Why are so many Nashville restaurants closing?

The New Year beckoned a rash of high-profile restaurant closings in Nashville, leaving diners and operators asking the same question: Has the bubble burst?

There’s no doubt Music City’s dining scene has mushroomed to unprecedented levels over the last several years. Out-of-town chefs have brought big names and big money, new hotels are anchored by trendy eateries and entire dining communities have sprung up where hardly anything existed before.

But industry experts say all that growth isn’t sustainable, even in booming Nashville.

“Restaurants in total are not growing because we’ve got more supply than we’ve got demand,” said Bonnie Riggs, a restaurant industry analyst with The NPD Group. “We’ve had a lot of the larger chains curtail their unit expansion, we have independent operators closing left and right because they can’t compete with the marketing clout of the chains and we’ve seen more bankruptcies.”

Nashville’s total restaurant count grew steadily from fall 2011 to fall 2016 when it hit a peak of 5,671 restaurants, according to data from The NPD Group.

That number fell close to 2 percent from fall 2016 to fall 2017, with independent restaurants — classified as those with one or two locations — taking the biggest hit and declining by 5 percent. At the same time, the number of chains with three or more locations grew close to 2 percent.

Riggs said the Nashville data is indicative of a larger national trend as restaurateurs struggle with increased competition, labor shortages, growing labor costs and declining profit margins. In some cities, including Nashville, rising property values and rental rates are squeezing independent operators out of the market.

And those independent operators, Riggs said, simply don’t have the marketing dollars to compete with national chains.

On the ground, we’re seeing the trend play out in Nashville’s dining scene. Just in the last six months, the city has lost both longtime favorites and trendy newcomers. The list of high-profile closures includes Nashville institution The Gerst Haus, significant wholesale supplier Provence Breads & Café, out-of-town favorite Cochon Butcher, Germantown newcomer Lulu and popular East Nashville spot Holland House Bar & Refuge.

Rick Bolsom, owner of Tin Angel and an early pioneer in Nashville’s dining scene alongside people like Deb Paquette and Randy Rayburn, believes the growing number of restaurant closures is a sign the industry has reached a saturation point.

“(The growth) has gone on long enough now that we’re starting to see the cumulative effect of the changes and we may see an acceleration this year of restaurants either closing or remaking themselves or turning over in some way, shape or form,” Bolsom said.

To be sure, Nashville is still abuzz with new restaurant activity. The city has become a noted culinary destination with the accolades to back it up, including spots on countless “best of” lists and Tandy Wilson’s James Beard win in 2016.

The city has seen successful expansions lately, with powerhouses such as Max and Ben Goldberg growing their Strategic Hospitality dining empire and restaurateur Austin Ray adding new concepts to his A. Ray Hospitality group.

And downtown is still a red-hot restaurant market, with 51 newcomers opened or scheduled to open just this year, according to the Nashville Convention & Visitors Corp. That’s nearly six times as many restaurants opened downtown in 2015.

But Bob Bernstein, Nashville’s king of coffee who helped shaped the coffeehouse and casual dining scene, worries Nashville is losing its flavor as some local restaurants become mini-chains with multiple locations throughout the city and smaller operators get priced out of the market.

“I had barely any money behind me when I opened my first store, but at the time, there were spaces available and landlords were willing to take a chance on somebody. Now landlords have their choice,” Bernstein said.

Over the years, Bernstein had the foresight to purchase some of his real estate. He’s not sure his businesses would survive in today’s market if he weren’t his own landlord.

“Anybody who has a lease that expires in the next five years, I would consider them somebody who is in danger of not being here for the long haul,” Bernstein said.

Margot McCormack, a pillar of the East Nashville dining community, fears the biggest loss will be Nashville’s longtime favorites.

“There are many reasons for all the closures, but it in the end it comes down to money," McCormack said. "The underlying issue here is that with all the growth, all the newness outshines or overshadows the old standbys, the places we have come to love and hold dear. So if we don’t frequent these old friends, they too, will go by the way side. Some people call it competition, some call it growth and change, but I just call it sad.”

By the numbers: Nashville's restaurant industry

5,582: Number of restaurants in Music City as of fall 2017

3,067: Number of chain restaurants with three or more locations

2,515: Number of independent restaurants with one or two locations

51: Number of new restaurants already opened or planning to open downtown this year

Source: The NPD Group and Nashville Convention & Visitors Corp.

Reach Lizzy Alfs at lalfs@tennessean.com or 615-726-5948 and on Twitter @lizzyalfs.