Archive for Sunday, October 11, 1998


October 11, 1998


Restaurant chains may be losing their appetite for Lawrence.

According to a just-released list of the nation's best and worst places to open a restaurant, Lawrence doesn't look so palatable. The city ranks 267th out of 321 metropolitan areas included in the study.

``This would signify that it's a below-average market to put a restaurant,'' said Brian Breuhaus, associate editor of Restaurant Business, a twice-monthly trade journal that has published the index for the past 31 years. ``It means that there are already more restaurants in Lawrence, Kansas, than there is actual demand for restaurants.''

The magazine's index comes the same week the bankrupt owner of Boston Market, a giant national chain, closed its 14-month-old Lawrence store, saying it had never been profitable.

And it comes as no surprise to owners of many area restaurants.

``Lawrence has certainly seen an influx of restaurants in the last decade or so,'' said Chuck Magerl, proprietor of Free State Brewing Co., a popular downtown restaurant and microbrewery. ``We certainly hear talk that the market is oversaturated. I know that's a sentiment that goes through the business community.''

Other restaurateurs say they're regularly contacted by a stream of owners and franchisees seeking buyers for struggling food-service businesses. And city hall has seen more national and regional chains turning away from Lawrence in their searches for new restaurant locations.

Scores of options

Breuhaus said his magazine's index is designed to find the metropolitan areas with the most development potential -- areas that haven't yet been overrun with eating places. In the process, it also identifies those that already are saturated.

Based on employment data, income, age, grocery store food sales and other information, the index uses a formula to assign a score to each of the nation's 321 statistical metropolitan areas. A score of 100 indicates a balanced marketplace, or one with about the right amount of restaurant supply to meet demand.

So, scores above 100 indicate areas with hotter prospects for a new restaurant to succeed, and scores below 100 offer less promise.

Lawrence received an index number of 87, and a ranking deep into the half of the list reserved for places to avoid.

The city's ranking was below both the overall Kansas ranking of 90 and the magazine's ranking for the ``west north central'' region that includes Kansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. The region's ranking was 94.

Only one other Kansas city -- Wichita -- had worse prospects. It received an index of 86. Topeka and Kansas City both scored above 100, at 114 and 112, respectively.

Mike O'Donnell, former director of the Kansas University Small Business Development Center, said the magazine's findings squared with Lawrence restaurant market studies he conducted in past years.

But he also expressed skepticism at any survey that attempts to paint every city across the nation with the same brush.

``Here in Lawrence,'' he said, ``the trends can be a little bit contradictory.''

As an example, he said that when his last restaurant study was conducted a few years ago, the national trend was for people to be spending less on food away from home. In Lawrence, the opposite was true.

``In a university town, there's a lot of traffic with all the activities that KU and Haskell (Indian Nations University) has,'' he said. ``A lot of things happen here that bring people from all over.''

Many restaurants in town depend on such ``tourist'' traffic to stay afloat, and do well that way.

Still, he admitted it appeared Lawrence had too many eating places.

``As of a few years ago, there were too many restaurants in Lawrence for the available disposable income,'' he said. ``And since the last time I did one of those surveys, a lot more restaurants have opened.''

Low satisfaction?

Magerl, of Free State Brewing, said the index results ``dovetailed'' in his mind with a recent KU study suggesting Lawrence had more retail outlets than its population could support, and with Boston Market's admission that its Lawrence store wasn't profitable.

``In many ways, all this is an anticipation of growth,'' he said of booming retail development, addition of more apartment units in an already saturated market -- and construction of more restaurants.

``The easy response (to the restaurant data) would be to say that the greater the number of choices out there, the better it is for the consumer,'' Magerl said. ``But the reality is that as margins tighten ... consumer satisfaction may be the ultimate casualty.''

He said he expected to see increasing turnover and consolidation in coming months.

``Restaurant operation is a high-demand type of business,'' Magerl said. ``The fatigue factor plays into people's motivations as much as anything.''

O'Donnell said such factors played a big role in the differences between chain and locally owned restaurants.

``There are two groups who have restaurants,'' he said. ``The huge corporate chains that don't mind making mistakes occasionally, because they can absorb the loss. At the other end is the family that pours their sweat and blood into the business.''

It remains to be seen which type will hold out longer, he and Magerl said.

``The future may not be as rosy as it has been,'' said O'Donnell, who now is executive director of Wakarusa Valley Development Corp. ``But there's always room for the right restaurant in the right location.''

-- Richard Brack's phone message number is 832-7194. His e-mail address is

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