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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThere's A Masive Restaurant Industry Bubble, and It's About To Burst
https://www.thrillist.com/eat/nation/american-restaurant-industry-bubble-burst?pinn_uid=18429180AS SOON AS HE WALKED THROUGH THE DOOR, Matt Semmelhack knew it was over. He'd been away from his San Francisco restaurant AQ for less than a week, but when he got back, it just felt different. It went beyond the usual concerns of the modern restaurateur. "I wasn't worried the lights were properly dim, or the regulars were in the right booths," he says. Instead, Semmelhack was just looking at his staff -- people he hangs out with on weekends, people whose livelihoods he supplies, some of his closest friends -- and all he could see was the money each one of them was costing him, flashing in front of him like a video-game score. "I knew right then," he says, "we had to shut it all down."
Semmelhack is not the only restaurateur looking to duck and cover. The American restaurant business is a bubble, and that bubble is bursting. I've arrived at this conclusion after spending a year traveling around the country and talking to chefs, restaurant owners, and other industry folk for this series. In part one, I talked about how the Good Food Revival Movement™ created colonies of similar, hip restaurants in cities all over the country. In the series' second story, I discussed how a shortage of cooks -- driven by a combination of the restaurant bubble, shifts in immigration, and a surge of millennials -- is permanently altering the way a restaurant's back of the house has to operate in order to survive.
This, the final story, is simple: I want you to understand why America's Golden Age of Restaurants is coming to an end.
To do that I'm going to tell the story of the rise and fall of Matt Semmelhack and Mark Liberman's AQ restaurant in San Francisco. But this story isn't confined to SF. In Atlanta, D.B.A. Barbecue chef Matt Coggin told Thrillist about out-of-control personnel costs: "Too many restaurants have opened in the last two years," he said. "There are not enough skilled hospitality workers to fill all of these restaurants. This has increased the cost for quality labor." In New Orleans, I spoke with chef James Cullen (previously of Treo and Press Street Station) who talked at length about the glut of copycats: "If one guy opens a cool barbecue place and that's successful, the next year we see five or six new cool barbecue places... We see it all the time here."
Even Portland, the patient zero of the Good Food Revival Movement, isn't safe. This year, chef Johanna Ware shut down universally lauded Smallwares, saying, "the restaurant world is so saturated nowadays and it requires so much extra work to keep yourself relevant." And Pok Pok kingmaker Andy Ricker closed his noodle joint Sen Yai, citing "soaring rents, the rising minimum wage, and stereotypical ideas about 'ethnic food' as 'cheap food'" in an interview with Portland Monthly. Rising labor costs, rent increases, a pandemic of similar restaurants, demanding customers unwilling to come to terms with higher prices -- it's the Perfect Restaurant Industry Storm. And even someone as optimistic as Ricker offers no comforting words about where we're headed.
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louis-t
(23,273 posts)Every corner has a giant, brand new LA Fitness building. As fickle as that market is, I see giant, empty buildings in our drumpy future.
Renew Deal
(81,847 posts)They charge a fortune. It might be the only way they can stay open.
Initech
(100,043 posts)Usher in the economic apocalypse, we've got shelter. 
underpants
(182,636 posts)Richmond Va itself is in the midst of a "foodie" boom.
Nay
(12,051 posts)hate cooking and I'm also a diabetic, but in the past few years I've noticed all the new restaurants that pop up and that some of them go away pretty quickly. I've wondered how this has gone on this long. Everyone knows restaurants can be tanked financially by, say, one crooked bartender, but they keep opening up.
Oh, BTW, the reason they can't find enough decent chefs/line cooks is because the pay sucks. Few people except die-hard lovers of food and cooking are going into the business except in the hopes of opening their own restaurant, and there are never enough of them to staff all the restaurants. And once they figure out that they aren't going to be able to make a living or even afford to open a restaurant, they just cook at home and for friends and get a decent-paying job doing something else. I have 2 friends who are amazing chefs but work at careers in wildly different areas. They saw the writing on the wall a long time ago.
underpants
(182,636 posts)People learn the business and decide to open their own place. They work their ass off as the primary cook/ordered/marketer but eventually they don't want to do it any more. They want to run the place but the margin isn't there for an extra person who isn't directly producing. There are exceptions that do last.
philosslayer
(3,076 posts)FarCenter
(19,429 posts)I don't see how a restaurant without either a very long term lease or owned space is a going business.
