Michael Lambert Bloom

Restaurant Research ASSIGNMENT REQUEST: I need answers to the following questions, along with condensed statements that could be used as a quote (you can provide two bullet points for each prompt to help organize what you provide ... citations underneath): Why are restaurants closing in some urban or city populations (e.g., Baltimore has had a decline in restaurants of late)? What are some symptoms of restaurants closing? Provide examples of food delivery systems other than Amazon food delivery and Uber Eats that operate in the northeast. How have online delivery systems impacted the restaurant industry? Provide any information pertaining to the increase of DIY (do-it-yourself) communities online that may have some impact on the restaurant business. For example, Blue Apron provides delivery services of ingredients and cooking instructions. Has this sort of business had an impact on restaurants? Find a list of startups that offer similar services to Blue Apron ... and other DIY-infused food delivery services that may cut into restaurants' market share. Any other information pertaining to a decline in restaurants (data, causes, etc.) will be much appreciated. -- RESULTS: Why are restaurants closing in some urban or city populations (e.g., Baltimore has had a decline in restaurants of late)? Consumers Behavior Restaurants throughout the U.S., including Baltimore, have been hit with a “restaurant recession” of declining sales (Garcia and Linnane, 2016), particularly in the case of 18- to- 35-year-olds (Jargon and Rizzon, 2016). “In the past 10 years, older millennials have made 50 fewer restaurant visits per capita, according to NPD. Although people under the age of 20 are increasing their visits, they go out to eat at a far lower rate than older millennials and members of Generation X did at their peak” (Jargon and Rizzon, 2016). The reasons for this difference include: a reaction to economic uncertainty and political uncertainty (Jargon, 2016; Jargon and Rizzon, 2016), a desire to eat at home because: “Millennial consumers are more attracted than their elders to cooking at home” (Taylor, 2017). Customers of all age brackets save money by shopping at the grocery store instead of going out to eat, because there “food is at its cheapest point relative to restaurants since the mid-1980s” (Jargon and Rizzon, 2016). The amount of options for dining-at-home has increased with the growth in the “number of places from which to buy food for at-home consumption, from prepared meals at the supermarket to meal-kit purveyors to convenience stores” (Jargon, 2016). changing work patterns have more people working from home, meaning that “restaurant visits at lunchtime—once a key source of revenue for the industry—also have declined.” (Jargon and Rizzon, 2016) These changes have not left enough customers left for some restaurants to stay in business. Baltimore: Owner James “Pat” Liberto on closing Camden Pub, “It got to the point where I was opening on, say, a Monday, and I’m just trying to make enough money to open the next day,” Liberto said. “It finally hit me one day: What am I doing? I had to stop the bleeding” (Case, 2017). [Consumers behavior toward restaurants, especially that of 18- to- 35-year-olds, is affected by economic and political uncertainty, changing work patterns, the enjoyment of cooking, and the desires to save money and time.] Changes in Restaurants’ Situation Not all types of restaurants are affected equally by these changes. Millennials are attracted to the convenience and apparently healthiness of “fast-casual spots like Chipotle and Panera,” as well as feeling that “[c]asual-dining brands just aren't cool anymore” (Taylor, 2017), so that family and casual dining have performed the worst in the restaurant recession (Linnane, 2017). In addition, there are a number of structural challenges faced by all restaurants, although more so by “sit-down restaurants.” The primary one of these is that there are simply too many restaurants. Analysts with NPD Group have charted the growth and retraction of this industry, saying that the number of restaurants in the U.S. grew by 7.3% between 2006 and 2014, peaking at more than 638,000. Since then, the trend has reversed, with a slight decline in restaurants to 624,000. Analysts say many of the closed stores come from independent restaurant chains (Kieler, 2016). Consequently, while “[h]aving a variety of food options at your disposal is great for hungry consumers…you eventually get to the point where there aren’t enough people eating out to support all of those restaurants” (Kieler, 2016), so that many restaurants have closed locations and/or filed for bankruptcy. In Baltimore, casual dining restaurants that have closed locations include: Famous Dave’s (in Bel Air and Timonium), Romano's Macaroni Grill (Timonium), and Stone's Cove Kitbar (Maryland restaurants in Bel Air and Owings Mills) (Meehan, 2017) Restaurants are also struggling with a high