America's Once Great Restaurant Chains Disappearing

Published December 12, 2012

| 24/7 Wall St.

In the past 10 years, some of America’s biggest food chains have lost more than 50% of their sales as they closed hundreds of locations nationwide.

These restaurants, which include former American staples such as Big Boy, Ponderosa and Bennigan’s have not been able to maintain a steady crowd. They have failed to update their brand or menu options. As a result locations have been closed in favor of a new generation of eateries. Based on data provided by food industry consulting and research firm Technomic Inc., 24/7 Wall St. reviewed the 10 large restaurant chains with the biggest decline in locations and sales between 2001 and 2011.

Restaurant brands are facing new challenges, Darren Tristano, Executive Vice President of Technomic, told 24/7 Wall St. in an interview. “What’s happening today is that the contemporization of restaurants is creating a new breed, a new generation of restaurant in a competitive environment.” The struggling brands, which “tend to be older in nature,” Tristano said “have not kept up with current generations, or have been dominated by new competition within the segment.”

The type of cuisine these restaurants offer has also played a major role in their decline. In the case of barbecue establishments such as Damon’s and Tony Roma’s, competition isn’t the problem. Rather, the barbecue segment as a whole is performing poorly because its a necessarily limited cuisine. Tristano explained that this is in large part due to the fact that barbecue typically tends to attract male customers more than women. It also isn’t a meal diners tend to eat every day. Tony Roma’s sales declined by more than 70% between 2001 and 2011, while Damon’s sales fell by more than 75%.

Other chains are in segments that are doing fine, but the restaurant is losing out to newer chains with exciting brands and new offerings. TCBY, the frozen yogurt chain that experienced meteoric growth starting in the 1980s, has been cooling off for years. Traditional ice cream chains such as Coldstone Creamery have eaten into its sales, as have new frozen yogurt establishments such as Pinkberry. In 2001, there were 1,777 TCBY locations across the country. By 2011, there were just 405.

Many of the restaurants on our list saw their heyday come and go several decades ago. Of the 10 chains with the biggest declines, eight have filed for bankruptcy in the past decade. In some cases, hundreds of locations were closed overnight. The chains were either then purchased or resumed operations only once the company emerged from bankruptcy. The remaining franchises continued to operate. But reinvigorating these brands will be an uphill battle.

The recent economic recession has further made the recovery of these brands challenging. While it is clear that actively pressing into new markets is necessary to keep these restaurants growing, these chains have been forced to devote most of their resources just to remaining afloat. Tristano explained, “The economy’s been a big negative for these restaurants trying to gain traction or even grow, and so in many cases they’ve actually just continued to struggle and close units that were underperforming.”

Based on sales data provided By Technomic, 24/7 Wall St. reviewed the 10 restaurant chains that had 60% or greater declines in the number of actual store locations operating from 2001 to 2011. In order to identify the chains that were once the biggest, restaurants had to have sales of at least $225 million in 2001 and experience 50% or greater declines in sales over the same period.

10. Blimpie Subs & Salads
> Pct. of stores closed: 60.1%
> Total stores: 739
> Stores closed: 1,114
> 2011 sales: $115.3 million
> Pct. decline in sales: -60.4%

Blimpie first opened in Hoboken, New Jersey, in 1964 as the nation’s first sub-sandwich chain. Although it remains the nation’s third largest such chain, Blimpie has struggled over the last decade. In 2011, Blimpie had just 739 stores and $115 million in sales, down from 1,853 stores and nearly $300 million in sales in 2001. Blimpie was purchased by Kahala, a franchising company that also bought Cold Stone Creamery in 2007.

9. Ponderosa/Bonanza:
> Pct. of stores closed: 63.5%
> Total stores: 175
> Stores closed: 305
> 2011 sales: $241 million
> Pct. decline in sales: -61.7%

Ponderosa and Bonanza are steakhouses that offer “the spirit of the Old West … and honest-to-goodness value.” Like many casual dining franchises, the recession hurt steakhouses’ bottom line. In 2008, the parent company, Metromedia Steakhouses Co., filed for bankruptcy. Although the company, now called Homestyle Dining LLC, exited bankruptcy in October 2009, its steakhouses have largely disappeared. Between 2001 and 2011 the number of Ponderosa and Bonanza restaurants fell by nearly two-thirds.

8. Big Boy
> Pct. of stores closed: 65.4%
> Total stores: 140
> Stores closed: 265
> 2011 sales: $183.4 million
> Pct. decline in sales: -68.4%

Big Boy, known for its double-decker hamburger and overall-wearing mascot, was opened in Glendale, California, in 1936. The company has struggled since its former franchiser, the Elias Brothers Corp., filed for bankruptcy in 2000. The year after the bankruptcy, there were 405 Big Boy restaurants nationwide. By 2011, there were just 140 restaurants in the U.S. In that time, annual sales at the chain have fallen by almost $400 million, from $580 million in 2001.

7. Don Pablo’s
> Pct. of stores closed: 71.0%
> Total stores: 38
> Stores closed: 93
> 2011 sales: $81.6 million
> Pct. decline in sales: -69.6%

Don Pablo’s describes itself as “Big Tex Bold Mex.” Avado Brands, the company that owned Don Pablo’s, went bankrupt twice in the last 10 years, first in 2004 and again in 2007. In 2008, the chain was sold to a restaurant group started by Avado’s bankruptcy lender. According to Tristano, full-service Mexican restaurants like Don Pablo’s have struggled as fast-casual restaurants such as Chipotle Mexican Grill (NYSE: CMG), have become America’s preferred choice for Mexican cuisine.

6. Tony Roma’s
> Pct. of stores closed: 71.6%
> Total stores: 46
> Stores closed: 116
> 2011 sales: $93 million
> Pct. decline in sales: -70.8%

Tony Roma’s was founded in 1972 and claims to be “the largest casual theme restaurant chain specializing in ribs in the world.” Between 2001 and 2011, Tony Roma’s domestic sales fell by over 70%, while its total number of U.S. restaurants declined from 162 to 46. The chain is struggling partly because, says Tristano, “barbecue is not an everyday food,” and because the cuisine tends to appeal only to males. In 2005, the restaurant’s parent company, Romacorp Inc., filed for bankruptcy. Although it is disappearing from the United States, Tony Roma’s is still active internationally with restaurants in over 30 countries.

To read the full list of America's disappearing restaurant chains, please visit 24/7 Wall St.

URL

http://www.foxbusiness.com/industries/2012/12/12/america-once-great-restaurant-chains-disappearing/