Analyst: "A Lot of Restaurants Are Just Going to Go Away"

During my reporting for the corporate strategy piece, I talked to one restaurant analyst who gave a very stark assessment of the restaurant industry.

A restaurant analyst says there are too many restaurants and many, like this one, will close next year.

A restaurant analyst says there are too many restaurants and many, like this one, will close next year.

“What you are going to see is that a lot of the restaurants are just going to go away,” the analyst said. “There has to be some rationalization with the amount of food choices out there. You will see some restaurants go out of business.”

His reasoning was quite simple. There are just way too many restaurants in many parts of the country – especially in the suburbs. In the United States and most developed nations there is a restaurant for about every 300 people, but in suburbs and some cities that can fall to as little as 100. Just for perspective, the ratio in China is one restaurant for every 2,000 people.

The analyst, who I’m not citing because I told him I wasn’t writing for publication, believes that several restaurants are just holding on to see what the holidays will be like and when they turn out to be far below 2007’s sales, they will close or be bought by someone else. But he didn’t include Burger King or other fast food chains.

“Some of the more casual dining, some of mom and pop stuff is going to go away,” he said.

He also thought that just the concepts of some restaurants could vanish.

“You might start getting rid of some of these casual dining concepts,” said the analyst, who has a buy on Burger King. “There could be no more Applebees. Then they would go to Burger King. I think its a long term benefit [for Burger King].”

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