company, Outback Steakhouse, and IHop.

Some newcomers may wonder if they are faced with a no-win situation.

Obviously, if you want full reign, you will lean towards your own independent unit. Let’s take a look at the most successful independent restaurants and just what strategies they may be applying.

The Top Independent Restaurants  

Currently, the highest-grossing independent restaurant lies inside the Venetian hotel on the Las Vegas Strip. The 60,000-square-foot, four-level entertainment venue boasted $42,470,345 in sales for 2017. It’s called Tao Las Vegas and consists of an Asian Bistro, lounge, nightclub and beach. Another top producer is New York’s Tao Downtown which came in third (at annual sales of $33,401,819) in Restaurant Businesses Top 100 Independents 2017 Ranking Report. Tao is known for their big, over-the-top venues and pan-Asian offerings.

One of their newest creations is soon to open in Chicago in the former Chicago Historical Society Building. It promises to remain true to the other Tao’s opulent interiors with a 16-foot-tall statue of Quan Yin and a capacity of 1,700 diners. In addition to a sunken dining room, it will offer a bar, lounge and nightclub.

Their top competitor (in terms of revenue) will be Gibsons Bar & Steakhouse, another top independent restaurant in Chicago that produced $24,700,825 in revenue.  Known for its prime angus steaks, double baked potatoes and drink menu, it’s an iconic eatery in the Windy City that will be hard to compete with.

Another independent that made the grade is Old Ebbitt Grill, located in Washington, D.C. and first opened in 1856. Known for its oysters, seafood, and close proximity to the White House, 2017 annual sales came in at $34.1 million. It’s the locals go-to and a Victorian-inspired venue that remains open for breakfast, lunch and dinner.

Just what do these top independent restaurants have in common?

There is something—be it tremendous, top-quality food, or unique and magnificent venues—that makes the business stand out from others in the field.

How many restaurants can say they get their beef from their own USDA Certified Angus Beef Program, and that it is sourced from a select list of farms in the upper Midwest? –Gibsons Bar & Steakhouse.

How many restaurants can boast that they have a 20-foot Quan Yin statue standing atop a koi pond?—Tao.

Besides making sure your independent restaurant stands out from the crowd, here are a few other tips:

  • Multiple streams of income is a term made famous by Robert Allen—real estate guru and author. While his tactics may be questioned by some, the fundamental principal—that multiple streams of income is the pathway to success—is proven. Some areas independent restaurants can capitalize on include growing take-out and delivery options, catering, food trucks, and sale of brand-recognized products.
  • There is power in numbers. Join (or start) an independent restaurant organization that works together to help each other compete against the larger chains. Consider pooling resources which will allow for better pricing when buying from suppliers or marketing.

When combined, independent restaurants and small chains account for about $210 billion in annual sales. Nothing to sneeze at. A report by Pentallect revealed that consumers see independent restaurants as more community minded and offering personalized service.  Don’t let the big conglomerates scare you from taking the first steps toward your dream. Just remember the wisdom imparted by Thomas Edison, “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

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