TheBlackAdder
(28,169 posts)Renew Deal
(81,847 posts)Copycats are a big problem in the NY food scene. Just look at the explosion of "Poke". It went from something I never heard of 2 years ago to something easy to find now. And not all of the restaurants are worth visiting.
The first example of this was the burger situation. Just after five guys exploded, a bunch of similar burger vendors showed up. Some intend to be chains. Some are small. And this has continued through a rotation of cuisines until today. The latest trend in NYC food is Greek. Greek places are popping up all over. And they aren't all traditional gyro shops. I wonder what's next.
HoneyBadger
(2,297 posts)50 cents of veggies from Jetro in a $7 smoothie in a 200 sq ft store
Retrograde
(10,130 posts)I like poke, I always buy some on my biennial visits to Hawai'i. But it's something to make with the small bits you trim off the bigger pieces of fish. You can even get it at some Costcos in the Bay Area, dished out for you in less-than-typical-Costco amounts. It makes a nice side dish. But the poke restaurants springing up all over the place seem to be taking the basic idea to extremes, and piling poke and everything else imaginable onto rice. I'm waiting for one to offer a poke and foie gras combination.
I think it's like a lot of food fads: everybody jumps on the bandwagon, hoping that their concept will turn into a national chain and make them the big bucks. Poke/overpriced frozen yogurt/burrito bars/you name it - it will be here for a couple of years, then no hipsters will dare to be caught sneering in one.
hatrack
(59,579 posts)Sounds like sushi, but not clear on the concept.
Retrograde
(10,130 posts)with soy sauce, seaweed, sesame oil, sesame seeds and onions. An old Hawai'ian native dish - usually eaten raw - with some influences from Japanese immigrants. Sort of a tuna tartare: you can get it in just about any grocery store on the islands. I've seen it made with mussels and other types of fish, but tuna is the most common variety.
How this relates to the current trendy poke bowl I have no idea.
hatrack
(59,579 posts)
Thanks for the explanation.
DinahMoeHum
(21,779 posts)While I love seafood (mostly shellfish and crustaceans), I won't eat fin fish unless it
was caught in the local waters just a few hours before.
MoonRiver
(36,926 posts)Everywhere we eat out, which is about 4 times a week, my husband and I have to tweek orders to not use sugar laden sauces, and cut the bacon, chicken stock etc. We are regulars at several good restaurants in town, so they know how to accommodate us here, but when we go to other areas it is a struggle.
MineralMan
(146,262 posts)with almost predictable regularity. Every sous chef in a restaurant wants to open his or her own place. So, they do. Underfunded and faced with massive competition, most last about six months and close their doors. A new restaurant opens in the space shortly thereafter.
Recently, we lost several "fine dining" places, due to the fickleness of restaurant-goers. My rule has always been to avoid new restaurants, which always seem to open with good reviews and impossible reservation lists. By the time that initial rush is over, you can book a table, but there's a fair chance that the new place will already be closed by the time your reservation date comes up.
These days, all those sous chefs seem to be opening food trucks, which create an immediate sensation. Next, they open a small restaurant selling the same food, basically. Then, they close the restaurant because the trend they started is over, with a new trendy place opening to steal the limited supply of diners.
At one time, about 20 years ago, I had an idea for a restaurant in the California are where I lived. It was going to be a "small plate" place, a trend which hadn't really developed yet. I had created a range of international-themed dishes and tested them on guests in my home. It was a good idea. However, after researching the restaurant business, I decided to pass on the idea. I didn't like my chances with the new concept. I'm glad I decided to pass.
Renew Deal
(81,847 posts)Especially as an owner. Hours, income, lifestyle, competition, FUD, etc
MineralMan
(146,262 posts)Too bad. It was a good concept.
nadine_mn
(3,702 posts)It is so hard to find non-chain restaurants that serve decent food. Finding a regular sit down restaurant without a gimmick shouldn't be so hard. Maybe I am spoiled coming from a small town used to hole in the wall restaurants and maybe one fast food joint.
HoneyBadger
(2,297 posts)Has been advising them for years to hire qualified chefs any time they see one, regardless of whether they needed them or not. My reaction was amusement.
