naked capitalism

If Starbucks, which sells an addictive staple at an only somewhat upmarket price point, is having to retrench, it’s a no-brainer that other consumer discretionary spending is taking an even bigger hit. But to date, the results are mixed. Movies, which in many places don’t require much driving, are holding up well. And they did very well in the Depression, although that may have been due in part to the fact that many (or so my mother reports) were air conditioned.

But restaurants take it on the chin early. Even so, rising food costs have taken them out earlier than might normally occur in a slump. In supposedly-not-too-badly-affected Manhattan, quite a few restaurants are shuttered, some with the storefronts still vacant, some with completely different merchants in the space, and a brave few with replacement eateries.

The Times tells us the same pattern is playing out nationally, with the price point above fast food suffering the most.

From the New York Times:

Several national restaurant chains were shuttered on Tuesday…The parent company of Bennigan’s, an Irish-themed bar and grill with about 200 sites across the country, filed for bankruptcy…

A sister brand, Steak & Ale, will also close. Franchise units of Bennigan’s will remain open for now….

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….

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….

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

“It’s not going to be easy to replace a tenant at this time, given the status of the industry,” Mr. Goldin, of Technomic, said. “It’s much trickier when you have to retrofit the whole place to fit in another kind of retailer.”

And Ms. Greene, of Avondale Partners, said that financing was also starting to dry up for ailing restaurant chains. “Banks have become less willing to lend to restaurants and franchisees,” she said. “The business fundamentals just do not support it right now.”