debt load, especially affects sit-down restaurants due to their greater initial investment. This situation leaves them vulnerable to economic downturns and often forces them into bankruptcy. Recently, one of Baltimore’s restaurants, the “casual Italian dining chain Romano’s Macaroni Grill filed for bankruptcy protection Wednesday with a plan to slash its debt and reorganize around its top restaurants” (http://www.marketwatch.com/story/romanos-macaroni-grill-owner-files-for-chapter-11-bankruptcy-). However, while [s]uch casual-dining chains, which offer table service, have been hit first…industry experts predict that fast-casual chains, where customers order at the counter, will be the next victims. While fast-casual chains, many of which are matched by private investors, don’t usually carry as much debt as full-service restaurants, they have overexpanded in recent years in response to growing demand for fresher, more customizable food in contemporary settings.” (Jargon and Rizzon, 2016) [Restaurants, especially casual dining ones, are faced with not only declining sales, but customers’ attitudes, over-saturation of the market, and economic debt.] References Case, W. (2017, March 28). Sports bar Camden Pub closes after more than 25 years. The Baltimore Sun. Retrieved from http://www.baltimoresun.com/entertainment/music/midnight-sun-blog/bal-camden-pub-baltimore-sports-bar-closes-story.html Chamlee, V. (2016, June 27). Why people are dining out less. Eater. Retrieved from https://www.eater.com/2016/6/27/-/brexit-restaurant-traffic-down-uk-us Garcia, T. and C. Linnane. (2016, November 8). The restaurant recession has arrived. MarketWatch. Retrieved from http://www.marketwatch.com/story/analysts-who-warned-this-summer-of-a-restaurant-recession-are-looking-smart-now- Jargon, J. (2016, June 27). Dining out falls victim to economy. Wall Street Journal. Retrieved from https://www.msn.com/en-us/money/companies/dining-out-falls-victim-to-economy/ar-AAhErzF Jargon, J. and L. Rizzon. (2016, October 16). Restaurant chains get burned by overexpansion, new rivals. Wall Street Journal. Retrieved from https://www.wsj.com/articles/restaurant-chains-get-burned-by-overexpansion-new-rivals- Kieler, A. (2016, November 17). Why are so many restaurant chains closing locations, filing for bankruptcy? Consumerist. Retrieved from https://consumerist.com/2016/10/17/why-are-so-many-restaurant-chains-closing-locations-filing-for-bankruptcy/ Linnane, C. (2017, January 20). The restaurant recession turned even more damaging in December. MarketWatch. Retrieved from http://www.marketwatch.com/story/the-restaurant-recession-created-misery-in-december- Meehan, S. (2017). 2017 restaurant and bar closures in Greater Baltimore. The Baltimore Sun. Retrieved from http://www.baltimoresun.com/entertainment/dining/baltimore-diner-blog/bal-2017-restaurant-closures--photogallery.html Taylor, K. (2017, June 3). Millennials are killing chains like Buffalo Wild Wings and Applebee's. Business Insider. Retrieved from http://www.businessinsider.com/millennials-endanger-casual-dining-restaurants-2017-5 What are some symptoms of restaurants closing? The restaurant closures are a symptoms of: economic problems for the restaurants, including their over expansion of restaurants during the previous periods of economic growth (Kieler, 2016). customers' reaction to economic uncertainty (Chamlee, 2016; Jargon, 2016) and political uncertainty (Jargon and Rizzon, 2016). “Restaurant visit growth has completely stalled in the last three months, signaling that consumers, jittery over economic uncertainties, are retrenching” (Jargon, 2016). the growth of alternatives to dining out, ranging from convenient prepackaged food at grocery stores to delivered meal kits, (Kieler, 2016). [Restaurant closures are symptomatic of economic and political uncertainty, alternatives to dining out, and over-saturation of the market.] References Chamlee, V. (2016, June 27). Why people are dining out less. Eater. Retrieved from https://www.eater.com/2016/6/27/-/brexit-restaurant-traffic-down-uk-us Jargon, J. (2016, June 27). Dining out falls victim to economy. Wall Street Journal. Retrieved from https://www.msn.com/en-us/money/companies/dining-out-falls-victim-to-economy/ar-AAhErzF Jargon, J. and L. Rizzon. (2016, October 16). Restaurant chains get burned by overexpansion, new rivals. Wall Street Journal. Retrieved from https://www.wsj.com/articles/restaurant-chains-get-burned-by-overexpansion-new-rivals- Kieler, A. (2016, November 17). Why are so many restaurant chains closing locations, filing for bankruptcy? Consumerist. Retrieved from https://consumerist.com/2016/10/17/why-are-so-many-restaurant-chains-closing-locations-filing-for-bankruptcy/ Provide examples of food delivery systems other than Amazon food delivery and Uber Eats that operate in the northeast. “DoorDash will join a growing list of third-party restaurant delivery services in the Baltimore area. Amazon, UberEats, GrubHub, Eat24 