Are We Sure Earls Fully Owning Cactus Club Is A Good Thing?
One family now owns a lions share of our dining options. This cannot be good for competitive balance and innovation.
Jamie Mah @grahammah
Last week, I received a text from a friend letting me know that Earls had just taken over full ownership of Cactus Club. At the time, I didn’t think much of it, except that they, meaning, Earls, Cactus Club and Joey’s are basically all owned by the same group anyways, the Fullers. Earls buying more than the current 65% share they already owned (they were the initial investors in the first Cactus Club in North Vancouver back in 1988) seemed trivial at this point. But as this news started to dominate my social feeds, the idea of what had just transpired began to weigh on me: The Fuller family now owns these three massive restaurant chains in their entirety.
This cannot be a good thing.
Mergers and acquisitions are part of the game in capitalism. We see it all the time. The AT&T Time Warner deal from a couple of years ago is a shining example of one going south the minute it happened. Microsoft just bought Activision. The devil — I mean Jeff Bezos, bought Whole Foods back in 2017.
This is how capitalism flows.
For the most part it’s alright. These acquisitions are often necessary for competitive balance. However, every once in awhile, the government has to step in when one party holds too much power. The most clear example of this happened over a hundred years ago when Standard Oil was broken up into smaller companies. John D. Rockefeller possessed an absurd amount of wealth at the turn of the century, something the US government saw as a negative for growth and innovation.
Competition is a good thing. It can bring the best in all of us. Without it, capitalism doesn’t work. We’re seeing this first hand right now with Spotify and their Joe Rogan scandal. Ultimately, Spotify needs to reckon with the logic that they are a media company first and no longer just a tech startup. The public has options, namely Apple Music, to move over too if things continue to progress even further (i.e. Spotify continues to lose the support of artists and paying customers because they continue to employ Rogan).
They’re going to have to make a stand on how this plays out. But none of this would have happened if they were the only game in town. Since they have rivals, they have to understand that their customers can switch services and join their competition if they so choose. So it’s in their best interest to solve this issue in a timely manner.
In understanding capitalism this way, let’s turn our attention back to my original query: Where does this leave us regarding Earls and Cactus Club? The Fuller family now owns all three of these massive restaurant chains in their entirety.
How is this good for the restaurant community at large?
I mean, look at how all three operate. They are essentially replicas of one another. Is there any innovation amongst any of them? Not really. Unless you count some of the solid hires they’ve made over the past years. Jason Yamasaki for Joey’s and Kevin Brownlee for Cactus Club being two notable examples of high quality talent landing within the fold.
We want options. We want variety. Creativity. Originality. Bright minds coming together to create a vision for their lives. Do we really want one family dominating our restaurant landscape with cookie cutter operations that share no soul or offer anything of substance? Are we that lazy when it comes to our dining choices that we just give in to their simplicity and familiarity?
Would we care if they purchased The Donnelley Group or Top Table?
How much of the market are we okay with them owning?
From The Balance:
A monopoly is a company that has “monopoly power” in the market for a particular good or service. This means that it has so much power in the market that it’s effectively impossible for any competing businesses to enter the market.
The existence of a monopoly relies on the nature of its business. It is often one that displays one or several of the following qualities:
Needs to operate under large economies of scale
Requires huge capital
Offers a product with no substitute
Prompts government mandate ensuring its sole existence
May possess — but does not always possess — technological superiority and control resources
When I interviewed food journalist and former food critic, Corey Mintz, for my podcast a few months back we discussed a section of his book where he talks about the negative impact these chains have within our communities: How many of them operate at a loss, the unfair buying advantages they have over smaller operators, or the political clout they have with government and their need for constant growth at whatever cost. How their size alone can dominate the restaurant landscape in a given community, leaving little left for every other restaurateur in the area.
In reference to this last sentence, here in Vancouver, on Burrard Street alone you have an Earls, two Joey, and a Cactus Club, with another massive Cactus Club just one block off near the water. Between them all that’s probably close to 1200 seats.
That’s one ownership group in control of that much dining real estate. Again, this cannot be a good thing.
How Monopolies Work
From The Balance:
Some companies become monopolies through vertical integration; they control the entire supply chain, from production to retail. Others use horizontal integration; they buy up competitors until they are the only ones left.
Once competitors are neutralized and a monopoly has been established, the monopoly can raise prices as much as it wants. If a new competitor tries to enter the market, the monopoly can reduce prices as much as it needs to squeeze out the competitors. Any losses can be recouped with higher prices once competitors have been squeezed out.
Earls/The Fuller Family = horizontal integration.
We flock to these brands because they’re there and they’re always open and they can afford the exorbitant rent. Yet, when was the last time a group of tourists set out specifically to visit one of these establishments? I’ve worked in a Hotel for over 10 years.
It never happens.
“Try as we might, chains are often unavoidable. We end up there after Little League games, or at conferences, because they have private rooms we can book for fifty guest or we’ve got a diverse crowd of picky eaters and the expansive menu promises options for people on paleo, keto, vegan, or other restrictive diets. The goal of their broad menus is to offer more on the plate, and more variety than anyone else, in order to cast the widest possible net to ensure that when you’re looking for a space to host your postgame/retirement/book-club lunch, you have no reason to say no. Or we end up there because we live somewhere that is mostly serviced by big chains.” — Corey Mintz, The Next Supper: The End of Restaurants As We Knew Them, And What Comes After
This quote is depressing and we now have one family in charge of so much of our social interactions.
What tourists want — what we all want — is The Diamond. St. Lawrence. Savio Volpe. Bao Bei. The Keefer Bar. Unique gems from creative minds, delivering the kinds of restaurants and bars which make Vancouver revered, not stale and boring. We need more of them and less of these.
Ultimately, I understand their place within our economy, they’re not going anywhere as they do provide a service many enjoy and they do employ a lot of people. But when power begets power, and concentration spills over into fewer and fewer hands, the outcomes are more often than not, unfavourable for all involved. I just can’t see the Fullers owning all three of these companies as a good thing for our dining culture. But hey, these are just my two cents. They won’t make or change the status quo. But they are worth recognizing.