Wednesday’s Wall Street Journal article, “Dining Chains Shut Doors” by Jeffrey McCracken and Janet Adamy, discusses the Chapter 7 bankruptcy liquidation filing of Plano, Texas-based Metromedia Restaurant Group, the parent company of Bennigan’s and Steak and Ale. Although the 138 franchisee-owned Bennigan’s sites were not included in the filing and apparently intend to remain open, they will be doing so initially without a franchisor or franchise system support. Those franchisees will also be trying to succeed in an environment that has already proven to be glutted with mid-priced, sitdown restaurants. The Ground Round chain went through a similar experience several years ago; ultimately the franchisor was acquired by a cooperative of existing franchisees.
What the future holds in store for Bennigan’s cannot be known at this point, but the bankruptcy is a painful indication of the Darwinian survival process that is evolving in the fiercely competitive franchise restaurant landscape. That does not mean that all franchised restaurants are a bad bet in this environment. Only time will tell if the economy is driving a broad move away from eating out, or simply to restaurants that offer cheaper, fast food meals. The latter concept could bode well for the franchisors of those concepts. We will examine how the more nimble franchisors are adjusting to the environment and look at some of those concepts in coming posts.