Restaurants do not need to consolidate yet

Not long after our newsletter went out last week, featuring our look at the report of an alleged acquisition of Chipotle by Starbucks, the coffee shop giant came out and said that it wasn’t buying the burrito chain after all.

Nobody we knew was surprised by this, because it was all just so far-fetched. But this also isn’t a great time for new, multi-brand concepts to begin with.

Aside from the cost of a Chipotle acquisition, Starbucks would have had to convince its shareholders that two would be better than one. That would mean convincing an investment public that has, rightly, grown plenty skeptical of such things.

Before the pandemic, we were convinced that the restaurant industry was on the precipice of a long-term consolidation trend, similar to those that have hit other consumer industries such as hotels and grocery stores. And plenty of companies have provided ammunition, notably Inspire Brands, Restaurant Brands International, and even bargain-hunting companies like MTY Group.

If that is still the case, then the industry is on a break now. MTY is planning to sell off some concepts. Yum Brands just sold Pizza Hut. RBI hasn’t bought anything in years. Neither has Inspire. Jack in the Box sold Del Taco.

It’s difficult for multi-brand companies to get all their chains pointed in the right direction. Nor is the payoff all that certain, especially given the expense associated with one chain buying another chain. That makes the investment public skeptical, which can prevent these types of deals.

Grocery stores and hotels both had good reason to consolidate. Grocers had to get bigger to compete better with the massive Walmart since its incursion into the business. Hotels needed to consolidate to wrest reservations away from Internet sites like Priceline.

Many of us thought restaurants would need to do something similar, to combat the business shift to third-party delivery. That still could be the case as that service takes more of the digital business. But third-party delivery simply isn’t big enough yet to force the industry into more consolidation. And so consolidation will apparently have to wait.

We wrote a lot about the economy last week because there was a lot of news about the economy to write about. Wages aren’t keeping up with inflation. And that’s a big problem. It’s also why fast-food executives are pessimistic.

Bankruptcy filings of large franchisees can create real problems for restaurant brands. Just ask Wendy’s.

When we first heard rumblings that KFC might change to Coke, we refused to believe it. But that is exactly what happened.

Savory Fund’s latest fundraise was its most difficult. But maybe its most impressive.

Politicians are taking an interest in private-equity ownership of restaurant chains.

Sysco keeps making its case to buy Restaurant Depot.

Domino’s franchisees are slowing their growth over profitability issues, which is what happens when a business discounts a lot.

This tells you a lot about the state of the pizza sector. Domino’s same-store sales remain far above two of its three biggest competitors, even as its own sales have slowed.

“Hardest thing that I’ve ever done in my whole career.” -Andrew Smith, cofounder and managing director of Savory Fund, on the private-equity firm’s latest fundraise.

On A Deeper Dive I spoke with Wing Drone Delivery on, you guessed it, drone delivery. On The Week in Restaurants we talked Domino’s, salad, and talking kiosks.

For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.