and Foodler are just a few of the services that deliver food on behalf of restaurants in the Baltimore area. And Slice, a pizza-specific delivery app, launched in Baltimore two weeks ago.” (Meehan, 2017b) Other examples include: GrubHub Seamless (merger of the two largest companies, as well as Boston-based DiningIn), Postmates, Caviar, (https://www.fsrmagazine.com/owner-operators/getting-real-dish-food-delivery) Takeout Taxi (https://www.takeouttaximd.com/), Eat24 (purchased by Yelp) (https://eat24hours.com/), Groupon (purchased OrderUp) (Blue Sky staff. (2017) Dashed (“the leading restaurant delivery service in the Northeast” http://www.dashed.com/about-us.html), *Amazon-includes 103 restaurants in Baltimore (https://www.amazon.com/restaurants/landing?sourceUrl=/restaurants&ref_=amzrst_ob_z) References Blue Sky staff. (2017, July 31).Grubhub, Groupon join forces on food delivery. Chicago Tribune. Retrieved from http://www.chicagotribune.com/bluesky/originals/ct-bsi-grubhub-groupon-food-delivery--story.html Meehan, S. (2017b, October 10). DoorDash restaurant delivery launches in Baltimore next week. The Baltimore Sun. Retrieved from http://www.baltimoresun.com/entertainment/dining/baltimore-diner-blog/bs-fo-doordash--story.html How has online delivery systems impacted the restaurant industry? General effects Restaurants have always had to evolve in the face of changing times and situations, and the effect of online delivery systems is no different. Broadly speaking, there have been three models in restaurant logistics in the U.S. There is the traditional eatery with a dining room and kitchen, which dominated until around World War II. Then came the era of mobile eating, which led to the rise of fast-food companies such as McDonald’s. That in turn caused the redesign of many kitchens, customer areas, and parking lots to facilitate serving food to people in cars rather than at tables. Now the rise of digital ordering means that many establishments that weren’t set up for large quantities of to-go orders or home delivery have to think about the layout of their facilities and how they deploy their staff. (Kell, 2017) In general, online delivery systems increase sales, which helps balance out the decline in restaurant visits (Kell, 2017) and extend a restaurant’s ‘reach’ (Holmes, 2016). However, this growth in delivery may require changes in: the proportions/focus of a restaurant, including redesigning kitchen, parking lot, and/or customer areas [As an extreme example, restaurants in London (Thompson, 2016) and New York (Nelson, 2017) are delivery only.], menu items, so that they travel better (Khrais, 2016), the design of the food packaging, for successful transport of all foods. In addition, it must be decided whether the deliveries will be run by the restaurant or a third party delivery system (Kell, 2017). Pros/Cons of Third Party Delivery Third-party delivery has advantages, including: saving time and effort for restaurant allowing the staff to focus on cooking, provides publicity and an easy connection to many people who would not travel to try an unknown restaurant. For example, according to a study GrubHub had conducted, it “can help cut food order processing time by as much as 50 percent, allowing restaurateurs to spend more time making food and less time managing orders.” Additionally, “on average, restaurants see a 30 percent increase in takeout revenue a year after joining GrubHub” (Lazare, 2015). There are, however, disadvantages to these systems. Restaurants may find they can not avoid such delivery systems, even if they chose not to join group and/or have reasons to not deliver. Restaurants also lose control of quality of the food during delivery, but still get blamed for wrong orders, cold food. Non-restaurant drivers are not considered professional food handlers and therefore not monitored by FDA. Restaurant staff may lose tips from their drivers (Jones, 2015; Wolf, 2016). [Online delivery systems encourage changes to restaurants, such as in their physical arrangements, although there are positives and negatives to the changes.] References Holmes, N. (2016, July 7). Food to go: Delivery services reshape the restaurant industry. JLL. Retrieved from http://www.jllrealviews.com/industries/food-demand-delivery-services-reshaping-restaurant-industry/ Jones, S. (2015, July 31). The Postmates Problem: Why Some Restaurants Are Forced to Fight the Delivery App. Eater. Retrieved from https://www.eater.com/2015/7/31/-/postmates-delivery-problems Kell, J. (2017, June 9). Restaurants face digital dilemma. Fortune. Retrieved from http://fortune.com/2017/06/09/order-online-food-delivery-starbucks-mcdonalds/ Khrais, R. (2016, September 9). How the rise of food delivery is changing restaurants. Marketplace. Retrieved from https://www.marketplace.org/2016/09/08/business/how-rise-food-delivery-changing-restaurants Lazare, L. (2015, October 20). GrubHub pushing new research highlighting 'GrubHub Effect’. Chicago