We love interesting and adventurous food, and we love interesting and adventurous restaurants.
Maybe some would call us food snobs since we very much prefer to try the new independent chef-owned Polish-Korean-Mexican fusion restaurant over the boring corporate restaurant chains (though we do not fit any of these hilarious profiles!).
So we were a bit bummed when we read the latest annual restaurant report published this week from The NPD Group, a market research firm that specializes in consumer purchasing data, which showed a 3% decline in the number of independent restaurants on a year-over-year basis. It is no secret the independent restaurant business is one of the most grueling of all small business types. The industry routinely throws around a failure rate of 60% in the first year of a restaurant's existence, which doesn’t appear to be a great investment proposition.
From the NPD report:
"The drop in independent restaurants was concentrated in the full service segment, which includes casual dining, midscale/family dining, and fine dining. Full service independent units were down 3 percent while quick service independent units declined by 2 percent…Visits to independent restaurants, a restaurant system type that is particularly challenged in a soft environment, were down 3 percent…Our forecast finds that U.S. foodservice visit growth will be less than one percent in the coming years, which means there will not be significant unit expansion for a while."
This report also corroborates one of our favorite leading economic indicators: the National Federation of Independent Business' (NFIB) Small Business Optimism Index. In August, the survey declined 0.2% to 94.4 and is much lower than levels one year ago. Furthermore, despite an improvement from the 2009 lows, the current levels are still well below the levels normally witnessed at the late stage of an economic recovery and do not bode well for this business cycle continuing long into the future. In the chart below there is generally a decline in the index level ahead of recessions (pink bars):
While this data is usually overlooked by the mainstream media, it really should not be given the contribution of small businesses to the overall economy. According to the NFIB, of the 26 million businesses registered in the U.S., only 6 million have active employment and generate revenue. Of that total, almost 80% have fewer than five employees. Small businesses therefore appear to be a big driver of the economy, jobs and wages.
Despite the bad news, we still have to eat and will do our very best to instill optimism at our favorite local restaurants!
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