Picture this: you walk into a new, bustling restaurant run by a chef. It is one of a kind and, by all appearances, looks like an independent establishment.
But dig a little deeper and it turns out that this independent restaurant is actually one of more than a dozen owned by the same company.
The restaurant “group” business model has, of course, been around for many years.
But experts withyes, these groups are becoming bigger players as industry struggling after pandemic amid decline in alcohol sales and below customer expenses.
Larger sizes provide better purchasing power and a barrier against risk, they say.
Vince Sgabellone, a food industry analyst at market research firm Circana Canada, said there is “strength in numbers.”
“It’s very difficult for an independent restaurateur.”
Unlike a restaurant chain, where each location is adorned with the same name, menu and decor, customers of a restaurant group may never know that the place they are dining at is part of a larger company.
But some say that after a certain scale, the trend may still involve a degree of homogenization, with even seemingly separate restaurants starting to look and taste the same.
A chain that is not a chain
The extent of the restaurant group model's growth is difficult to determine. Restaurants in Canada do not track this; Neither does Statistics Canada.
But Sgabellone said Circana data shows that between 2020 and 2024, smaller chains and independent restaurants (restaurant groups are tracked as part of both categories) grew more than twice as fast as large restaurant chains in Canada.
And experts like Bruce McAdams say the trend is gaining momentum as part of a generational shift around the chain restaurant concept.
There is an admittedly fine line (and perhaps some overlap) between a restaurant chain company and a multi-concept restaurant group.
But generally speaking, while in the 1970s and 1980s it was desirable for restaurateurs to open local establishments in every city in the country, that is no longer the case, says McAdams, an assistant professor of hospitality at the University of Guelph.
“The whole restaurant market has changed dramatically,” said McAdams, who worked for the Toronto restaurant group Oliver & Bonacini before becoming an academic.
As the country has become more diverse, Canadians have been introduced to different types of food. Shoppers are more interested in trying something new and less interested in familiarity (though McAdams noted that some big chains, like The Keg and Earls, are still doing well).
For sit-down food companies, this means they can attract more attention by opening different types of restaurants with different cuisines, rather than trying to replicate the same restaurant over and over again.
Economies of scale
Purchasing power is a major advantage for restaurant groups. Compared to independent restaurant owners, groups can achieve greater economies of scale by operating at larger volumes.
For Calgary's Concorde Entertainment Group, the company's size means it has been able to open its own kitchen downtown, producing ingredients such as cocktail syrups that can be shipped to all of its locations. This can be done cheaper than ordering goods from individual suppliers.
“It also allows the company to ensure that everything meets certain standards of consistency and quality,” said John Molyneux, the company's vice president of business development, sales and events.
“People may not realize how tiny the margins are and yet our costs for everything are going up,” Molyneux said. “Any time we can save a dollar here, a dollar there, it really helps.”
Concorde began in 1987 with a single student bar and has since grown to nearly two dozen locations, including a renowned steakhouse, a Japanese restaurant, a Pacific-style restaurant and a chain of breweries within a group of restaurants.
The company has also expanded beyond Calgary, opening some of its most popular restaurants in Canmore and Toronto.
Concorde restaurants do not have signs indicating that the business is part of a group, but it is easy for customers to tell if they are visiting the restaurant. website or buy a gift card.
“WWe’re not trying to keep it a secret,” Molyneux said.
“Dominance” in the market
Another advantage of the business model is proximity. While companies like Concorde sometimes expand beyond a specific city, groups usually start by opening a few restaurants in one region.
“Maybe they have a sushi restaurant. Well, now they can open a steakhouse right across the street,” Circana analyst Sgabellone said.
“This allows them to really monopolize and dominate the geography.”
This means that companies benefit from the same economies of scale as chain restaurants, but don't have to deal with the logistics of trying to ensure a consistent restaurant concept across multiple cities, especially in a country as vast as Canada.
McAdams remembers how difficult it was to do this when he worked at Red Lobster during a period when the company was rapidly expanding across the country.
“It was a gong show,” he said.
By being part of a group, restaurants can also consolidate some of their back-office work. Multiple positions may share the same HR, Marketing, and Payroll department.
In addition, Sgabellone says the model offers some protection against changing consumer preferences. If one restaurant in a group stops doing well because the cuisine has gone out of style, the company has other concepts to fall back on.
“If they have more restaurants, they have a better chance of being on the cutting edge,” he said.
Pros and cons
Calgary restaurateur Tony Migliarese sees the pros and cons of the restaurant group model. He now owns five restaurants in the city (an Italian bistro, a wine bar, a noodle shop, a tavern and a pizzeria) and considers his business not quite a restaurant group, but it's getting close.
Migliarese says he understands why this model is becoming more common.
“In some ways, you are too big to fail,” said Migliarese, best known as the owner of DOPO.
The model also works as a sort of staff retention tool, he said. If someone who works for a restaurant group wants to open a new establishment, they can do so without leaving the company.
But at a certain scale, Migliarese says, it carries the risk of being bland and “everything looking the same.”
Restaurant industry analyst Robert Carter agrees. He noted that in any industry, consolidation carries a certain risk of homogenization, especially where private equity is concerned.
“There's a fear of losing that sense of independence and just becoming more like a corporate structure,” said Carter, managing partner of restaurant consulting firm The StratonHunter Group.
What consumers see
Restaurateurs aren't the only ones benefiting from the group model; those who eat in them can too.
If larger groups can get better deals on ingredients, this could lead to lower prices.
And for consumers constrained by the high cost of living, spending money at a restaurant associated with an established favorite may seem less risky than taking a chance on something completely new, Sgabellone said.
In the current economic situation, enterprises are also trying to reduce risks.
According to a recent report from Restaurants Canada, food, labor and staffing costs continue to rise, putting pressure on restaurant owners while consumers choose to spend less on non-essential items.
Experts say this means the restaurant group model will likely continue to grow. They say being big helps in tough times.
