Restaurant Unit Growth Has Been Really Weak


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Mounting competition in the lending environment has made life pretty good for restaurant companies and big franchisees, assuming they operate one of a handful of big, legacy chains. For the rest of the world, lending is still tough to find. The result: meager growth in the number of restaurant units over the past year.

This is according to the latest tally by the Chicago-based marketing firm NPD, which this morning released its Spring ReCount. According to the firm, there were only 3,045 more restaurants this spring than last spring, growth of just 0.5 percent. That’s really weak.

All of that gain came from chains. The number of chains grew by 1.3 percent, to 280,336 between the spring of 2012 and the spring of 2013. The number of independents declined by 0.2 percent, to 337,169, during that same period.

The operating environment favors chains over independents, and big companies over small ones, giving larger companies and concepts more confidence to expand. But not much more.

As we noted yesterday, the economy remains sluggish. Disposable income has been weak, and with weak disposable income comes little in the way of improving restaurant sales. As such, “operators are being more cautious in their expansion plans,” Greg Starzynski, director of product management for NPD, said in a statement. NPD has forecasted slow traffic growth over the next decade, which should yield continued conservative development.

In addition, the cost environment makes it tougher to make a profit. Larger operators with scale can better survive than smaller independents.

All of this is why lenders remain less apt to loan to restaurants outside of a handful, perhaps 10, older, legacy brands, plus a few smaller regional chains. For everybody else, the environment is a struggle, and as such growth remains painfully slow.

 

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