Restaurant economics in the Midwest

[kiliki]

One reason for more independent places not being in the suburbs could be the cost of rent(this has probably already been mentioned). Is it really no suprise that rent in Detroit is cheaper than the suburbs?

Then how to explain the very low numbers of chains in cities like San Francisco and Seattle, where rents are much higher than they are in the 'burbs?

Secondly, chains predominate in many suburban areas because of commercial real estate developers. They are marketing traffic counts and visibility, chains love those numbers. Chains can also move quicker in securing and developing coveted sites due to their vast resources, both financial and human.

That makes sense.

[Brad Ballinger]

I'm not convinced this is a purely Midwestern phenomenon. I think it's generally more of an urban v. suburban phenomenon.

In the suburbs, you'll generally have more families. So there's the whole value equation -- enough food for the money. There's the palate thing -- food that appeals to kids and a broad range of folks (think "safe"), not to mention all the marketing directed at kids. There's also a quicker in and out factor. This doesn't necessarily mean fast food, but it does mean quick food. And franchises typically have standardized processes, pre-fab ingredients, and automation that not all indies can develop.

In the suburbs, the franchises are also located in heavy traffic areas -- busy intersections, interstate off-ramps, etc. That real estate is more costly than neighborhood, or even suburban low traffic real estate. Franchises have deeper pockets. And when we look at new development, a real estate developer wants commitments before building. That developer is going to ink a deal with a known franchise that can pay its bills than with an unknown indie. Upthread, someone asked about San Francisco and Seattle city centers that have high-priced real estate. I don't know enough about Seattle, but San Francisco gets enough business and leisure travel and has a reputation as a food town that franchise investment may not be that necessary. Even so, there's plenty of restaurant turnover in that city.

In Minneapolis, Milwaukee, St. Louis (more than Chicago), the urban centers are seeing more franchises -- particularly in newer real estate developments or renovated developments. But in the neighborhoods, you'll find more indies.

The franchise business model, regardless of what business is franchised, is also typically based on volume and operational efficiency. Most indies have a model of quality and customer loyalty. That's not to say those things can't exist in franchises. They can and do. But the loyalty is to the brand of the franchise, not the location, and brand loyalty in this instance creates volume for other franchise locations.

[moosnsqrl]

I wonder if much of Ann Arbor's food scene developed in the 60's/70's (as did, for example, Berkeley's).  I don't know how or if the two campuses/towns differed then or in the aftermath but pehaps that is a reason for the difference.  Also, are there more immigrants in one town versus the other? 

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I think that the proximity to Detroit helps Ann Arbor a lot. They get people with money from the suburbs eating at their restaurants, not just the locals and students. There is also better availability of ingredients (especially in the winter). I think one of the hardest things about living here is the lack of good produce during the winter, and anywhere other than the Farmer's Market, joining a CSA, or having a great garden in the summer. Champaign is just so isolated in the middle of a cornfield, and there are comparatively few people who know good food. Most people who are looking for a good dining experience head up to Chicago for the night.

Champaign doesn't have a downtown Farmer's Market - there is something in a parking lot at the edge of town in the middle of the week (I've never been). Urbana has a Saturday farmer's market in the parking lot of their moribund downtown shopping center. Interestingly, Champaign's downtown area is further along in its redevelopment than Urbana's.

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My deepest sympathy. We moved in the opposite direction (Chambana first, then A2) and I doubt a week ever passed when one of us didn't comment on the non-existence of good food in "the cornfield swamp" (not to be unkind but facts are facts). I think the lack of a metropolitan area, coupled with the general "middle of nowhere" ambiance has held Chambana back. People go to school in Ann Arbor and seem to want to stick around for the natural beauty, among other things. I didn't meet all that many U of I alumni when we lived in Champaign.

There was a Wednesday morning version of the Saturday farmer's market in Champaign back then. It was smaller than the Saturday market and not all of the farmers were there but those who were also participated in the Saturday one. It wasn't highly publicized and I found out quite accidentally about it. Is it possibly still there and you haven't stumbled upon it? I don't know how long you've been living there so no offense intended - I'm sure if you're on this forum you have a nose for such things.

[moosnsqrl]

Secondly, chains predominate in many suburban areas because of commercial real estate developers. They are marketing traffic counts and visibility, chains love those numbers. Chains can also move quicker in securing and developing coveted sites due to their vast resources, both financial and human.

I would add to that the availability of tax incentives used to spur new development. Around KC it's referred to as TIF (Tax Increment Financing) which is leveraged by developers, in addition to the impressive traffic numbers. It's a hot issue in these parts at the moment, since the original intent was more to encourage redevelopment in blighted areas but now the dollars are finding their way into fairly exclusive, clearly *not* blighted areas.

[dinerminer]

You're exactly right , Judy. And the developers want the commitment way up front.

