If at least two restaurants are owned by the same company, they are typically considered a chain. However, there are a few exceptions to this rule. For example, if the two restaurants have different menus or operate under different names, they may not be considered a chain.
Examples of “Fuzzy” or Hybrid Brand Strategies
Occasionally, the brand strategy categories are not quite so clear. Three local examples show the complexity of categorizing any organization, even if the dining public may not ever know or care.
Though I assigned them to the simple brand strategy, perhaps we should think about how a veteran of the local industry, Patrick Lyons, and his partners in The Lyons Group have built a company that they clearly do not want to be identified as a chain. Over the past three decades they have created a true portfolio of more than 30 different offerings including single restaurants, branded pubs and complex entertainment venues, which range from large multi-site brands such as King’s Bowl America to the truly unique Bleacher Bar inside Fenway Park’s center field. But to respond to market trends, The Lyons Group has positioned themselves in a way that a majority of other restaurant companies have not, to be viewed as a management operating company:
“Each establishment is independently owned and operated. Lyons Group is a management company that provides administrative and marketing services to restaurants. We do not own or operate restaurants.” [6]
So, while branding itself as a restaurant group they function as a management company which provides centralized administrative functions, presumably purchasing, accounting and human resource management (including a unified website link for employment and internships) and marketing services including a single on-line event booking and reservations system. This is the quintessential test of a restaurant chain: do they create the economies of scale and scope that are the hallmarks of creating value for any corporate or chain restaurant company.
Next, we might consider the Lyons Group’s systemized approach to be completely different than the “family” of restaurants associated with multiple James Beard Restaurateur of the Year nominee, Garrett Harker.[7] He owns Eastern Standard and is a partner with a confederacy of others in two Row 34s, two Island Creek Oyster Bars, one each of Branch Line and Les Sablons, the food service at the Hotel Commonwealth, and The Hawthorne lounge. While informally this collection is known as “Harker Town” it is proud to be loosely organized and does not profess to operate under a single corporate umbrella (or group name), but does consolidate some human resource management functions, menu development and kitchen functions, and a flexible shared employee base.
And then, there is the restaurant collection of famed Chefs Ken Oringer and Jamie Bissonnette, both James Beard award winning chefs, but Oringer is also a James Beard Restaurateur of the Year nominee. Between them they have three acclaimed individual, independent restaurants, Uni, Coppa and Little Donkey, but they also have four Toro restaurants, one each in Boston, New York City, Bangkok and Dubai. Which strategy are they using with these seven units, simple or monolithic, or is it both? Does the fact that their award winning personal names are associated with each restaurant mean that this is an example of an endorsed strategy? Do they benefit from a single headquarters? Certainly for menu development, but is there any benefit for a centralized human resource department or purchasing and accounting functions? Maybe the Coppa restaurant is stand-alone, but is the Toro brand a chain in this case?
When is a Group a Chain, and a Chain a Brand?
Over the past four decades, in a slow but inexorable manner, a growing corporate imperative has replaced the independent restaurant in most markets. In greater Boston, possibly more than in many similar sized cities, a reputation for having more independent than chain restaurants is something bordering on civic pride. This perception is especially interesting to observe since the city has seen an explosive growth in new restaurant offerings over the past fifteen years. This growth of new restaurants in turn has both helped, and been helped by, the rejuvenation of many of Boston’s historic neighborhoods from Fort Point to Fenway, from Somerville to Southie.
What makes this belief in the power of the independent so unique is that it really is masked by the rise of the portfolio power of the “Restaurant Group” (or sometimes “Collection” or “Family”) of mostly individual restaurant concepts all managed by a single corporate entity. A company which creates an assortment of single restaurants into a portfolio is usually called a “multi-concept operator,” which is appropriate here. Using the most accepted definition, any company operating three or more restaurant units from a common headquarters in this manner is deemed a chain,[1] but apparently not in Boston.
While artisanal and craft enterprises continue to be the hot new thing for many savvy young consumers, there is still the subtle but important growth of corporate multi-unit or multi-concept brands on every street corner. What makes this of particular interest today is that because of social media and the almost instantaneous fame (or infamy) it can bring, creating a distinct brand identity is more important than ever. Even the start-up, craft, fair trade coffee and bakery shop is looking to define itself as a unique offer in the branded world.
In this new, almost paradoxical environment, the owner’s reputation for being authentic and unique is only one part of the value equation; competence and quality of execution are now expected, even from the smallest of offerings. The market and the restaurateur are both keenly aware that brands live or die on the most fickle of attributes. How the customer perceives that new reputation, in reality the enterprise’s brand identity, needs to become the daily focus of the operation as it builds consumer knowledge and loyalty.
