Lane Cardwell

Top 200: Hot, Then Not

Ron Paul of Technomic gives the industry the two things which it needs most in order to avoid repeating the mistakes of the past. He gives us facts, and he gives us insights about those facts. Over the years, his most revealing looks at our industry have often been when he has shown us lists of chains that were big at one time, and are now gone or forgotten. In the 40 years since Ron founded Technomic, there have been a lot of chains that have achieved success, and then lost it.

In the August 2008 edition of The Technomic Viewpoint, Ron focuses on two lists of chains. The first are those chains that were in the Top 200 in sales in 1990, but are no longer in the Top 200 today (2007). The second list shows chains that are in the Top 200 today (2007) but were not on the list in 1990. I find it more instructive to focus on what happened to those who had achieved the success of size, and then lost it.

“Looking at this list, the over-riding theme is diminished concept relevance, though the reasons are varied. Generally speaking, they fall into three major areas:

·         Narrow Focus - For single-item specialists like The Original Cookie Co. and Hot Sam, a focus on cookies and pretzels, respectively, ultimately proved too limited. When major competitive concepts add similar items to their menus, the lure is suddenly gone.

·         Lackluster Niches - The rest of the chains on this list operated in segments that have fallen victim to changing consumer preferences and new and improved interpretations in other segments. For example, full-service Mexican (the realm of Casa Bonita and Garcia’s Mexican Restaurants) remains largely uninspired in the chain market, while

Independents and quick-casual concepts like Chipotle are highlighting more authentic and fresh approaches with far superior results.

·         Limited Differentiation - There are also many midscale/family-dining operators on this list. Generally speaking, consumers have turned away from the all-things-to-all-people approach in favor of concepts that offer more excitement and specialization on their menus. (This is a trend that should now be of particular concern to some traditional casual-dining chains experiencing weaker performance.)

I chose 1990 as a point of comparison because it represents a climate very similar to the current one. As we all know, consumers are becoming increasingly cost-conscious, bringing with that higher expectations for a solid return on their dollar when it comes to foodservice spending. Also, importantly, in the last 17-plus years, the bar has been raised on expectations for quality, but also convenience and, increasingly, value.

Thus, similar to the early 1990’s, it is likely that we can expect some similar “shakeouts” over time for concepts that are not forward-thinking and agile enough to respond to changing dynamics, or that lack sound financial footing.”

Ron Paul, and his team at Technomic, have provided much of the original research that helps shape concepts trying to capitalize on new trends and categories in the industry. However, nothing benefits the industry more than when they use their industry expertise to warn us of the new dangers of old practices. Like so much else in life, you must be present to win.

Posted by Lane Cardwell on October 23, 2008 | Comments (4)