Dive Brief:
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Salad and stir-fry chain Honeygrow will close five stores by the end of the year, starting with all three in Chicago on Nov. 16. In addition to one of its slimmed-down Minigrow formats, two Chicago locations opened only a year ago. One suburban store will remain open in the greater Chicago are, but the only store in Washington and one New York outpost will also close, reported The Philadelphia Inquirer.
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Founder and CEO Justin Rosenberg told Restaurant Business that high rents and difficult employee training scuttled smooth operations in Chicago, affecting about 100 workers. "It was the last thing on the planet I ever wanted to do, to open restaurants to close them,” he said.
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The 5-year-old chain has wooed investors to the tune of $70 million, including an additional $18 million last winter to expand its Minigrow concept. The closures will drop the chain's unit count to 29 in eight states, and will relegate the Philadelphia-based brand back to the East Coast.
Dive Insight:
Rosenberg blamed HoneyGrow's Midwest problems on steep rent costs and difficulty scaling employee training across new stores. The chain's expansion plan included adding 19 stores to its 15-unit footprint by mid-2018 — a pace that may have been too fast for the investor darling, which boasts $39 million in sales and 96% year-over-year growth.
At a glance, business at both Chicago Honeygrows should have been a breeze. One sits in the theater district, near dozens of hotels and the shopping mecca on Michigan Avenue. But the company opened a Minigrow less than a half-mile away, which could have cannibalized sales. The other location opened in the bustling West Loop, where Google and McDonald’s offices have attracted a wave of fast-casual restaurants. It's possible that between nearby Sweetgreen and Just Salad locations, the chain had too much competition from rival salad chains in that area.
Losing Chicago's West Loop doesn't bode well for the chain's future in competitive urban markets. With an unprecedented amount of high-rise, hotel and office construction, that location could have garnered significant foot traffic. Honeygrow's recent round of $18 million in funding will help it crawl back from this setback, though it's unclear which region it will set its eyes on next when it comes time to resume expansion.
The company's problems reflect challenges plaguing the larger fast casual space, especially for regional players eyeing national expansion. Analysts speculate that a rapid expansion clip may have been what took down sandwich shop Taylor Gourmet, which unexpectedly shuttered all 17 of its stores after a push into Chicago. Noon Mediterranean stumbled on similar obstacles, and filed for bankruptcy in August before being absorbed by Greek restaurant chain, Daphne's.