It is a glamor business. You find a couple of investors to foot the bills and take a shot at making money. If the concept works, everyone wins, if not, the employees get paid for 2 years, and the investors lose. The whole thing screams bubble from start to finish,
mopinko
(70,027 posts)it is the shitty wages that are dragging them down.
i have a son from another mother who graduated last year from culinary institute of america. he has $60k in loans.
he got offers of $10/hr. even a place where he did an internship, and they loved him and wanted him back would only go to $12.50, and he knew there was not much room to go up there. the top guy made $14.50.
this was a place where they are turning them away on the weekends.
he ended up in boston, where he is making $14/hr and only surviving because he works 60hour weeks.
i worked in restaurants over 30 years ago, and people are still making he same money.
Wounded Bear
(58,606 posts)the real bubble coming up is the student loan industry. Pres Obama tried to alleviate it a bit, but with Repubs in charge, I'd expect it to burst in another 2-3 years at the most. I figure the Repubs will do another fly-by-night rescue of the banks and leave all the debtors out in the cold. That's why they want to disassemble Dodd-Frank, so they can get another bailout.
Ilsa
(61,690 posts)Debt forgiveness, even partial, to help alleviate this mess. I think a tax on stock transactions would cover it. I think Bernie proposed something like this.
KamaAina
(78,249 posts)and paying a living wage instead.
mopinko
(70,027 posts)there are some here doing it, too. heard a dude on the local npr station crowing about workforce cohesion, and giving the back of the house their due.
BSdetect
(8,995 posts)He said otherwise but we know what he really wants.
He wants you to bid for a job on a weekly contract - lowest bidder wins a temporary job.
LINE UP SUCKERS.
Bettie
(16,079 posts)most of the time, you never do get paid.
hollowdweller
(4,229 posts)We are at the same level of population working as 1976.
At that time a large amount of wives were staying home.
I think one thing besides the overabundance of restaurants is that
maybe where more people are choosing not to work, and maybe with the economy more people are living together, maybe there is a bit more of cooking at home???
My wife and I just retired a couple years ago. We went from eating out usually multiple times a day because of time factors due to commute, to maybe eating out once a week?
I always prefer to cook my own stuff so maybe more people are getting into cooking?
Also not sure but what about the fact a lot of people are moving to the city? Moving closer to where they work?? You'd think that might mean eating our MORE but could also possibly mean more time to cook meals at home due to no long commute? Plus the proliferation of local fresh food and farmers markets makes good food to cook be more available?
smirkymonkey
(63,221 posts)Interesting article. I love going out to eat, I just can't afford to do it as much anymore. It's a luxury where as at one time it was something that was just a regularity.
Retrograde
(10,130 posts)I have the time, inclination, and ability to cook for myself and Mr. Retrograde, so I do that most days. I do like to go out for a nice sit-down dinner occasionally, but it's becoming less and less frequent (and Bay Area traffic isn't helping any). We do go out for lunch a couple of times a week, which is smaller and less formal.
Another factor: as people age and start having families and other commitments on their time, fine dining becomes more of a time sink. I think the restaurants that will have a better chance of surviving are the mid-range "family style" places (too many of them chains - in my area there are a lot of Mexican/assorted Asian places that fill a similar niche) where the food and service may not be as high-level but children are tolerated and the price/portion ration is good.
Binkie The Clown
(7,911 posts)I'm retired on a fixed income. Why would I throw money away?
FarCenter
(19,429 posts)That is also true with other businesses like the LA Fitness and other fitness places. Since the mall stores that sell rags and trinkets can no longer make money, the mall operators are turning more and more to leasing space to businesses that sell "experiences".
Of course, when folks tire of this or that experience, the market becomes saturated and a whole lot of small businesses go bust.
Wish I had gotten into the tennis boom, the radon testing boom, ...
There have been so many, but the trick is to get in fast on the right boom and then get out at the top.
Binkie The Clown
(7,911 posts)A long walk down by the river, watching the ospreys catching fish is an experience I don't have to pay anyone for.
HeartachesNhangovers
(814 posts)that are just too complicated or time-consuming to make if you're just cooking for one or two (unless you LOVE cooking). For example, I've tried to make the same fried rice dishes that I ate a couple of times a week for lunch when I worked and that were usually around $8 or $9 in San Francisco, but they are a MESS to make (rice flying all over the kitchen) and in order to do it right I have to run the wok so hot it overwhelms the range hood and the house fills with food fog - nasty! Even if you mostly cook yourself, like my wife and I do, you learn that certain meals are best left to the experts.
Binkie The Clown
(7,911 posts)Personally, however, I don't really "eat for pleasure." I eat to feed my body a good assortment of nutrients. Frankly, I don't much care what form those nutrients come in, as long as it's reasonably pleasant to consume. I have about 2 dozen favorites that I rotate through the month, and that's plenty of variety for my simple tastes.
