At a time when growth is sluggish at fastfood chains and expensive restaurants are diving into Chapter 11, the Silver Diner is in the forefront of what looks like a restaurant trend in the making. New diners have been popping up in Atlanta, New York, Chicago, California and towns and cities in between. Even McDonald's is experimenting with the concept, having opened a Golden Arch Cafe in a stainless steel diner in Hartsville, Tenn., about 40 miles from Nashville.
The resurgence of Diners owes much to the confluence of two trends. Demographically, as America's baby boomers have their own children, they are looking for alternatives too eating fast food. They are willing to pay a little more-but not a lot more-for homestyle cooking. Casual restaurants like diners and cafes fit the bill nicely.
Economically, the outlook is uncertain, and consumers are reigning in on discretionary spending. This, too, plays to the diner's advantage. Working couples still eat out, but they're more likely these days to choose a moderately priced diner over a fancy restaurant. In this regard, diners represent competition for moderately priced chains like Sizzler and Ryan's Family Steak Houses as well as Denny's and Bob's Big Boy.
There are esthetics to consider, too. Robert Giaimo, 39, is co-owner of the Silver Diner in Laurel and another much like it in nearby Rockville. Says Giaimo: "The rebirth of the diner is being fueled by a growing nostalgia for what is familiar and comfortable and by a dissatisfaction with the anonymous eating experiences of fast-food restaurants."
Economically, the outlook is uncertain, and consumers are reigning in on discretionary spending. This, too, plays to the diner's advantage. Working couples still eat out, but they're more likely these days to choose a moderately priced diner over a fancy restaurant. In this regard, diners represent competition for moderately priced chains like Sizzler and Ryan's Family Steak Houses as well as Denny's and Bob's Big Boy.
There are esthetics to consider, too. Robert Giaimo, 39, is co-owner of the Silver Diner in Laurel and another much like it in nearby Rockville. Says Giaimo: "The rebirth of the diner is being fueled by a growing nostalgia for what is familiar and comfortable and by a dissatisfaction with the anonymous eating experiences of fast-food restaurants."
Three years ago, eager to start a new restaurant venture, Giaimo visited scores of diners around the country to get the feel for what worked best. He eventually came across the Dining Car, a thriving 1930s art deco diner in northeast Philadelphia replete with a glistening stainless steel railcar look and comfortable booths. Owned by the Morozin family, the Dining Car was serving a phenomenal 17,000 meals a week at an average ticket of $5 or so. Annual gross: nearly $4.5 million. That would be enough too catch the attention of many fastfood outlet owners, and it certainly caught Giaimo's. He spent weeks at the Dining Car, studying operations and talking with customers.
- Giaimo was not untutored in the-restaurant business. In the early 1970s he had started a restaurant in Washington, D.C. that grew to a small chain called American Cafe. In 1986 he sold his 70% stake to W.R. Grace, a financial backer.
Just as old neckties often come back into style, so is there new life in the old restaurant fads. Take the newly popular diner.
In February 1989, after gleaning all he could from the Dining Car, Giaimo went into the diner business, opening a diner in Rockville with partner Ype Hengst. Learning from the Dining Car layout, Giaimo made sure too leave the kitchen in his diners open: patrons had told him they liked to see their food being prepared in a clean kitchen.
To open the diner, it cost the partners around $2 million (excluding land cost). But in the first year Giaimo and his partner served 12,000 customers a week and grossed nearly $4 million. Next year Giaimo hopes to open two more diners, one near Washington and one near Baltimore, and then start franchising under the Silver Diner name.
He will have competition if he moves toward Atlanta. In that city's downtown area, Mick's diner already draws big crowds. Many shoppers leave their names and return over an hour later, and still have to wait 15 minutes to be seated. The fare includes such dishes as freshly prepared salads and grilled fish and meat. Mick's is owned by Atlanta's Pesant chain, which has four other Mick's and plans to open several more.
On the campy, nostalgia end of the business is a five-diner chain called Ed Debevic's. Founded in 1984 by restaurant investors Richard Melman and Lee Cohn, Ed Debevic's has two diners in Chicago and two in Los Angeles, one in Phoenix and a franchise in Osaka, Japan, where American kitsch is very much in fashion.
Debevic's goes to great lengths too recreate the 1950s diner atmosphere. Figuring that the diner's image includes gum chewing waitresses and sharp-tongued waiters, Debevic's hires unemployed actors and actresses to dispense wit along with the food. The atmosphere also includes loud jukeboxes with 1950s tunes, and a menu featuring thick malted milk shakes, old-fashioned meatloaf and hamburgers. The mix works. Next month Melman and two New York real estate investors are planning to open a $3.5 million Debevic's in New York City's Soho District.
Clearly, diners will not supplant the nation's tens of thousands of fast food outlets. But they do represent one of the fresher entries into the market for reasonably priced family dining. And they again confirm what all smart merchandising people know in their bones, namely, that yesterday's fad can easily become tomorrow's.
Reprinted Article from Forbes Magazine: November 12, 1990.