Logically all chain restaurants have to begin as a single unit. Though eventually, the business model of multi-unit/multi-concept corporate restaurants is as different from that of the single independent restaurant as the daily activities of a 1000-room Hilton Hotel are from a six-room Bed & Breakfast inn. In this new world the traditional reputation of an owner or chef is only one part of the value equation. Instead of the owner’s name above the single front door signaling integrity and quality, the branded business name often becomes the focus of consumer knowledge and loyalty. For more than 30 years, a new wave of celebrity chefs have capitalized on this trend by branding their names as early as possible in their careers.
Two interesting local restaurateurs who are tied to the independent vs. chain debate are very Boston based, one historic and one quite modern. The first person credited with coining the phrase “chain of restaurants” was Howard Johnson, the eponymous founder of the mid-20th century Howard Johnson’s restaurant empire, originally from Quincy, MA. As his brand name grew through franchising to more than 1000 restaurants, he told his operators that all of the units from Maine to Florida[2] were linked together like a chain, the reputation of all became affected by the weakest link not holding up system-wide standards.
Seventy years later, the other person is Roger Berkowitz, the CEO of the family controlled and Boston-based restaurant company, Legal Sea Foods. In his desire to not have Legal Sea Foods ever associated with the phrase “chain restaurant” in 2014 his New York based advertising firm, DeVito/Verdi, created an entire advertising campaign based on the tag line, “Where chain is a four-letter word.” Mr. Berkowitz himself appeared in a number of television and print ads with this as a theme, including one commercial where he was strapped to a lie-detector machine. In an August 6, 2014 article in the New York Times, “Call It What You Like, but Not a Chain” the point was well made.
“While Legal Sea Foods has a number of locations, we’re not a chain,” says Mr. Berkowitz, seated at a restaurant table, in one of the new spots. “Each of our restaurants is unique, not cookie-cutter, so you can call me stupid, an egomaniac, or even an” — the word is bleeped and his mouth pixelized in a scene. “Just don’t call me a chain.” [3]
While Legal Sea Foods, currently with 26 restaurants in Massachusetts and another ten in other states, is not as large as The 99 Restaurant & Pubs, with 63 in Massachusetts and more than 40 others, or even Bertucci’s with 37 restaurants in Massachusetts, it certainly does meet the criterion of “a company operating three or more restaurant units from a common headquarters” with all the centralized functions one would find in a multi-unit corporate enterprise.
But when we look at Legal Sea Foods in the metro Boston market they do, in fact, publicly position their restaurants as a collection of similar, but distinctly unique brand offerings. They have 14 branded as traditional full-service Legal Sea Foods, but they also have four as Legal C Bars, two each as Legal Fish Bowls and Legal Test Kitchens, and one each as Legal Oysteria, Legal on the Mystic, Legal Harborside and Legal Crossing.[4] With their strong Boston brand identity, six of these various concepts are located in Logan Airport’s multiple terminals to reinforce the city’s with the travelling public. So we can be sure Mr. Berkowitz would say Legal Sea Foods is a brand, but is it a chain?
8 Forgotten Restaurant Chains We Need Back!
FAQ
What classifies a chain restaurant?
How many restaurants do you need to be considered a chain?
How many stores are needed to be a chain?
What is considered a chain?
What are the different types of chain restaurants?
Though fast food is the most popular type of chain restaurant, restaurant chains don’t have to be a particular restaurant type. Chain restaurants can be sit-down, fast-casual, fine dining, or any other concept. There are differing opinions when it comes to what makes a restaurant a chain, and how many locations are required.
What is a chain restaurant?
(The Affordable Care Act is supposed to eventually impose a similar rule across the country, defining chains by the number of locations, but the implementation of that part of the law has been delayed.) One restaurant group has suggested that a chain is any eatery with 10 locations, or one that crosses state borders.
How do I start a chain restaurant?
Once you have your first location up and running, you can start expanding. Revise your business plan to include multiple locations, and start looking for new properties. Keep growing your chain by opening new locations and continuing to provide excellent food and customer service. The key to success with a chain restaurant is consistency.
Are chain restaurants owned by the same company?
They can either be owned by the same company or be individually owned through franchising. Though fast food is the most popular type of chain restaurant, restaurant chains don’t have to be a particular restaurant type. Chain restaurants can be sit-down, fast-casual, fine dining, or any other concept.