America’s Disappearing Restaurant Chains

24/7 Wall St.

Some of the country’s once iconic brands -- in retail, consumer products and beer -- are now shells of their former selves. Some of America's restaurants, too, are not what they used to be. In the past 10 years, several of the nation's biggest restaurant chains have lost more than 50% of their sales and have closed hundreds of locations nationwide.

24/7 Wall St. reviewed data provided by food industry consulting and research firm Technomic to determine the 10 large restaurant chains with the biggest decline in locations and sales between 2002 and 2012. Notably, Bennigan's sales plunged by more than 90% between 2002 and 2012. In 2002, there were 1,688 TCBY’s in the U.S. As of last year, there were just 500.

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According to Technomic executive vice president Darren Tristano, many of these struggling restaurants suffer from extremely stiff competition in their segments. The majority of these are full-service restaurants. This segment in particular, explained Tristano, is extremely competitive. Companies like LongHorn Steakhouse, Don Pablo’s, and Fazoli’s, have been hurt by the success of companies like Olive Garden and LongHorn. They have also lost market share to non-full service companies like Chipotle and Domino’s.

Nearly all of these declining restaurant brands face an aging image and business model, Tristano explained. “Today, if you’re not updating your restaurant within, say five to eight years of the previous update, you’re falling out of favor.”

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Unlike their competition, these brands have not been able to make these necessary changes. “The underlying issue here is that as restaurants begin to decline, they struggle to have the level of working capital needed to invest in the brand. Once you start to be in a defensive mode, you stop investing in the brand, and you start cutting your losses,” Tristano said.

Brands like Bennigan’s, Fazoli’s, and Tony Roma’s have made serious attempts to modernize and restructure. In some cases, they have added a few restaurants. Their efforts may not be enough at this point. They are certainly nowhere close to where they were a decade ago.

In some cases, these declining restaurants are in segments that no longer have the level of demand they once did. Sales of buffet-style restaurant Ponderosa and Bonanza Steakhouses dropped by 60% as self-serve restaurants have fallen out of favor.

Based on sales data provided by Technomic, 24/7 Wall St. reviewed the 10 restaurant chains that had a 50% or greater decline in the number of U.S. store locations operating from 2002 to 2012. In order to identify the chains that were once the biggest, they had to have U.S. sales of at least $250 million in 2002 and experience a 50% or greater declines in sales over the same period. All sales figures and units are U.S.-only, and are for both company-owned and franchised restaurants.

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These are America’s disappearing restaurant chains.

9. Damon’s Grill & Sports Bar
> Pct. decline in restaurants: 72.3%
> Decline in restaurants: 99
> Total restaurants: 38
> 2012 sales: $70.0 million
> Pct. decline in sales: 75.5%

Damon’s International Inc. filed for Chapter 11 bankruptcy reorganization in October 2009. At the time of the bankruptcy filing, there were about 50 Damon’s Grill & Sports Bars in the U.S., down from 137 in 2002. By 2012, the number of restaurants had declined to just 38 in the U.S. Following some success in the 1990s, Damon's has begun to struggle, according to Technomic’s Tristano. The company “very likely overextend[ed] itself into markets where it just didn’t have a big enough presence.” He added that the company shifted its menu away from its focus on barbecue. “When they shifted away from barbecue, they lost focus," Tristano said. "They lost a point of differentiation, and the customer didn’t see them as being different from other brands.” In 2011, the company announced new strategy such as new menus and restructured relationships with franchisees. There are eight more restaurants than there were in 2011, but the Damon’s is still far away from where it was a decade ago.

8. Tony Roma’s
> Pct. decline in restaurants: 71.7%
> Decline in restaurants: 114
> Total restaurants: 45
> 2012 sales: $93.0 million
> Pct. decline in sales: 70.4%

Known mainly for its ribs, Tony Roma’s is another restaurant chain undergoing a massive restructuring. This week in Florida, the company will test a new strategy with new menus, lounge areas, fire pits, other image alterations, and a new name: Tony Roma’s Fire Grill & Lounge. The dramatic changes come in the wake of struggling performance in the U.S. In 2012, U.S. sales were down more than 70% from 2002. Over that time, the number of U.S. locations declined by 114. The restaurant has much more success overseas. According to the The Orlando Sentinal, the chain's 120 international restaurants are responsible for the majority of the company's revenues. In the U.S., however, there are now only 45 locations.

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7. Ponderosa/Bonanza
> Pct. decline in restaurants: 57.3%
> Decline in restaurants: 238
> Total restaurants: 177
> 2012 sales: $208.3 million
> Pct. decline in sales: 60.3%

Ponderosa and Bonanza steakhouses’ parent company filed for Chapter 11 bankruptcy in 2008. At the time, there were 208 franchised restaurants and 50 company-owned stores. Between 2002 and 2012, the total number of Ponderosa/Bonanza restaurants had fallen from 415 to 177. Technomic’s Tristano explained that the chain’s long-term decline in the U.S. has been largely due to the segment it is in. “What has happened with the brand is that the cafeteria and buffet segment has been on a constant decline because consumers have been looking for quality and not quantity.” Ponderosa may have more success overseas with its grand opening of a new franchise in Amman, Jordan earlier this year. According to the company, the brand is well-known in the region, with restaurants across the Middle East.

