Chain restaurants are suffering. This year’s sales numbers trail last year’s, which were already gloomy, and industry experts attribute much of the decline to consumers’ preference for independent restaurants.
“This really seems to be the dawning of the era of the independent,” said Darren Tristano of Chicago-based research firm Technomic, which tracks the restaurant industry. “The independents and small chains are now outperforming. The big chains are now lagging.
Recently, there has been plenty of anecdotal evidence to support this claim. Ignite Restaurant Inc., which operates the Joe’s Crab Shack and Brick House Tavern chains (with a total of more than 130 restaurants), is $121 million in debt and filing for bankruptcy. Its shares have fallen 95 percent this year. Subway Restaurants saw its domestic number of locations “decline for the first time ever last year,” reported Bloomberg. Ruby Tuesday Inc. has said it may put itself up for sale.
Consumers have grown more sophisticated when it comes to dining out, and the rise of social media and independent review sites such as Yelp has made it easier for independents to compete with the big chains. That doesn’t mean it’s suddenly easy to open and maintain a restaurant — 27 percent of new restaurants shut down within 12 months and 60 percent shutter within three years.
But overall the picture is rosier for the independents. Another research firm, Pentallect, predicts that while big chains will see revenue growth of 3 percent through 2020, independent growth will be more robust at 5 percent.