Over-expansion, cheap money & fabricated demand

September 8 2016

Restaurant Group & Ed’s Easy Diner have said that they are to dispose of units:

Restaurant Group has said that it is taking ‘catch up action on underperforming sites’
It is to close 33 units
Ed’s has also said that it is to consolidate its position & exit 3 units
RTN and Ed’s are unlikely to be the last operators to trim their estates
But it’s one thing to announce an exit from (presumably underperforming) leasehold sites and quite another to achieve it
Having said that, having a tail of poor or shut sites didn’t do Spirit much harm in the end

If sites are available, better we have them than the competition:

That (and cheap money) has got us where we are now
Operators may well have scrambled for sites that they would not otherwise have sought out
Retail parks with 8, 10 or 12 casual dining outlets arguably have too much cutlery on site
Poor operators (undifferentiated, entitled and/or lazy) will do least well but all operators will suffer as the cake is sliced more thinly

So what’s the answer?

Here’s the thing with answers, there sometimes isn’t one.
Macro and micro incentives may remain out of line for some time.
The market may not have a braking mechanism. It may only have a crashing mechanism.
Making the best of a bad job entails having a superlative & relevant offer, attractively priced
Ultimate takeaway may be to slow leases, buy freeholds. That’s what JDW/MARS are doing