6. Black Angus Steakhouse
> Pct. decline in restaurants: 57.8%
> Decline in restaurants: 63
> Total restaurants: 46
> 2012 sales: $135.5 million
> Pct. decline in sales: 54.1%

Los Altos, California-based chain Black Angus Steakhouse has undergone two bankruptcy restructurings over the past decade, the most recent of which occurred in early 2009. ARG Enterprises Inc., the operator of Black Angus Steakhouse, filed for Chapter 11 bankruptcy due in part to its restaurant locations getting hit hard by the mortgage crisis, according to Lisa Poulin, ARG’s chief restructuring officer. U.S. sales over the 10-year period between 2002 and 2012 fell by nearly $160 million. In addition, the number of Black Angus Steakhouses in the U.S. dropped by 57.8%. Technomic’s Tristano noted that the brand has struggled in a very competitive casual dining steak segment. The company has just hired a new CEO, previously of Boudin Bakery and forklift brands. "[T]hey're trying to change direction and move positive, but they have struggled because their price point is both above value and below quality in the eyes of consumers,” Tristano said.

5. Fazoli’s
> Pct. decline in restaurants: 44.3%
> Decline in restaurants: 178
> Total restaurants: 224
> 2012 sales: $207.4 million
> Pct. decline in sales: 50.6%

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The first Fazoli’s, a quick-serve Italian restaurant, opened in Lexington, Kentucky, in 1988. Between 2002 and 2012, the number of restaurants in the U.S. fell by 44%. In 2012, the company attempted to improve floundering growth rates with a restructuring plan that included a new restaurant layout and the introduction of real plates and silverware. Next year, Fazoli’s plans to introduce a new fast-casual concept that emphasizes self-serve. Such efforts have improved sales somewhat -- there were seven more restaurants in 2012 compared to 2011, but the chain is still nowhere near where it was. According to Technomic’s Tristano, the chain is struggling because of extremely strong competition in the fast casual segment. “The competition that is coming from Olive Garden in full-service and certainly the effort that Domino’s has made to have higher-quality pizza is really eating away at some of the company’s success.”

4. Bennigan’s
> Pct. decline in restaurants: 87.7%
> Decline in restaurants: 250
> Total restaurants: 35
> 2012 sales: $62.0 million
> Pct. decline in sales: 90.4%

Bennigan’s, the pub-themed restaurant chain, was founded in 1976 in Atlanta by Norman Brinker, founder of several other restaurant chains such as Chili’s and Steak and Ale. For a time, it was one of the nation’s iconic restaurant brands. However, an increasingly outdated brand resulted in a massive sales decline nationwide. When parent company Metromedia Restaurant Group filed for Chapter 7 bankruptcy in 2008, all 150 corporate stores were closed. Some of the company’s franchises remained in business but suffered without corporate support.

Recently, however, Bennigan’s has tried to make a comeback, introducing new strategies such as catering, and opening a few new stores. Bennigan's has signed agreements with five new franchise partners. According to Tristano, however, with weaker restaurants continuing to shut down, the company’s improvements have not been enough. As of 2012, U.S. sales were down $584 million from 2002, the biggest drop in sales out of the restaurants reviewed by Technomic. “They have tried to rebuild the prototype that’s more contemporary and on-target with trends. But to date, it really hasn’t blown the doors out or grown. They just continue to see some of the weaker links in the chain fall off and close down.”

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1. TCBY
> Pct. decline in restaurants: 70.4%
> Decline in restaurants: 1,188
> Total restaurants: 500
> 2012 sales: $98.0 million
> Pct. decline in sales: 61.2%

TCBY, short for “The Country’s Best Yogurt," opened its first shop in Arkansas in 1981. In 2000, TCBY merged with Mrs. Fields, becoming Mrs. Fields Famous Brands. Eight years later, however, the cookie retailer filed for bankruptcy. Technomic’s Tristano noted that the company’s decline can be explained by competition from new brands like Pinkberry, and more premium brand companies like Haagen-Dazs, Ben & Jerry’s, and Coldstone. TCBY operates under a franchise model, which has allowed local store operators to experiment with new store models. In 2010, for example, one TCBY franchise owner introduced a self-serve model, which boosted sales and has since been embraced by many other franchises. Between 2011 and 2012, the number of U.S.-based TCBYs increased by 95. The improvement, however, has barely been a blip in the company’s overall downward trend in the country. Between 2002 and 2012, the number of TCBY U.S. stores declined by 1,188, by far the largest drop among companies reviewed by Technomic. Tristano noted that “some of these new TCBYs are co-branded into Mrs. Field’s, so they aren’t necessarily full units.”

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