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Jun 12, 2009 05:26 PM

Chain Restaurants in peril

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  1. Interesting. My life wouldn't change if both Krispy Kreme and Sbarro went out of business this afternoon. And I really miss Bennigan's. Not.

    3 Replies
    1. re: Samalicious

      So your life wouldn't change a bit.....glad to hear. But for the hard working people who do work in the places mentioned, a significant number jobs could be lost and for those employees and owners, their lives would be greatly affected. The post and the story was not to be meant about you.

      1. re: fourunder

        I was commenting on the food at the mentioned chains, which I presumed to be a safe context on this board. Of course I don't want anyone to lose their jobs, and I am aware the article was not meant to be about me. Thanks anyway.

        1. re: Samalicious

          I've reread the post.....sorry, but I see no mention of the food at any of the places in your post.......and I was just commenting as I see it in real time....I was not trying to pick a fight with you....let's just say we both misunderstood and call it a day.


    2. That's too bad. Mrs. Sippi and I have a tough time resisting the "Hot Now" sign.

      That's a lot of jobs lost too.


      1. Krispy Kreme expanded and leveraged itself far too quickly - it was having tough times before September of '08. They have been used in business school class lectures as an example of how not to fill-in-the-blank. Their product also tends to be supported by a relatively narrow band of consumers within a relatively narrow time frame - at least in LA. Their product was hyped up by a few celebs - the real test is if the product can last after the hype fades away. Obviously, this did not happen. At least in the SoCal market, there is another issue that complicates Krispy Kreme's matrix - small family-run donut shops. The abundance of these shops - mostly owned and operated by Cambodian immigrants - are everywhere. Most folks are perfectly happy with these donuts, particularly since the Krispy Kreme locations are relatively few and far between in comparison.

        Sbarro's business plan for the most part is to sell their product to a somewhat captive audience - worn-down shoppers at malls. Given the quality of their food and their prices, I think most would agree they would get some serious competition outside of malls, given a standard amount of competition were to go up against it. Now that the malls are seeing markedly declining numbers of shoppers, Sbarro's is directly impacted by fewer worn-down shoppers who are willing to drop their precious funds on their food.

        If a company has a business model that is too specialized and inflexible, offers products or services that are neither a leader in price or in quality, has poor financial savvy, and is far too optimistic with its forecasts, then weathering tough times will be very difficult at best. Many consumer markets tend to gravitate toward quality, convenience or price - particularly when it comes to non-durables. Those competitors in the middle usually have a harder time gaining some form of identity with the consumer because they are often seen as not offering enough of any of those consumer-desired aspects. At the same time, it is exactly at these times that they can gain a new identity by changing their business model. The question is whether upper mgmt feels they have the ability to do so.

        Folks who are at the top of the "chain" will obviously be fine if things fold under them, barring any revelations of improprieties. As others have mentioned, it's the people who work at the counters and in the kitchens who will be immediately affected by the closures. It's the vendors who serve these locations, and of course the landlords who will also be immediately impacted by the closures. And as all of these folks are impacted, so will everyone else who relies on their hard-earned bucks to be spent at their businesses.

        11 Replies
        1. re: bulavinaka

          You remind me of why I read chowhound. Insightful,learned commentary about food and the business of food.Thanks.

          1. re: bulavinaka

            I remember reading an article about Dunkin Donuts in my local paper several months ago. I was surprised by the number of stores they were planning on opening in the DFW area...Krispy Kreme was already struggling and we have a ton of mom and pop donut shops around here. I would be curious to see what you think of these Zales executive's expansion plans. It seems like they may be a little too optimistic, but i am certainly no expert. From the Dallas Morning News:

            1. re: iluvtennis

              Last summer, the local franchise here in Columbia, SC announced plans for approx. 30 stores, which is also a little too optimistic. There are 4 or 5 currently.

              1. re: iluvtennis

                I think you've struck on the main point already - the market might already be far too saturated. While mom&pops do not enjoy the benefits of shared ad and marketing costs (they usually have none), lower material costs (flour, sugar, fat, etc.) and corporate level industrial engineering advice, technology and r&d, they are willing to work long hours for whatever their business ends up generating in terms of income, no matter how meager it may be. They also tend to be innovative on their own. Croissant sandwich? Sure - we can make it. Boba tea to go with your peanut butter-filled donut? Done. Bagel with scrambled eggs and bacon? I have no rules - I can do that too. You bought a dozen donuts so I'll throw in an extra or maybe an handful of donut holes because I like you and want you to come back. The mom&pops are very flexible. They don't invest millions in r&d in a new sandwich or menu concept, or spend millions more promoting it. They are quick on their feet and can turn a new idea on a dime. If it doesn't work they'll literally eat the losses and move on to try something else.

