Surviving the Niche: How Underutilized Restaurants Stay Afloat

Restaurants that struggle with low business volumes face numerous challenges, including high utility costs, difficulty in securing bank loans, and the uncertainty of staying open. Despite these hurdles, some restaurants find creative ways to survive, such as multi-business operations and strategic use of property.

Exploring the Challenges

Many small businesses, including restaurants, find their operations strained by a lack of customer base. Utility costs, especially in the current economic climate, put additional pressure on these establishments, making it difficult to maintain operations without sufficient revenue. Banks are typically hesitant to provide loans to dining establishments, which only exacerbates the problem. Consequently, a significant number of these businesses fail or opt to sell.

Common Justifications for Pushing On

There are several potential reasons why some aberrant restaurants continue to operate:

Profit from Side Businesses: Many serve bread or other products beyond just meals, using these efforts to supplement their income. Money Laundering: Some are used as fronts for illegal activities to disguise financial transactions. Private Use: Occasionally, very wealthy individuals use such establishments for personal enjoyment and social gatherings, without the expectation of profitability.

Case Study: My Hometown’s Empty Restaurant

A local restaurant in my hometown, located in a strip mall, remained vacant for over a decade. It was owned by the same individual who operated a busy diner close by. According to local lore, the empty restaurant was used for bread production. This restaurant's owner had also purchased a vacant Howard Johnson’s situated near a major interstate exit. Despite this real estate investment, the primary goal was likely to prevent any new competition in that prime location.

Complicated Personal History

The owner’s personal life garnered some media attention when his home was searched by IRS agents. A large sum of cash, allegedly around $400,000, was found in a closet. Although the exact figure is disputed, this incident shed light on the owner’s complex financial dealings.

Retirement and Passion Projects

Interestingly, wealthier individuals sometimes use such venues as personal retreats. I often joke that if I won the lottery, I would transform my go-to restaurant into a personalized eatery, complete with a reserved stool, a loft for myself to live in, and an expanded breakfast menu. While whimsical, this idea reflects a broader trend of using property for personal purposes rather than traditional business operations.

The Value of Food as a Business Base

Interestingly, serving food inherently gives restaurants an advantage. Beyond just food sales, many use the restaurant to bake bread, make pastries, or sell other food-related items. This additional revenue stream can help sustain operations. Maintain a full refrigerator for potential customers and occasional volume can significantly reduce other expenses.

Conclusion

While many underutilized restaurants struggle and ultimately close, a few survive by leveraging creative business strategies. Utilizing the restaurant for side businesses, private use, or money laundering are common reasons for their continued operation. Regardless of the motivation, these establishments often serve as a reminder of the resilience and ingenuity of those who own them.