HeartachesNhangovers
(814 posts)people who have simple nutritional problems but they don't fix them because they insist that everything they eat has to "taste good". My mother-in-law, for example, knows that she should eat more protein, but she doesn't do it because she doesn't like the taste of protein supplements and prefers higher-carb to higher-protein foods. If she would just prioritize nutrition over taste for just ONE meal a day by starting out with a solid serving of protein at breakfast, she would be more satisfied and less likely to eat junk the rest of the day.
Achilleaze
(15,543 posts)
ret5hd
(20,483 posts)Not to mention the free circumcisions in the kitchen.
KamaAina
(78,249 posts)Well, pit bulls, anyway. 
ret5hd
(20,483 posts)
eleny
(46,166 posts)
guillaumeb
(42,641 posts)As each one bursts another is forming.
The solution? Living wage jobs that allow people to spend and stimulate the economy. Henry Ford knew that in 1905.
Freethinker65
(10,002 posts)Farmers Markets are really trendy, as are new (and old - cast iron!) cooking techniques. The internet is full of tested foodie recipes and "rare" ingredients are easier to find. We bought a smoker a few years back and actually prefer our at home meals to most trendy BBQ joints around here in Chicagoland. We never ate out much, but eat out less often since we started buying better quality food to prepare at home. A great restaurant in a great location will always have customers regardless of any wage issue.
edhopper
(33,494 posts)too many, turning out too many students with too much debt.
Having their own restaurant is the only way they may repay their debt.
Line jobs are long, long hours for not enough pay.
mopinko
(70,027 posts)you can still work your way up to at least midlevel. and it doesnt take long if you have good cooking sense.
neighbor kid is working 60 hrs a week to pay back $60k for c.i.a., but he cant get any more money that the talented kid who has been there for a couple years.
cannabis_flower
(3,764 posts)pretty much always been the case. I used to wait tables and I worked at more than one restaurant that went out of business.
HeartachesNhangovers
(814 posts)restaurants just start raising prices a bit to bring wages up to reasonable levels for kitchen staff. This might squeeze out a lot of the mid-level (cost-wise) restaurants if people decide to cook for themselves or go to cheap places on a regular basis, and only go to expensive places for special occasions.
Actually, good food and drink are the only benefit I can see to out-of-control gentrification.
Warren DeMontague
(80,708 posts)Generally when something is a bubble it involves inflated valuations, speculation... even if the restaurant field is over-saturated, that doesn't make it a "bubble".
I can say definitively that if PDX suffers from anything along those lines- "extra work to keep yourself relevant"- it's because there's just an embarrassment of riches in terms of super good restaurants in the town. I have no doubt that the restaurant industry is tough, but that's not exactly news, now, is it? I think the failure rate for new restaurants has always been, historically, ridiculously high. Not a business for the faint of heart.
I'm sure the SF Bay Area has unique problems in terms of staffing because no one who has an actual working wage job can afford to live within 100 miles of the place, but again, that's not exactly news either.
RB TexLa
(17,003 posts)for far less.
It is just wasteful.
Defending them is akin to saying we should get outlaw tractors so there will be more jobs in farming.
Codeine
(25,586 posts)(plus 1)
Aristus
(66,299 posts)We both have busy careers and always come home tired. We spent a staggering amount of money on restaurants and take-out. We just couldn't sustain that habit anymore. So we've started grocery shopping again. For foodstuffs, not just for soap, milk, light bulbs, and snacks. We cook two or three times a week, tired as we are. And when we sit down to our home-cooked meal together, it makes it all worth it.
We live for the rest of the week on the leftovers, spending for an entire week's meals what we used to drop in one visit to a restaurant.
I expect that an economic shitstorm is on its way here. The best thing to do is hunker down and economize as much as possible until it blows over...
vanlassie
(5,666 posts)Anthony Bourdain's book Kitchen Confidential- really enjoyed the behind the scenes view of the business. It's out there downloadable as a free PDF.
JI7
(89,241 posts)opening and closing .
i know of one guy who went through a bunch of openings/closings in just the past 5 years or so and maybe more before.
you need to find investors and certain types that talk a certain way always seem to get people.
i do think there might be too much of a certain type and probably with people thinking or hoping to get rich quick from it.
there should be more focus on lower cost casual type places where people prefer to take out .