                Dunkin Donuts seems to have a very dedicated following, particularly when it comes to their coffee and creamer. Personally, I found the quality of their products to be better than the average mom&pop, as well as the once-popular chain, Winchell's. Unlike Krispy Kreme, the Dunkin Donuts shops that I've seen appear to be more reasonable in size and easier on the overhead. They've expanded their menu to include more hearty and savory breakfast choices that are like wraps, sandwiches, etc. This menu expansion is in direct response to the increasing competition for the breakfast $$ from corporate giants like McDonald's and Starbuck's. Unfortunately, there are no Dunkin Donuts in the LA area that I know of - the few that were around died off at about the same time that many of the Winchell's started to disappear - this coincided with the rise of the Cambodian donut shop owner phenomenon. But this does also suggest to me that like Winchell's, Dunkin Donuts had a difficult time competing with these mom&pops as well - at least based on their old business model. With this said, I don't have any first-hand comparison to make in terms of real time.

                Expanding now seems to be a calculated gamble. The condition of the economy would seem to make one reconsider a seemingly risky move like this. Huge capital expenditures at a time when capital and debt are hard to come by would seem tough. The players in this particular expansion plan are pretty big with a knack for what works. Does Dunkin Donuts have an existing or growing customer base to make the increased supply of donut shops feasible? On the flip side, maybe there is an increasing demand for their products - food items from places like donut shops are relatively inexpensive - they can offer a quick breakfast faster and/or cheaper than most could do themselves. Also, with the excess of commercial and retail spaces available, maybe Dunkin Donuts feels they will have an easier time finding suitable locations for their additional units. Also, I don't know Texas. Maybe there's something about the consumer profile of this state that does offer a big window of opportunity to these investors. I do know that real estate in Texas far more reasonable than places like LA, which gives a big boost to their overhead issues.

                I think another thing to consider about this particular market niche is that it's breakfast on the go for the majority of customers. That means a relatively narrow window of time to generate the majority of revenue. Whether it's grabbing a couple of donuts/croissants/sandwiches/wraps and a coffee to go, or a dozen in a box to bring to the office/workplace, convenience is key. Starbucks has invested billions in accommodating convenience - they found through their studies that this particular market can be very sensitive to location vs. decision to buy. McDonald's has had a real estate division since day 2 that has always based their future locations on forecasted population growth, etc. So if Dunkin Donuts feels they now have the right menu to broaden their appeal, if they feel they can expand regardless of the current market conditions, if they feel that they can go head-to-head with the mom&pops, and can secure convenient locations to maximize their sales, then who knows...

                  1. re: bulavinaka

                    We had a Krispy Kreme here in RI that closed a few years back. For the most part, people loved the donuts but thought the coffee was TERRIBLE. Coffee rules here in the northeast, and I always thought that that was a major reason why ours didn't make it. People will go for coffee and then get a donut as an afterthought, but not vice-versa (generally speaking).

                    1. re: dagwood

                      The Krispy Kreme that opened in Newington, CT was greeted with so much media fanfare (at Grand Opening) that the parking lot spilled out onto the main road and the lines were around the building.

                      The company had promised the town that they'd respect the neighbors. Then, a month or so after opening, they started running the Newington store as a 24-hour factory, producing donuts for their stores that didn't make them. The neighbors complained about trucks coming and going in the wee hours of the morning -- and that was the end of Newington's Krispy Kreme.

                      I seem to remember having some pretty good food (years ago) at a NYC Sbarro. Lately, though, it's plastic and predictable. Icch.

                      Finally, about Dunkin' Donuts: the best thing about their policies is that they dump out all of the coffee that's been sitting around for 15-20 minutes. They also use very good beans. It's nice to be able to walk into any one of their stores and *know* you're gonna get good coffee.

                      1. re: dagwood

                        There's a very old Krispy Kreme near me that's always sold excellent coffee, but at some point they stopped selling their whole beans and only sold ground. I still buy it on occasion, as it tastes much better than Starbucks, McDonalds, or Dunkin Donuts.

                        1. re: dagwood

                          I agree. We had a very nice Krispy Kreme here in West Palm Beach. The original doughnuts were fantastic but the coffee was absolutely horrid. Dunkin actually has the good coffee. They also didnt know anything about customer service. They had a company policy here( i dont know if it was/is nationwide) that when the red light was on, customers could receive a free fresh doughnut right off the line. I had been caring for my mother, who was quite elderly and unable to walk easily and we went to their drive up where i purchased 4 dozen doughnuts to go...not a bad purchase and i asked for our free doughnuts since we could not walk in...i was informed that if i wanted the free doughnuts, one for each of the 2 of us, i would have to walk in...if there had been another outlet locally, and if i had not already paid her, i would have driven off.

                          1. re: faleentoby

                            The policy here was if the light was on the donuts were piping hot (which is when they were at their gooey-ist and most delicious). I can't tell you how many times I went through the drive-thru just because that light was on and got cold donuts. So dissapointing. I really think they could have succeeded had it not been for the bad coffee and fake-hot-donut ads.

