The oligopolization of "fine dining"
It's no secret that fast-food chains predominate in the restaurant industry. What a 2002 article from the Wall Street Journal ("More Local Restaurants Struggle As Big Chains Eat Their Lunch". 7/9/02) show sis that chain are making big inroads into the sit-down dinner business, long a bastion of independent ownership.
Last year, large chains for the first time nabbed the majority share of the $269.4 billion restaurant market, which was once dominated by the mom-and-pops. In 1991, the big chains had a market share of about 46%, according to Technomic Inc., a Chicago food-consulting firm. By last year, that had blossomed to 50.6%.
Much of that growth has come from the explosion of highly sophisticated companies specializing in sit-down restaurants such as Cheesecake Factory (American), P.F. Chang's China Bistro (Chinese), Morton's (Steak) and Olive Garden (Italian). Many of these chains have dozens, even hundreds, of restaurants fanning out nationally. Many are publicly traded, with Wall Street money fueling their initial expansion.
One commentator calls it the "Wal-Marting" of the American restaurant industry. The chains have the marketing money (check out the Olive Garden's TV ads), the deep pockets keeping going while building a clientele, the R&D money to identify and jump on food trends, and the ability to scout out and buy the best locations. Of course, they also have the buying muscle to lower prices from suppliers. Most independents have trouble keeping up.
And we're not talking just about low-end establishments. A number of well-known chefs have got into the game. According to the WSJ, "Chef-to-the-stars Wolfgang Puck oversees 68 restaurants across the country, including five Spagos, 15 Wolfgang Puck Cafes and 19 Wolfgang Puck Expresses -- some in malls and airports." The growth in $30-$40 a customer chain restaurants with wine lists has far outpaced the growth of fast food chains in recent years.
As with so many other industries, the benefits of oligopolization (for investors) are radically converting the landscape. These savvy chains make life even more difficult for independent restauranteurs, who were already in a difficult industry. It's many people's dream to open a tasteful small restaurant, perhaps like the ones they visited in their last trip to Europe. That dream is becoming more and more of a fantasy. Who needs your little Tuscan trattoria when the Olive Garden is one side, Spago's on the other?
