Restaurant Industry News: Darden restaurant group, the world’s largest full service restaurant company, with approximately 6.3 billion in annual sales, announced its fourth-quarter earnings this past Friday.
(Update on analyst reaction today from Nation’s Restaurant News…)
Olive Garden and Red Lobster, Darden’s largest casual dining brands, are aimed at middle class customers. They are slumping in sales, and Darden is in the process of selling Red Lobster. Meanwhile, Darden’s high end brand Capital Grille is doing the best out of all its concepts. This article views these developments as a symptom of weakness in the US economy due to the growing concentration of wealth among society’s wealthy top few percent. Is the middle class dying off along with mid-scale sit down restaurants?
I think it is more complicated than that, and Darden’s sales fluctuations are primarily due to the relative theme appeal of each restaurant concept. For example, Longhorn Steakhouse which is mid-scale was up in sales, although traffic and profits dropped.
But overall industry trends show mid-market consumers “trading down” from sit down casual dining to cheaper fast casual outlets such as Chipotle and Panera and even down to QSR fast feeders like Subway and Taco Bell. How much of that trend is driven by shrinking middle class paychecks, how much is better marketing, service and theme relevance by Fast Casual and QSR, and how much is cultural with the quickening pace of American life, especially for younger demos?
There have been a growing number of analyses that widening wealth disparity between the top and bottom earners in society is a drag on our economy, is that something to be considered? Consumer spending is 70% of economic activity, driven primarily by the middle class. Food for thought.
I’ve read several rants against food truck regulations in Chicago, DC and other cities, which limit food trucks from selling near buildings containing restaurants.
Writers including this think tank dude and this political pundit apparently think using public streets rent-free to undercut restaurateurs who rehab buildings and pay property taxes is libertarian free enterprise. Somehow I doubt cities or pundits would favor me pulling up in a U-Haul and selling TVs on the street outside a Best Buy, or dropping pallets of fertilizer on the sidewalk in front of Home Depot, intercepting people on their way to those retailers. There’s no difference between that and parking your cupcake truck in front of a local bakery. It would be closer to a level playing field if food trucks paid the equivalent tax burden of a “brick and mortar” business, provided consistent employment for a comparable number of local residents, provided restrooms, cafe seating and the other amenities that restaurants provide. But instead we have numerous start-up sites that say stuff like this: “With lower overhead costs and greater mobility, a food truck can be an exciting opportunity…”
Why would a city want to bet on a fad, making it easier for food trucks to congest already crowded city streets, hurting restaurants that make long term community investments to turn empty storefronts into public attractions? If the neighborhood starts to slide, food trucks can drive away to another city or location; they have no commitment to a neighborhood or community.
By squatting on taxpayer-maintained public streets, food trucks are the farthest thing from a free market case study. They need to be prevented from piggy backing on the entrepreneurs that build healthy city dining districts. The Chicago rules, DC proposals and other regulations are not government favoritism toward established restaurants, but simply a way to level the playing field. If food trucks can survive by bringing food service to unique locations, they are creating value on their own, but not by poaching traffic in existing restaurant districts built by tax paying long term operators.
If food trucks can’t make it without being parasites, they should die off as a short term fad, without taking our vibrant business districts down with them.