David R. Henderson  

Joseph Schumpeter on the Decline of Applebee's

Real and nominal shocks... Mean Reversion and the Permane...
"Now there's [sic] many, many options that people are replacing chains with," Victor Fernandez, the executive director of insights at the restaurant-industry tracker TDn2K, recently told Business Insider.

Many of these options involve cooking at home. Grocery chains are increasingly competing with restaurants, thanks to lower prices and perks such as pick-up and delivery, new technology, and trendy features like wine bars and to-go meals. And meal-delivery kits like Blue Apron are focused on getting millennials on subscription plans to persuade them to stay in and cook a certain number of days a week.

Convenience is also a factor, both when it comes to delivery and speed of service. And casual-dining chains are still playing catch-up regarding delivery.

"The only part of casual dining that's growing right now is the off-premise side," Bonnie Riggs, a food-service industry analyst for NPD, recently told Nation's Restaurant News.

This is from Kate Taylor, "Millennials are killing chains like Buffalo Wild Wings and Applebee's," June 3, 2017. HT2 Janet Bufton.

The late great economist Joseph Schumpeter had something to say about this in his 1942 classic Capitalism, Socialism, and Democracy.

Here's from his bio, where I quote his thoughts on his famous term "creative destruction:"

Innovation by the entrepreneur, argued Schumpeter, leads to gales of "creative destruction" as innovations cause old inventories, ideas, technologies, skills, and equipment to become obsolete. The question is not "how capitalism administers existing structures, ... [but] how it creates and destroys them." This creative destruction, he believed, causes continuous progress and improves the standards of living for everyone.

Schumpeter argued with the prevailing view that "perfect" competition was the way to maximize economic well-being. Under perfect competition all firms in an industry produce the same good, sell it for the same price, and have access to the same technology. Schumpeter saw this kind of competition as relatively unimportant. He wrote: "[What counts is] competition from the new commodity, the new technology, the new source of supply, the new type of organization ... competition which ... strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives."

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COMMENTS (4 to date)
john hare writes:

Today I was driving past another huge housing development built mostly by subcontractors that are substandard compared to most of us 'professionals'. Somehow I started thinking about the standards when I entered the field in 1977 and realized that the substandard workmanship prevalent in many track homes is at or above the standards of back when. This innovation is mostly a form of mass production of a previously one off item. I don't like it as I am cut out of that class of work now. Sucks to be on the losing side for once, but since we have plenty of higher end work anyway, so what.

I have been innovated out of one class of work, so I do a different class of work now. Are you as glad that my job wasn't protected as I am?

Ryan Murphy writes:

Hard to beat the innovation of Endless Apps for $10.

John Thacker writes:

Applebees's and its casual dining ilk have always had to innovate to survive. It has its roots in the "fern bar" trend of the late 1960s and 1970s, lead by T.G.I. Fridays, when all those restaurants were singles bars, designed to be more women-friendly than traditional bars. In the 80s those restaurants aged along with their original clientele, changing from singles bars where people got drunk and met dates to family restaurants where people brought their children.

Strangely enough just the next day or two after seeing this article, I saw another one about how millennials love chain restaurants. Just different ones that aren't their parents', perhaps?

Seth writes:

When I think Applebee's I think blah food, shoddy service and a dated atmosphere.

McDonald's has done a better job at evolving with consumer tastes.

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