While it’s been a tough few years for the restaurant industry as consumers cut back on discretionary spending, it seems that smaller, independent restaurants have taken a bigger hit than chain restaurants.
That’s according to a report from The NPD Group, a consumer and retail research firm, which found independent restaurants accounted for 87 percent of restaurant visit losses during the past three years.
Darren Tristano, executive VP of Technomics, a food service research and consulting firm, says much of the change is happening in restaurants that cater to low- and middle-income demographics.
“The very upscale, high-volume restaurants in major cities are doing OK,” he told CNBC.com. “But the more mom-and-pop establishments in suburbs and rural areas are being devastated by high-value, fast-casual restaurants.” He says chains such as Smashburger and Five Guys are taking business away from local, suburban restaurants.
Since 2009, NPD says, 7,158 independent restaurants have closed. In the same period, restaurant chains have grown by 4,511 units. Currently, independent restaurants represent 27 percent of visits to food establishments, down from 28 percent in November 2008. Market share for chain restaurants has grown from 60 to 61 percent in that period.
“Independent restaurant operators have neither the money nor resources that the chains have,” NPD restaurant industry analyst Bonnie Riggs said in the report. “They lacked the marketing power to drive traffic and the monetary buffer to get through the difficult times during the past several years.”
Tristano says that one reason chains have grown: Those independent business owners who closed restaurants are moving into chain operations.
“People who go out of business, if they want to remain an owner, will go into a franchise,” he said. “It’s a comfortable space for them, and they know what they are getting into.”