Business Journal. Retrieved from https://www.bizjournals.com/chicago/news/2015/10/20/grubhub-pushing-new-research-highlighting-grubhub.html Nelson, K, Jr. (2017, June 22). Ando is David Chang’s new restaurant where you can only have food delivered. Digital Trends. Retrieved from https://www.digitaltrends.com/home/ando-delivery-restaurant-app-david-chang-news/ Thompson, H. (2016, June 17). Will home delivery kill the restaurant trade? the guardian. Retrieved from https://www.theguardian.com/lifeandstyle/2016/jun/17/will-home-delivery-kill-the-restaurant-trade Wolf, B. (2016, December).Getting the Real Dish on Food Delivery. FSR Magazine. Retrieved from https://www.fsrmagazine.com/owner-operators/getting-real-dish-food-delivery Provide any information pertaining to the increase of DIY (do-it-yourself) communities online that may have some impact on the restaurant business. For example, Blue Apron provides delivery services of ingredients and cooking instructions. Has this sort of business had an impact on restaurants? In spite of claims, the effect of deliverable meal kits on restaurants is debated, primarily because the systems are so new (Krummer, 2016). Current viewpoints include: They take away customers from restaurants. {cheaper} “The U.S. is having one of its biggest restaurant shakeouts in years…with many independent restaurants shutting their doors as chains continued to expand. Meanwhile, meal-kit delivery services, such as Blue Apron…have been taking away customers” (Jargon and Rizzon, 2016). They take away customers, but only from fast casual restaurants. {comparably priced} “Meal kit delivery users are more likely to eat at fast casual restaurants and have a more favorable opinion of restaurants like Panera, Boston Market, and Noodles & Company. It wouldn’t be surprising to see these likely users substituting their frequent meals out with meal kit deliveries” (Solomon, 2016). They pose a potential, but not current threat to restaurants. “Food industry consulting firm Pentallect has suggested that though the current impact of meal kit delivery services like Blue Apron is small, the ongoing growth trend in the sector, which is about 25 to 30 percent per year, could eventually lead to a significant impact on the already sluggish dine-in restaurant business – stealing away as many as “millions of occasions” from more traditional eateries (Pomranz, 2017). They are little to no threat to restaurants because they primarily replace other meals that were already going to be made at home. {more expensive} “Meal kits are typically used to replace an in-home dinner, but the cost of a kit is comparable to a restaurant meal rather than an in-home dinner” (NPD, 2016). Therefore, “The retail grocery industry seems more likely to lose revenue to meal kit delivery providers than restaurants will be” (Krummer, 2016). Consequently, “[t]here is a lot of buzz around meal kit delivery services, like Blue Apron and HelloFresh, but the buzz may be greater than those who currently use the kits” (NPD, 2016). [The growth of meal kit delivery appears to threaten restaurants success, although its affects are still up for debate.] References Jargon, J. and L. Rizzon. (2016, October 16). Restaurant chains get burned by overexpansion, new rivals. Wall Street Journal. Retrieved from https://www.wsj.com/articles/restaurant-chains-get-burned-by-overexpansion-new-rivals- Krummer, B. (2016, July 25). Meal kit growth not hurting restaurants—yet. Restaurant Hospitality. Retrieved from http://www.restaurant-hospitality.com/consumer-trends/meal-kit-growth-not-hurting-restaurants-yet NPD. (2016, July 20). Buzz About Meal Kit Delivery Services May Be Greater Than Adoption At This Point, Reports NPD Group [Press Release]. The NPD Group, Inc. Retrieved from https://www.npd.com/wps/portal/npd/us/news/press-releases/2016/buzz-about-meal-kit-delivery-services-may-be-greater-than-adoption-at-this-point-reports-npd-group/ Pomranz, M. (2017, June 29). Meal Kits Are a ‘Threat’ to Restaurants, Study Says. Food & Wine. Retrieved from http://www.foodandwine.com/news/meal-kits-are-threat-restaurants-study-says Solomon, M. (2016, August 19). Are Meal Kit Delivery Services a Real Threat to Food Retailers? Retrieved from https://civicscience.com/are-meal-kit-delivery-services-a-real-threat-to-food-retailers/ Find a list of startups that offer similar services to Blue Apron ... and other DIY-infused food delivery services that may cut into restaurants' market share. Appetites Gathered Table Green Chef HelloFresh Martha & Marley Spoon Plated Sun Basket References Leonhardt, M. (2017, July 19). This is the best meal-kit service on the market right now. Money Magazine. Retrieved from http://time.com/money/-/best-meal-kits-value/ Worley, B. (2014, Decemeber 3). Inside the Kitchen: Testing Food-Delivery Services Like Blue Apron and More. ABC News. Retrieved from http://abcnews.go.com/Lifestyle/inside-kitchen-testing-food-delivery-services-blue-apron/story?id=-