[werewrsdf]

That is generally not how things work. Your same argument could be made if they realized the restaurant was very popular/profitable (with low empoloyee wages). Rents have to be somewhat in line with market. They can't just increase rents ignoring the rest of the market. If you are arguing that switch costs are high, so they can. That may be somewhat true, but I know of multiple restaurants in my area that have moved. It's not that high and commercial real estate is not in the best place, so landlords aren't looking forward to vacant property

[giraffe_lady]

This is like the contemporary example of rent seeking and during my years of experience in the industry was absolutely a key factor in the long term success or failure of many restaurants.

When you hear of a popular, well-reviewed, by all accounts successful place closing after 5+ years with no whiff of professional scandal or business partner discord, this is usually the reason.

[tristor]

> That is generally not how things work. Your same argument could be made if they realized the restaurant was very popular/profitable (with low empoloyee wages). Rents have to be somewhat in line with market. They can't just increase rents ignoring the rest of the market.

No, that is actually pretty much exactly how things work. Successful restaurants get higher rents on lease renewal which is why they're incentivized to sign longer lease terms. The restaurant is usually paying for all the necessary renovations to kit a property out with their equipment, decor, and branding, so the switching costs are very high, and the landlord is heavily incentivized to squeeze them. It's one of the largest, most common, and most existential issues for restaurants as a business, and a major reason why the largest and most successful chains usually operate on a franchise lease-back model where the corporate entity owns the free-standing building, preventing mis-aligned landlords from making the business unsustainable and eating into their profit-margins. Have you ever wondered why an Applebee's or similar is a free-standing building even on a mall property, even though it doesn't need a drive-through? Because Darden Restaurant Group, just like McDonald's, is as much a real-estate investment company as it is a restaurant company, and it understands that both the franchisee/operator and their primary corporate entity benefit from cutting out landlords that are incentivized to be a rent-seeking as possible.

Your comment is deeply misinformed and it's clear you've never been involved in running a restaurant as a business. Rent is often the #1 factor that can drive a restaurant out of business, because it's the thing you have the least control over. You can often structure your menu to help manage food/ingredient and staffing cost, but you cannot do the same about rent. Restaurants are somewhat unique in that for single-location entities, too /much/ success can actually kill you because of asshole landlords.

[gamblor956]

The Applebee's location is also leased by Dardens (or McDonalds) from the mall...the difference is that they are leasing the plot of land and not a building, so they get to build the restaurant to their own specifications. (For franchised locations, Dardens/McDonalds then leases the completed restaurant to a franchisee. Sources differ on the %, but McDonalds only owns about 40-60% of the land, and about 66-75% of the buildings, for its restaurant locations.)

Successful restaurants usually get higher rents because the value of the location increases with the success of a restaurant. This generally means higher costs for the property owner. This is also why most successful restaurants have long term leases, meaning 10 years or more, and major chains like McDonalds can have even longer leases; it's not unusual for an Applebee's location to have a 30 or 50-year lease.

[tristor]

To be more exact, individual owners may not be able to sign longer lease terms, especially when starting out. The franchise-based restaurants generally arrange things so that the corporate entity (let's say McDonald's) owns or long-term leases the /land/, and then builds and owns the building, which they then lease-back on shorter terms to the franchisee so they can afford to start/operate the business.

So sure, McDonald's might have a 50-year lease w/ the mall property owner, but the actual franchisee/operator likely has a 1-5 year lease w/ McDonald's for the building + land that's tied to their franchise license.

I allude to this very thing in my prior comment, by pointing out that landlord's incentive to rent-seek in turn incentivizes restaurants to look for longer lease terms.

[fallingknife]

How does the landlord know how much money the restaurant is making? All they would know is that the rent is paid on time and the restaurant "looks busy," which really isn't an accurate picture of income at all.

[tristor]

> How does the landlord know how much money the restaurant is making?

They don't. But when the local newspaper food reviewer gives you a glowing review and there's lines out the door waiting for a table when you have full covers for the night, and they happen to drive by /their/ building and see this, it doesn't take a rocket scientist to figure out you're doing well. The unfortunate reality of restaurant economics means you could have booming business and still making little or no excess profits though, depending on how adept you are at controlling other business costs, but since the landlord can't see your books they use these other indicators to decide to fuck with you instead.

There is neither a legal nor inherent natural requirement that a landlord choose a reasonable or accurate metric to decide to raise your rent. In fact, in most parts of the country (world?) raising your rent is an entirely arbitrary decision in their full discretion. You seem to be under the impression that the just world fallacy is a truth, when in fact it's not only untrue, most landlords are scum who will happily do as much financial harm as possible to you to the very edge of the limit for what it takes for you to go out of business. The landlord doesn't want you to go out of business or move, which is the only incentive tempering their greed at all.

[peterashford]

This is why Adam Smith hated rent seeking behaviour and I think its the biggest flaw in how we do capitalism: the wealthy create wealth by controlling stuff - especially natural monopolies like land, not by doing any actual work. It's parasitic.

[giraffe_lady]

That's literally the capital in capitalism. There's not some other way to do capitalism that's not like that: it's inherent to the model and what you want is some other system.

[t-writescode]

How about rent control?

[mordae]

They just keep raising it till the restaurant starts rising the prices, slow down for a bit and then start rising the rent again.