Food Service & Agriculture, Retail, and Small Business & Startups

GR hitting restaurant saturation?

MRA president says two closings this month could indicate city nearing its peak.

June 16, 2017
| By Pat Evans |
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Two restaurant closures this month could signal saturation in the Grand Rapids area.

Without spelling doom and gloom in the industry, Michigan Restaurant Association President and CEO Justin Winslow suggested Grand Rapids could be nearing a peak in its operating restaurants, at least in the industry’s current state.

The restaurant industry operates at a 3 to 5 percent profit margin, Winslow said, creating a more competitive industry than most others. He said it has been a “surprisingly” difficult year nationwide, with a variety of brands merging, being bought out or going bankrupt.

“It’s razor thin and dog eat dog,” Winslow said. “Grand Rapids is a particularly competitive market, because it’s become a culinary destination. More people are getting involved, wanting to test their wares and become a part of that market.”

The comments came during an interview with the Business Journal following the closure of Black Heron Kitchen & Bar, 428 Bridge St. NW, and the announced closure of The Lazy Susan, 411 Wilson Ave. NW, at the end of the month.

Messages with both restaurants were not returned as of print deadline.

The 2-year-old Black Heron closed earlier this month with a note on the door mentioning “closed until further notice.” One of the restaurant’s floor-to-ceiling windows still was boarded up following a car crashing through the window earlier this month.

Black Heron owner Seth Porter later confirmed in a Facebook group called DrinkGR the restaurant would be closed “forever.”

The Lazy Susan, however, gave its customers nearly a month’s notice, with an exact closing date this month yet-to-be announced. The restaurant opened in October 2016 by Grand Rapids restaurant industry veterans Shana and Bob Waterbury.

“It’s with heavy heart, and immense sadness we share that TLS will be closing at the end of the month,” The Lazy Susan posted on its Facebook page. “We will keep you posted as to where the members of our team end up. Please stop in and see us for some good eats during our last few weeks open.”

The Business Journal reported earlier this month on the MRA’s first quarterly survey of the state’s restaurant industry following demand for more state-specific industry data. Michigan has a $15.9 billion restaurant industry with more than 16,000 eating and drinking locations in the state.

The report, performed by Cleveland Research, found sales grew 2.6 percent in the first quarter of 2017, which was below expectations and down from 2016’s 3.6 percent growth.

The low growth numbers led to Winslow talking about the pressures of the restaurant industry in Grand Rapids.

“Grand Rapids has developed a mature and highly regarded restaurant community with a sizeable consumer base always looking for the next great thing,” he told the Business Journal earlier this month. “That inspires many new and exciting concepts, but it also puts inordinate pressure on existing operators to remain fresh and innovative.”

Winslow said consumers have only a certain amount of disposable income and eating out therefore becomes a more challenging decision, especially balancing trying new establishments and frequenting favorites.

Some restaurants also will struggle because of a copycat affect of replicating other already successful models — a trend seen in most industries, Winslow said. In that instance, restaurants with similar menus will succeed or fail based on the experience and atmosphere offered, he said.

Winslow also mentioned more concepts catering toward the demographic changes occurring in the population, including more restaurants working on delivery models.

“Especially on the corporate side, brands are adapting by finding opportunities for delivery,” he said. “There’s a perception that millennials are more apt to stay in than go out compared to older generations, and when they do go out, they want a unique experience.

“Many brands are trying to meet these issues and perceptions head on.”

With such small profitability outlook, Winslow said a solid business plan is just as, if not more, important than other businesses. A great food concept will only get a restaurant so far, he said.

Start-up capital, location, marketing, offerings, management and industry knowledge could lead to an establishment’s demise, just as easily as a bad menu.

“It’s not always the food,” Winslow said. “There have been several closures in Michigan history of places with amazing food. It’s a major component, but to really succeed long term, you better have a keen business sense and make sound business decisions, or it will catch up to you.”

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