Dr. Peter C. Earle of the American Institute for Economic Research joins the Collapse Life podcast to talk about the vicious economic cycles leading to a deluge of restaurant closures.
Unfortunately for some it goes to housing, gas, and basic groceries. So yeah, it stays in circulation in that aspect, but it goes to necessities instead of “luxuries” like eating out.
I think that there are only certain kinds of restaurant that are doomed by this trend.
The real losers will be the franchise establishments. The mediocre fare is not worth the extra expense. Subway and McDonalds are the prime examples. They were based on the idea that you could just buy a franchise, hire a bunch of kids at minimum wage (actually a fraction of minimum wage in many cases), and not even have an active role in the establishment and expect a profit.
As businesses go, restaurants have a pretty low bar for entry into the market. There are plenty of people that will step in to fill the gaps that will actually be less of a drain on the local communities. All the profit that goes to the franchise will stay in the community instead.
This is a normal part of the business cycle. When credit is easy, and markets doing well, people get the ambition and confidence to "start their dream business" I would put craft breweries and sports bars into this same category. Businesses such as these have slim margins. So those that are not providing the best quality products and experience get weeded out as soon as things tighten up. Even the best chefs and restaurateurs make mistakes when choosing locations, and menus and pricing that can turn the business upsidedown in a heart beat.
If you are going to eat out. I highly recommend A&W!
What people save by cutting down eating out they will spend on something else instead. Money circulates, it doesn't shrink.
Unfortunately for some it goes to housing, gas, and basic groceries. So yeah, it stays in circulation in that aspect, but it goes to necessities instead of “luxuries” like eating out.
True, but velocity of money can be a wild card.
I think that there are only certain kinds of restaurant that are doomed by this trend.
The real losers will be the franchise establishments. The mediocre fare is not worth the extra expense. Subway and McDonalds are the prime examples. They were based on the idea that you could just buy a franchise, hire a bunch of kids at minimum wage (actually a fraction of minimum wage in many cases), and not even have an active role in the establishment and expect a profit.
As businesses go, restaurants have a pretty low bar for entry into the market. There are plenty of people that will step in to fill the gaps that will actually be less of a drain on the local communities. All the profit that goes to the franchise will stay in the community instead.
This is a normal part of the business cycle. When credit is easy, and markets doing well, people get the ambition and confidence to "start their dream business" I would put craft breweries and sports bars into this same category. Businesses such as these have slim margins. So those that are not providing the best quality products and experience get weeded out as soon as things tighten up. Even the best chefs and restaurateurs make mistakes when choosing locations, and menus and pricing that can turn the business upsidedown in a heart beat.
Not only are the prices stupid but the ingredients are toxic trash. Big bye eating out. Don’t let the door hit you in the ass on the way out!