In “Burn the Ice: The American Culinary Revolution and Its End” (Penguin Press, 384 pgs, $28) a new book by James Beard Award-winning food journalist Kevin Alexander, the thesis is that due to an confluence of factors: saturated restaurant markets, rising labor and food costs, weak sales, changing consumer tastes and loyalties, a shrinking middle class, declines in mall traffic, bank and investor skittishness about returns on investments all point of a bleak future for the sector.
Mr. Alexander argues that, starting in Y 2006, we experienced a transformative period for the US restaurant industry.
He marks some of the innovations: the rise of “fine casual dining” meaning those restaurants with dangling light bulbs and exposed brick and in-your-face ambitious food that does not lean overmuch on fine linens or fancy stemware, craft cocktails, farm-to-table dining, the hipification of non-Western food, the audacity of food truck culture, and the democratization of criticism via social media.
Now he says we should prepare for a major shake-up.
“There are too many restaurants,” Mr. Alexander said. “There has not been a recession since 2008, and a recession gets the people who are not serious out of the way, austerity breeds creativity.”
And, that for a number of years, the rate of restaurant growth has exceeded population growth.
Too many restaurants are chasing too few consumer dollars. Part of this is because of demographic changes. People age 35 to 54 go out to eat most often. Younger than that and they may not have enough earning power to spend, older than that and careers are winding down and there may be less travel or disposable income.
In Y 2007, 41% of consumers were in a spending sweet spot, today it is just about 34% that we are still 5-7 yrs away from the huge millennial generation fitting in the spending sweet spot.
Restaurants cannot just make a go of it until then. Subway closed 1,100 locations in Y 2018, and Starbucks aims to shutter 150 underperforming stores this year. And “fast casual,” order-at-the-counter restaurants are in a far better position than full-service casual restaurants.
Dining out is an ingrained consumer behavior and unlikely to diminish significantly across the board. Even during the recession of the last decade, dining out was a relatively cheap way to indulge, the way lipstick sales spiked during the Great Depression.
Men and women are not suddenly going to learn to cook in the next 3 yrs. And there is a major contrast in dining behavior. A person is either convenience-driven or experience-driven, casual dining is caught in the middle.
America’s consumers are now avoiding the big casual chains like Applebee’s in favor of local, Chef-driven independent restaurants. But even those appear to be on shaky grounds in many crowded markets.
Mr. Alexander says part of the reason local, Chef-driven independent restaurants may be struggling is that we have entered what he calls the age of the operator.
“The gestation period to develop new ideas in Portland in the middle of the last decade was years,” Mr. Alexander says. “Now if you do not have your act together in 3 months, someone is going to take your idea and own it. It doesn’t matter where they live, if they have the resources and skill to execute better than you can, anyone can plagiarize you.”
When Instagram and Yelp are crowded with 300 pictures of your latest dish or cutting-edge bar decor, imitation is not just a form of flattery, it is intellectual theft that is entirely legal and impossible to prevent.
In an industry where profit margins are usually in the single digits, adding in food delivery options such as Uber Eats or DoorDash originally seemed to offer an added revenue stream without the expense of extra kitchen staff, expanded hours of operation or additional equipment.
Growth in that area has been explosive, and last year $10-B in revenue was generated by 3rd-party delivery companies. But at some point delivery cannibalizes existing restaurants.
Most 4rd-party delivery services are charging 25% to 30%, which squeezes restaurants’ profit margins further. For a small independent restaurant it is hard.
An argument can be made that if fine-dining restaurants disappear, to be replaced by cookie-cutter fast-casual spots, not much is lost but elitist clubhouses for the 1%. But they are the incubators of new ideas, says Mr. Alexander, “the academic chapels of learning.”
“They do not need to be for everyone, they should not be. It is almost like couture lines: Fashion houses lose money on them, but that’s what pushes fashion forward. You need those to exist in food,” Mr. Alexander says.
And while Mr. Alexander laments the passing of the hip fine-casual Chef-driven restaurants in his book, he thinks they may be partly responsible for their own demise.
“When we started to think everything was all about the food and who cares about the service and decor, it opened up a dangerous Pandora’s box. The logical extension is ‘fast casual’ – who even needs waiters? It was a failure to appreciate the full dining-out experience.”
But Mr. Alexander is hoping for the pendulum swing back in the other direction.
“I hope it will come back around to the simple sit-down restaurant that cares about service. And maybe I will check my phone with the phone-check person. And be invested in the meal and the conversation.”
Back to the dining experience with company, but for that we will have to wait until coronavirus social distancing rule is lifted.
For now it is order by phone, pay by app, pick up or deliver and eat at home.
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