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July 30, 2008
Restaurant Chains Close as Diners Reduce Spending
By MICHAEL M. GRYNBAUM
NY Times

Several national restaurant chains were shuttered on Tuesday, possibly
offering an early taste of what’s in store this year for businesses that
depend on free-spending consumers whose budgets are now being squeezed.

The parent company of Bennigan’s, an Irish-themed bar and grill with about
200 sites across the country, filed for bankruptcy, a move that will put
hundreds of employees out of work and leave many landlords with empty
retail space during a painful time in the real estate market.

A sister brand, Steak & Ale, will also close. Franchise units of Bennigan’s
will remain open for now, a spokeswoman, Leah Templeton, wrote in an
e-mail message.

The restaurants are the latest casualties in the so-called casual dining
sector, considered a cut above fast food. Soaring food costs and a surfeit
of locations have hurt the companies’ bottom lines just as Americans are
choosing to take more meals at home.

The closings are “something we’re going to see more of over the next 6 to
12 months,” said Amy Greene, a director at Avondale Partners who tracks
the restaurant industry.

“The companies have been getting squeezed from all directions,” Ms. Greene
said. “You have had minimum wage go up again, commodity prices continue to
go up. We’re in a softening consumer market where the consumer is less
willing to accept the price increases than they might have been in the
past. The companies are having to eat the cost difference.”

Trips to the mall or the local tavern — the casual outings that provide
much of the business for midtier retailers — are falling by the wayside,
analysts said, as gas prices reach record highs and Americans tighten
their household budgets.

“Even folks for whom $3 gas is not necessarily a budget issue appear to be
changing their behavior,” said Bryan C. Elliott, an analyst at Raymond
James & Associates.

Another hurdle facing these restaurants is their copycat nature. Though
Bennigan’s modeled itself as an Irish pub, its menu had Black Angus
steaks, Southwestern-style appetizers and tempura shrimp, items that would
not be unfamiliar to patrons of, say, T.G.I. Friday’s or Ruby Tuesday.

“All these bar and grill concepts are very, very similar,” said Bob
Goldin, executive vice president of Technomic, a restaurant industry
consulting group. “They have the same kind of menu, décor, appeal,” which
makes it more difficult to establish brand loyalty among customers.

The restaurant chains are owned by the Texas-based Metromedia Restaurant
Group, a unit of a business conglomerate owned by the billionaire John
Kluge.

The Ponderosa and Bonanza restaurants, which operate under another entity,
Metromedia Steakhouses, were not covered in the bankruptcy.

Thank god the world's best and largest hamburger maker has positioned itself
the market to weather the storm in this sea (boating ref.) of mediocre
restaurant failings.