Over-expansion, cheap money & fabricated demand
Restaurant Group & Ed’s Easy Diner have said that they are to dispose of units:
- Restaurant Group has said that it is taking ‘catch up action on underperforming sites’
- It is to close 33 units
- Ed’s has also said that it is to consolidate its position & exit 3 units
- RTN and Ed’s are unlikely to be the last operators to trim their estates
- But it’s one thing to announce an exit from (presumably underperforming) leasehold sites and quite another to achieve it
- Having said that, having a tail of poor or shut sites didn’t do Spirit much harm in the end
If sites are available, better we have them than the competition:
- That (and cheap money) has got us where we are now
- Operators may well have scrambled for sites that they would not otherwise have sought out
- Retail parks with 8, 10 or 12 casual dining outlets arguably have too much cutlery on site
- Poor operators (undifferentiated, entitled and/or lazy) will do least well but all operators will suffer as the cake is sliced more thinly
So what’s the answer?
- Here’s the thing with answers, there sometimes isn’t one.
- Macro and micro incentives may remain out of line for some time.
- The market may not have a braking mechanism. It may only have a crashing mechanism.
- Making the best of a bad job entails having a superlative & relevant offer, attractively priced
- Ultimate takeaway may be to slow leases, buy freeholds. That’s what JDW/MARS are doing