After 35 years, Dixie Restaurants, Inc. is shutting down. The Little Rock-based company announced it is closing all 17 of its Dixie Café and Delta Café restaurants in Arkansas, Oklahoma, and Tennessee. The last day for foodies to enjoy a meatball sandwich or catfish is Thursday, December 7.
Dixie Cafe & Delta Cafe Chains Closing Across Arkansas, Oklahoma, and Tennessee
The company has not said how many employees will be laid off as a result of the mass closure, and its website has already been disabled. Falling sales and rising costs were cited as the reason for the closures.
“After over 35 years in business, we have decided that we must close our restaurants,” said Allan Roberts, CEO of the long-standing family restaurant. “It’s a very difficult operating environment for full-service, family-oriented restaurants. We have seen declining sales combined with increasing costs that have made this difficult decision necessary.”
Dixie Restaurants Closing After 35 Years, Declining Sales at Family Restaurants to Blame
The chain restaurant industry is in a death spiral and Dixie Restaurants is just the next name in a long list of brands that have permanently closed their doors. In fact, more than 1,000 restaurant locations have closed since 2016: in addition to the 17 Dixie Restaurants, Joe’s Crab Shack closed 40+ locations, Papa Murphy’s Pizzeria has trimmed its portfolio by 16 stores, Pollo Tropical has shuttered 30 locations, and Applebee’s expects to dim the lights on up to 135 restaurants. In 2016, Subway closed 359 locations and 95 Ruby Tuesday, Inc. (NYSE:RT) restaurants are no more.
There are a number of reasons why the U.S. restaurant industry is in turmoil. Family restaurants like Dixie cite falling sales, rising costs, lower grocery prices, competition, and economic headwinds as the main hurdles. But there may be another reason why casual style and popular chain restaurants are closing at record pace: Millennials.
Sally Smith, CEO of Buffalo Wild Wings (NASDAQ:BWLD), said in a letter to shareholders that “Casual-dining restaurants face a uniquely challenging market today.” She says three of the biggest challenges undermining restaurant sales–casual-dining chains in particular–is changing customer tastes, lost foot traffic at malls, and declining sports viewership.
“Millennial consumers are more attracted than their elders to cooking at home, ordering delivery from restaurants and eating quickly, in fast-casual or quick-serve restaurants,” she said.
According to the most recent data, the only area of casual dining that is growing is delivery. Unfortunately for restaurants, those who prefer delivery do not add unnecessarily to their order and ultimately spend less. This is particularly true for casual dining restaurants that rely on alcohol orders to drive sales.
On-the-go millennial customers also prefer the convenience and lower prices of fast-casual chains like Panera Bread and Chipotle Mexican Grill, Inc. (NYSE:CMG). Case in point: from 1999 to 2014, the fast-casual restaurant industry soared by 550%. Though even that sector is starting to show cracks; since the summer of 2015, Chipotle’s share price has tumbled almost 60%.
Sales at both fast food and family restaurants are down, and by all accounts, the industry will continue to suffer. This will result in many more restaurant closures in 2018.
“Delta Cafe, Dixie Cafe locations set to close permanently this week,” KTUL, December 4, 2017.
“Buffalo Wild Wings CEO hits back at activist investor and blames chain’s problems on millennials,” Business Insider, May 30, 2017.
“The restaurant industry is in its worst tailspin since the recession,” Business Insider, May 14, 2017.