Closing Doors in a Healthy Economy

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Reports from late 2019 and early 2020 have identified numerous restaurant and food chains that either closed or plan on closing stores across the country. Although each brand has specific reasoning for closing particular stores, the status of the economy certainly has an impact. In a strong economy, increased competition and strategic marketing decisions have a large impact on the success of brands. 

According to the Restaurant Performance Index, prepared by the National Restaurant Association, restaurants have been successful during recent years. The index shows restaurants have erred on the side of expansion despite periods of contraction since 2017. Although the restaurant industry has remained successful as a whole, there are a number of brands that are rapidly closing their doors. 

Many of these brands include Starbucks, Pizza Hut, Burger King, Subway, and Taco Bell. One of the biggest reasons why stores close their doors is because of performance issues. Ultimately, performance issues can be traced back to the company’s marketing decisions – product, placement, pricing, and promotion. Executives of Red Robin have identified placement, specifically in shopping malls as an issue. One of the more obvious reasons is that malls do not filter as much traffic as they did before online shopping became mainstream. By reducing the volume of customers traveling throughout the mall, the restaurant’s location faltered in response. Other companies have identified promotion as they struggle to attract newer and younger customers. Chains that were established before the 1950’s like Roy Rogers, Perkins, and Friendly’s have all been victims of this and forced to close stores as a result. 

At the same time while some brands are closing their doors, there are a number of brands that are thriving due to a steadily increasing competitive market in the food service industry. An increase in health-conscious consumers have leveraged companies to update their menu and as a result there has been a boom in Beyond Meat products. Companies like Burger King and Dunkin have incorporated Beyond Meat into their products while bringing in spokespeople like Snoop Dogg for promotions. Similarly, the market for chicken sandwiches has expanded exponentially as companies like Chick-Fil-A and Popeyes fight for dominance while other fast food places, such as McDonald’s, struggle for a share of the market. 

Another confounding variable affecting the food service industry is the way customers place orders. Similarly to online shopping, consumers are ordering more food from their mobile devices. Apps like GrubHub, DoorDash, and UberEats are all having effects on how individuals takeout food, especially from restaurants. Rather than physically going out to eat, consumers can order food from their favorite foodery, have it delivered and eat it in the comfort of their home. When customers do physically go out to eat, middle age and younger individuals tend to prefer fast food over traditional dine-in establishments. 

Overall, while some chains close certain restaurants it is in large part a reflection of a strong, robust economy. There are countless options for individuals to choose from when they want to eat, and they are typically bunched together in populated urban areas. Health conscious consumers have flooded a saturated market and chains that have been able to adjust and offer products to fulfill their needs have performed well in recent years. Other chains that have struggled to adapt have seen their sales decline and have not been able to compete. Therefore, in a competitive market some companies are able to set themselves apart from their competitors and thrive while other brands are forced to mitigate losses, typically by shutting down stores. Considering that labor and technology costs are on the rise as well, companies that are having trouble competing are more likely to downsize. All in all, the struggles of certain brands to stay relevant is a reflection of this strong, competitive economy.  

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