Traditional lunch eateries are finding it hard to survive as increasingly consumers are eating out less, bringing leftovers or simply buying lunch “to go” and taking it back to their office desks. The one hour lunch breaks that fostered the quaint custom of office goers carpooling themselves to a local eatery is quickly becoming as rare as the three martini lunches of yester years.
Sit down lunch eateries – Cosi Inc., Garden Fresh Corp., and Old Country Buffet have all filed for bankruptcy while Ruby Tuesday and Famous Dave’s of America are rapidly closing restaurants. In its Q1 17 earnings call, Tyson foods attributed its 27% earnings drop to decline in restaurant traffic.
The overall shift to healthier diets is clearly a major factor. The desire to eat fresh foods, low fat foods, organic foods and free food in places like Google, have all contributed to consumers staying at their desks during lunch. If packaged lunch products at Whole Foods didn’t cost a whole paycheck, the shift would be even more dramatic.
And then, there is higher labor costs and real estate prices. Menu prices at sit down restaurants have been climbing as higher rents and salaries has forced restaurant owners to raise prices. Consequently, the price difference between a “sit down lunch” and “grab and go” lunch has widened. With the likes of Starbucks offering hot soups, salad and sandwiches and Chipotle offering ready to eat burritos (sans tainted meat) in less than 5 minutes, it is hard to imagine a time when casual sit down lunch eateries will see a resurgence in their business.
Future Wealth’s View
The idea of a group of office goers getting together for lunch to a sit down place on a regular basis, was a bad idea to begin with. There is always a few in the group who tag along but wish they were back in the office, one or two who can’t stand the company but are stuck with them and a loner or two, who would rather be working out at the local gym instead. And universally, all but a few don’t want to be saddled with the $10 – $15 lunch expense and hope the manager in the group will pick up the tab. Until the bill arrives.
The internet and the smartphone has also changed the dynamics of interaction that brought out the idea of lunch getaways in the first place. Most office goers are now content to sit in front of their monitors or smartphones and surf the web or post on Facebook while they munch on leftovers or take-out food from a cafeteria. This obviates the need for uncomfortable personal conversations, made up vacation talk or dealing with the guy who orders most of the lunch items and pays less than his fair share.
The restaurant business, much like retail malls and auto dealerships is in trouble and has yet to adapt to the changing consumer habits. To quote Peter Lynch, the iconic Magellan Fund Manager – Never bet on comeback while they’re playing “Taps”. (“Taps” is the name of the bugle tune they play at military funerals).