In envisioning a scenario, imagine stepping into a new and vibrant restaurant led by a renowned chef. At first glance, it appears to be a standalone establishment. However, upon closer examination, it is revealed that this independent restaurant is part of a larger company that owns over a dozen similar establishments.
The concept of restaurant groups has been in existence for many years but is gaining prominence in the post-pandemic era as the industry grapples with challenges such as declining alcohol sales and reduced customer spending. The advantage of being part of a larger group lies in the enhanced purchasing power and a buffer against risks.
Vince Sgabellone, a food industry analyst at Circana Canada, emphasizes the benefits of strength in numbers, highlighting the challenges faced by independent restaurateurs. Unlike traditional restaurant chains where uniformity is evident across all locations, customers dining at a restaurant group may not even realize they are patronizing a branch of a larger company.
The trend towards restaurant groups is on the rise, with smaller chains and independent restaurants experiencing faster growth compared to large restaurant chains in Canada. As consumer preferences evolve and diversify, there is a shift towards exploring diverse culinary experiences rather than replicating the same restaurant concept repeatedly.
One significant advantage of restaurant groups is their enhanced buying power, allowing them to achieve better economies of scale by procuring supplies in bulk. Companies like Concorde Entertainment Group in Calgary leverage their size to operate a central commissary kitchen that produces ingredients for all their establishments, ensuring consistency and quality while managing costs effectively.
Concorde Entertainment Group, which originated as a single college bar in 1987, has expanded to include around two dozen venues encompassing various cuisines. While there may not be overt indications of group affiliation at their restaurants, customers can easily discern this information through the company’s website or by purchasing gift cards.
The restaurant group model offers proximity benefits, enabling companies to concentrate multiple establishments in a particular area, thereby creating a dominant presence. This strategic approach allows businesses to capitalize on economies of scale without the logistical challenges associated with maintaining consistency across diverse locations.
In addition to operational efficiencies, the restaurant group model provides a safeguard against shifting consumer preferences and economic uncertainties. By diversifying their concepts, companies can adapt to evolving trends and mitigate risks associated with fluctuations in demand for specific cuisines.
While there are clear advantages to the restaurant group model, there are also potential drawbacks, including concerns about standardization and the risk of losing the unique charm associated with independent establishments. However, from a consumer perspective, group affiliations can translate into cost savings on ingredients and a sense of familiarity and reliability when dining out.
In an environment where businesses are striving to navigate economic challenges and consumer behavior changes, the restaurant group model is poised for continued growth. The scalability and operational advantages offered by this approach provide a level of stability and resilience in an ever-evolving industry landscape.