Being rich means you don’t have to go out to eat — and more and more people, it seems, are “rich” in that sense.
It’s a conundrum for U.S. restaurants, whose offerings are too expensive for the poorest 30 percent of the population while at the same time, representing a quality compromise that the richest 30 percent are reluctant to make — a pattern that is easier to make out in the under-50 demographic.
You see the extent of the problems if you look at the fastest-growing large restaurant chain, Chipotle, which has stumbled with its two latest initiatives. One is a speed-up in food production — this, in a restaurant that already threw together its custom-made items with such ferocity that nearly anything you might select would have a couple of mistakes in it. The other is a price increase averaging apparently around 10 percent. It was moves just like this a decade ago that killed Subway’s novelty effect and turned it from a Chipotle to a McDonald’s (where U.S. same-store sales were down 2 percent in the latest report). Before Subway abandoned its fresh-bread concept to try to move customers through quicker, it was the high-growth “healthy” alternative in fast food. Since, it has struggled like the rest of the industry just to keep sales level from one year to the next.
This kind of desperation in innovation is characteristic of the corporate restaurant sector. But when an industry employs so many bright people and still can’t find the right answers, you have to eventually conclude that there are no answers. It may be that the fundamental financial constraints of the restaurant cut too close to the edge. Consumers demand food that is prepared with attention to detail, and they may want a place to sit or stand while they eat. As long as that is the case, labor costs and real estate costs are heavy constraints a restaurant can never break free from.
And now, food preparation is becoming a leisure activity for the wealthy again. A semi-skilled cook with a home kitchen can spend ten times as much as a restaurant spends on ingredients to prepare a meal for the same price, and in about the same length of time. To win over these customers, restaurants will never be able to compete on quality, price, or convenience — it will have to be something else.