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As casual dining chains decline, diners are increasingly frequenting restaurants based in their own communities.

Local Restaurants are Stiff Competition for Casual Chains

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With more casual-dining brands closing, independents are seeing more growth.
By Andrew Szala September 2017 Expert Insights

As large restaurant operations move towards growing their global footprint, smaller, more agile operations may be able to out-maneuver their behemoth casual-dining competition by creating unique tastes and memorable experiences.

Recent data indicate that local restaurateurs have a significant leg up on nationwide chains. According to the Bureau of Labor and Statistics, the demand for dining in the U.S. grew 2.8 percent last year with combined sales exceeding $799 billion. Over 53,000 restaurant jobs were added in July 2017 alone, with seasonal jobs in the food service industry projected to top out around 490,000, per the National Restaurant Association’s annual Eating and Drinking Place Summer Employment Forecast.

Yet, last year, chain restaurants saw a 2.4 percent decrease in domestic sales on a whole. Even Howard Johnson’s, once the quintessential chain on the American dining scene, put its final location up for sale this past January.

Chain Restaurants Curb U.S. Locations; Expand Internationally

Over the next year, 135 Applebee’s restaurants are slated to close nationwide. DineEuity Inc., the parent company of both restaurants, will prune underperforming locations in domestic markets in favor of new restaurant locations abroad. Similarly, Applebee’s restaurants in Bahrain, Oman, and Panama will soon welcome new diners, while new IHOPs will open in Thailand and India.

So while there is still a place for investment in the restaurant marketplace, a stake in a new franchise may not be the best option. Instead, the opportunity lies with local restaurants that have a distinct advantage in a marketplace craving unique flavors, personalized choices, and experiential dining.

Currently, 70 percent of restaurants in the United States are single unit operations, and new establishments are opening every day. New restaurant options mean more than diverse entrees; each new restaurant has an impact on the local economy, as well. Some cities are already experiencing a boom of new workforce opportunities. In Cleveland, Ohio, 40 percent of new jobs (more than 8 percent of the entire metro economy), were created by the culinary industry in 2016. In Wichita, Kansas, this number was almost 80 percent. In Hartford, Connecticut, 96 percent of new jobs in 2016 were born from kitchens, counters and bars. Regardless of location, the fact remains: The hospitality industry is a major economic driver and will remain so for the foreseeable future.

Why Local Restaurants Work

Unlike traditional full-service chains, local restaurants can customize their menus to fit the taste of their neighborhood and run specials that drive local foot traffic. Nationwide chains, on the other hand, must make their menu options appeal to broad tastes taken from a nationwide sample size. Local restaurateurs can enhance a personal touch, and improve hospitality through access to emerging technologies, such as advanced menu analytics, extensive loyalty programs, and a multitude of mobile ordering options. With these data driven advances, restaurateurs have a chance to create a dining landscape in which nimble, single-location restaurants can react to the demands of local consumers.

But diners searching for something unique don’t necessarily translate to a demand for haute cuisine. Authentic global foods are also drawing crowds with 63 percent of millennials favoring heritage dining. Further, this year’s food trends report from the National Restaurant Association indicates downhome cooking to be en vogue with “hyper-locally sourced foods” appearing as the number one restaurant theme of 2017. Today’s dining public wants local flavors, original menu options and to feel good about supporting the local economy.

While chain restaurants won’t disappear anytime soon, this shift in dining preference presents a unique opportunity. Today’s diners want more specificity instead of overloaded menus. Now, more than any other time in recent history, restaurateurs who are able to harness their local identity have a real chance of pulling in new customers looking to experience original flavors in their own backyards. Together, they may just change the way Americans enjoy a night out. 

Andrew Szala is with Upserve, one of the largest and fastest­-growing companies in the restaurant technology space. Upserve’s restaurant management system offers a complete suite of solutions purpose-built for restaurants. Upserve's system also includes Breadcrumb POS by Upserve, the industry's strongest cloud-based restaurant management point of sale.