Opinion: Restaurant Competition Fierce

Streetsmart NWA researches data pertaining to both competitive full-service and fast-food/buffet restaurants in Benton and Washington counties. In the first quarter of 2010 our research supported there were between 31,000 and 32,000 full-service restaurant seats and between 14,000 and 15,000 fast-food/buffet restaurant seats in the five major cities within the two-county area. Based on 2009 population estimates, the number of people per restaurant seat was indicated as follows:

Bentonville, Fayetteville and Rogers each reflect a high number of full-service restaurant seats in comparison to their population base. For instance, in the first quarter of 2010 the number of people per full-service competitive restaurant seat in Little Rock was indicated to be 10. 

Competition is high in the restaurant sector in Benton and Washington counties. Over the past three years several full-service restaurants have closed, including major chains. Some of these facilities have reopened under a different theme, usually with significant upfront savings in comparison to the previous occupant.

Bentonville and Fayetteville each collect restaurant tax receipts while Rogers, Siloam Springs, and Springdale do not. Bentonville collects 1 percent on restaurant sales while Fayetteville collects 2 percent. First quarter year-over-year comparisons show tax receipts in Bentonville and Fayetteville increased from the first quarter of 2006 through the first quarter of 2009. However, between 2009 and 2010 each of these two cities experienced a decline in restaurant tax receipts. The decrease was less than 1 percent in Bentonville, but 4.4 percent, in Fayetteville.

Yearly comparisons show that between 2008 and 2009 Bentonville reflected a 1.3 percent increase in tax receipts, with Fayetteville experiencing an increase of less than 1 percent.

Economic conditions have adversely impacted the restaurant sector and are expected to continue to do so, at least in the near term. This is true nationwide.

To some extent restaurants will operate under new rules as we move forward. A June 2010 article in Shopping Center Business, indicated the following points: 2010-2011 will bring more fast casual and quick-serve restaurants to the dining scene; grocers will continue to expand take-out food operations; operating costs will continue to rise; chains will implement strategies to close the lowest performing 5 to 10 percent of their units; unique and top of segment/class will prevail; changing demographics will hurt mature chains with an older clientele; new operations will emerge to take many of the closed restaurants but capital constraints will slow this process; and, site selection will be more important than ever, as well as lease/purchase negotiations.

The preceding points relate strongly to the restaurant sector in Benton and Washington counties. 

Tom Reed is a partner in Streetsmart NWA, which produces reports pertaining to the residential, multi-family, and commercial sectors of the real estate market. Company offices are located at 2804 Main Street, Suite C, Fayetteville, Arkansas. The phone number is 479-575-9100.