There is a TIF going on in our area and guess what, the first five "commitments" from restaurants were all chains. Wah! None of the independent operators I know were ever contacted about potential site opportunities by the city or developer. In many ways it is a closed system driven by dollars.

Edited February 28, 2007 by dinerminer (log)

[nsxtasy]

Then how to explain the very low numbers of chains in cities like San Francisco and Seattle, where rents are much higher than they are in the 'burbs?

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Because it's not true. There are plenty of chain restaurants in the areas around San Francisco and Seattle. But, as Brad and others have mentioned, it's more of a city vs suburbs thing. There are plenty of chain restaurants in the suburbs of both cities.

[annarborfoodie]

My deepest sympathy.  We moved in the opposite direction (Chambana first, then A2) and I doubt a week ever passed when one of us didn't comment on the non-existence of good food in "the cornfield swamp" (not to be unkind but facts are facts). 

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Finally someone who understands our pain!

It is just really hard to like it here having lived in somewhere as wonderful as Ann Arbor. We are trying to embrace the prairie though and take advantage of our surroundings. We like to go down to the Amish area about a half hour South of Champaign.

Back on topic -

I just double-checked - the Wednesday Champaign market is the one I mentioned above - in a parking lot at the western edge of town. So it's not helping the downtown area, though that area is actually very much up-and-coming.

[markk]

Why is that the first restaurants to go into expanding suburban areas... are all chains?

Is it something as simple as the fact that almost by definition, suburban restaurants are almost all "new construction"? Expanding suburban areas don't have existing downtown areas with storefronts for rent. Most anything in the suburbs would be new construction, whether it's a free-standing restaurant, or part of a mall, no?

[moosnsqrl]

My deepest sympathy.  We moved in the opposite direction (Chambana first, then A2) and I doubt a week ever passed when one of us didn't comment on the non-existence of good food in "the cornfield swamp" (not to be unkind but facts are facts). 

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Finally someone who understands our pain!

It is just really hard to like it here having lived in somewhere as wonderful as Ann Arbor. We are trying to embrace the prairie though and take advantage of our surroundings. We like to go down to the Amish area about a half hour South of Champaign.

Back on topic -

I just double-checked - the Wednesday Champaign market is the one I mentioned above - in a parking lot at the western edge of town. So it's not helping the downtown area, though that area is actually very much up-and-coming.

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I guess it's moved farther out - it was near the [probably by now razed] round "high-rise" apartment building not far from downtown - can't remember the name of it - but certainly not in the 'burbs. Ah, what memories .

[Behemoth]

My deepest sympathy.  We moved in the opposite direction (Chambana first, then A2) and I doubt a week ever passed when one of us didn't comment on the non-existence of good food in "the cornfield swamp" (not to be unkind but facts are facts). 

←

Finally someone who understands our pain!

It is just really hard to like it here having lived in somewhere as wonderful as Ann Arbor. We are trying to embrace the prairie though and take advantage of our surroundings. We like to go down to the Amish area about a half hour South of Champaign.

Back on topic -

I just double-checked - the Wednesday Champaign market is the one I mentioned above - in a parking lot at the western edge of town. So it's not helping the downtown area, though that area is actually very much up-and-coming.

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I am transplanted city person currently living about 8 months out of the year in Champaign. I honestly don't think it's that bad, considering the population is only about 100,000. I've found that there are some very interesting options, though admittedly you kind of have to look for them. The Urbana farmer's market is very lively and I think it has been around since the late 70s. There are very good ethnic options, because of all the foregin students, some very nice small local joints. On the high end, while limited, there are at least a few very nice options. I can't remember the last time I ate at a chain. Well, except for a slight obsession with Steak -n- Shake, which I feel like I should exploit while I still have a chance.

[paul o' vendange]

From the perspective of someone who's not in the restaurant business, I bet one reason is that chain restaurants already have a reputation (maybe mediocre to many of us at eGullet, but they wouldn't have gotten to be chains if mass-America didn't flock to their tables), and independents are an unknown quantity.

People will go to chain restaurants because they know what to expect. Conversely, they'll stay away from independents because they don't know what to expect.

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I think this is true, and I think that reputation feeds two different streams in smaller areas: planning, and consumer demand. At least from my experience, limited as it was to being an owner-operator of an independent bistro in small town America.

People there (the Upper Peninsula, Michigan) considered Applebee's fine dining (no hyperbole, nor disrespect - it is what it is). I think the chains provide comfort; they are known, they don't frighten people generally wary of new experiences, which is, from what we saw, the overall culture in the area.

From the city planner perspective, city planners will agonize for years over new development, intended to make the area more of a magnet for expats from the cities, and declare they want locally owned, locally operated business; they put millions in outright funding and tax abatement in harbor development, condo's, etc., but then they reject all this to give the nod to the national chains, Applebee's apparently being the top choice.

This is what we witnessed, anyway, and Suzy's conclusion is what we drew.

Edited April 22, 2007 by paul o' vendange (log)