                          2. re: dagwood

                            >>For the most part, people loved the donuts but thought the coffee was TERRIBLE.<<

                            I have no opinion on their coffee - never tried it since none exist around LA. But many have stated how much they like the coffee at DD. If DD is able to sell the coffee beans in supermarkets, then I'd say there's a pretty loyal following.

                            >>People will go for coffee and then get a donut as an afterthought, but not vice-versa (generally speaking).<<

                            This must be how folks around RI do it - this is definitely not the case in LA. Donuts are king of morning junk food out here. Whether it's grabbing one, one dozen, or three or four boxes for work, folks go to donut shops to get donuts. The coffee is secondary (unfortunately), and many will grab a separate cuppajoe at a coffee shop.

                    2. Support your local restaurants, many of which do not own a microwave nor a freezer, and for good reason.

                      8 Replies
                      1. re: steakman55

                        "Support your local restaurants"

                        For foodie reasons, sure, support your local restauants.

                        To stimulate the economy, how about support any kind of commercial enterprise? Either way, jobs are affected.

                          1. re: Fibber McGee

                            Of course there is. In this gloomy economy, it doesn't make sense to only patronize local establishments. Everything is interrelated. You won't find me at a TGIFriday's, but I am pleased to see it bustling with customers because that means money is being spent; integral to stimulate an economy.

                            1. re: ginael

                              i don't necessarily agree with that. independent local restaurants spend the *majority* of every dollar spent at their establishments back into the same local economy-- chances are, at other indie local businesses. when more local dollars are spent locally, the consumer gets the equivalent of a "multiplier" on every dollar spent-- that ends up re-spent in her/his own state, city, county, school district, etc. an independent restaurant may spend money locally at such establishments as: gas station/mechanic shop, local printer/labelmaker, uniform company, food distributor, liquor distributor, produce distributor(s), meat distributor(s), farmers, farmer's markets, independent bakery (bread), independent dessert baker, ethnic food distributor(s), local coffee roaster, local specialty butcher, local bank, local payroll company, local ad company, local landlord(s), local groundskeepers/plow company, local window washers, local packaging company, local hardware store, local office supply, local linen company, local janitorial company, local delivery company, local restaurant supply company(s), local bookkeeping service, local mass transit (for employees), local insurance company, local charities, local medical services (for employees), etc. (just for starters). & all of *those* businesses also employ folks essential to the economy. by contrast, chain establishments send the majority of every dollar spent *out* of the local economy, spend a disproportionate amount of $ on advertising and ceo benefits, & in the case of international corps, sometimes even send the money out of the country, and overall the economy of scale/centralized chain distribution & warehousing= fewer jobs overall.

                              i'm not saying that buying a taco bell chalupa won't do anything to stimulate the overall economy. . . i'm just saying that spending the same amount at the mom&pop down the street will do about 5 times as much for your own immediate area's economy, *plus* the added benefits to the overall economy.

                          2. re: ginael

                            But when you spend a dollar at a local mom & pop, Mom and Pop get that dollar. When you spend a dollar at TGI McFunsters, a nickel stays local, a dime goes to the ad exec who developed their most recent national marketing campaign, a quarter goes to the networks for running the crappy ad, and most of the rest gets fed into overhead, including the CEO's $13,000 hand-tooled Italian leather wastebasket.

                            Admittedly there were probably some highly skilled Italian craftsmen whose jobs were preserved by the purchase of that wastebasket. But given the fact that most of us have limited resources, I prefer to spend my dollars where they'll do the most good in my community.

                            1. re: alanbarnes

                              So righteous.

                              I'm looking at the big picture, folks.

                              When chain restaurants close, servers lose jobs. Those servers are local.

                              I don't disagree that in many ways, it feels nice to spend money at local establishments, however don't fool yourselves. Business closing, regardless of their commerical origins, affect people around you.

                              1. re: ginael

                                Um, that's not righteousness, it's common sense. Nobody's disputing that the closure of a chain restaurant affects local people. It's just that the closure of a local restaurant has a greater effect on a larger number of local people. And by the same token, a dollar spent at a local restaurant tends to have a greater positive effect on the local economy than a dollar spent at a chain.

                                You may not think that's a big deal. Fine. But if you can't see these indisputable realities, there's not much point continuing the discussion.

                            2. re: ginael

                              And keep in mind that any number of chains operate as franchises, and there's often a small businessperson or couple that owns one or a handful of restaurants under agreement with the corporate offices. I can think of a couple of franchise owners around here that are extremely generous when it comes to raising money for local charities.

                          3. There is a question of how much information technology will affect the chain restaurants. The only time I frequent them is when traveling, especially on road trips. They are often conveniently located just off the freeway and a fuel and fuel stop is efficient. However, if a local joint, touted by locals, was easily available, I would go a bit out of the way.

                            Now, with netbooks getting so cheap and reliable, information about such is just a few keystrokes away.