First To Line Up at The Buffet - Will Casino Have Walmart-type Effect on Elk Grove's Chain Restaurants?

September 9, 2017 |  During the scant public hearings held last year on the proposed Wilton Rancheria's casino resort, then Elk...

September 9, 2017 | 

During the scant public hearings held last year on the proposed Wilton Rancheria's casino resort, then Elk Grove City Council Member and current Mayor Steve Ly unwittingly uttered a now famous, and perhaps prophetic line.

When discussing the tribe's proposal and his obvious excitement for the casino, and its obligatory all-you-can-eat smorgasbord, Ly giddily said when the $400 million facility opens, "I'll be first to line up for the buffet!" 

Whether Ly knew it or not, his schoolboy-type excitement at the prospect of gorging on endless plates of mac and cheese, slices of warmed-over cardboard pizza followed by a river's flow of soft serve ice cream pointed to one of the possible ill-effects of the casino. The reference was not to the food per se, rather the effects it could have on other restaurants in Elk Grove.

Anyone who has been into a large gaming facility knows operators provide a slew of eating establishments. Aside from the multi-ethnic food themed buffet, casinos will typically have a coffee shop-type 24-hour restaurant, perhaps a high-end place like a steakhouse, snack bars, and possibly an Asian themed eatery. 

If the still unnamed Wilton Rancheria seeks market share, we only need to look at nearby Thunder Valley casino to get an idea of what to expect. That establishment has the obligatory buffet, High Steaks Steakhouse, the 24-hour Thunder Cafe, the Red Lantern Asian-themed restaurant, and a five outlet food court. 

Undoubtedly the Wilton Rancheria casino will be a major draw for the entire Sacramento region given it easy access and semi-urban location. Aside from the well-documented societal effects of gambling, what are some of the other implications the gaming hall have in Elk Grove, and more specifically its businesses

The best example might be to look at the effects Walmart has on small independently-owned businesses, particularly in smaller markets. As is well known, when Walmart enters a new market, because of their economies of scale, it quickly kills smaller businesses.

When the Wilton Rancheria opens, what group of businesses will be most vulnerable to this Walmart effect? In our view, those businesses most likely to feel the weight will be the national chain restaurants that populate Elk Grove.

First, as a group, mid-range casual restaurant chains like Applebee's, Chili's, IHOP, and Sizzler are facing immense pressure. Much of this pressure is coming from other national chains such as Panera Bread in the so-called fast casual restaurant segment.          

In the last week, Applebee's and IHOP announced that they would respectively close 135 and 160 stores. While it is not known if Elk Grove units would be among the casualties, these chains are nonetheless under pressure.

Another victim, of sorts, from the pressure of the fast casual, is Chili's.  To reduce cost and improve operations, the Dallas-based chain announced this week that it would eliminate 40-percent of its menu.

Elk Grove has, among other national casual chain restaurants, Applebee's, BJ's Brewhouse, Chili's, IHOP, Logan's (which went Chapter 11), Outback Steakhouse, Red Robin, and Romano's Macaroni Grill. 

Once the Wilton Rancheria opens their gambling parlor, you can bet they will have an offering of restaurants similar to Thunder Valley. Expect to see Mayor Ly's buffet, a steakhouse, an Asian-themed bistro, a 24-hour coffee shop, a food court (which would be detrimental to the Outlet Collection at Elk Grove's proposed food court), and if they are good operators, a sports-themed bar and restaurant. 

Given the financial heft and expertise of Boyd Gaming, the casino will undoubtedly have a precise marketing and advertising program to lure diners with loyalty cards and discounted dining options. Of course, the Wilton Rancheria is not in the dining business - but they will use the lure of dining to pick the wallets of these same diners at any of its 2,500 slot machines and scores of gaming tables.

There is one other aspect that Wilton Rancheria could have on national casual dining chains, and more importantly locally-based high-end restaurateurs, considering opening shop in Elk Grove in the next few years. Even though the casino is not likely to open for at least four years, it will create a wet blanket of uncertainty thwarting investments, especially for relatively small capitalized locally-based operators much less the besieged national chains.  

Of course, the City of Elk Grove could offer incentives in hopes of attracting some of Sacramento's burgeoning gourmet farm-to fork restaurants, but that is an entirely different subject.  

Much like the effect Walmart historically had on mom and pop businesses when entering small, non-urban markets, once Boyd Gaming and the Wilton Rancheria fire up their marketing machine, any one of Elk Grove's casual chain restaurants could be the first business fatalities. 


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