Disney Punts, Shutting Most ESPN Zone Restaurants

Perhaps there was a time when it made sense for the Walt Disney Company (DIS) to own a seven-city chain of ESPN-themed restaurants, but that day has long past. Mickey Mouse's corporate home has finally come to its senses and decided to (mostly) get out of a business that it had no business being in.

According to a company statement, ESPN Zones in Baltimore, Chicago, New York, Las Vegas and Washington, D.C. will be shuttered. The Los Angeles and Anaheim locations -- which are tied to Disney properties -- will remain open. According to the Washington Business Journal, the five locations will shut down on June 16. An ESPN spokesman was not immediately available for comment.

The decision is hardly a surprise. Casual dining chains have gotten squeezed hard by the economic slowdown as people preferred their own cooking or cheap fast food to an expensive night out. Among the casualties were Benigan's and Steak & Ale, whose corporate parent went bust in 2008. The industry remains on the ropes. Thirty-nine percent of restaurant operators reported a same-store sales gain between April 2009 and April 2010, down from 43 percent of operators who reported higher sales in March, according to The National Restaurant Association. Traffic levels also fell.

Families Cut Back on Dining Out

"This year was horrible," retail-tracker NPD Group's Harry Balzer told the Los Angeles Times, which broke the news. "A restaurant meal is a very discretionary behavior. You could always eat at home and save money doing it. And going out for dinner is the most expensive food you could buy." The ESPN Zones were Disney's attempt to create family-friendly sports bars, if such a thing is possible. They were opened in 1998 at a time when the restaurant industry -- as well as many other businesses -- was thriving. They were positioned on prime real estate, such as New York's Times Square.

"A decision like this is never easy," said Rick Alessandri, Senior Vice President of ESPN, in a statement. "The ESPN Zones have served as a terrific experience for fans across the country, but remain a long-term business challenge."

Closing the ESPN Zones will likely not harm Disney's bottom line (which I find reassuring as a very tiny shareholder). The ESPN television networks remain cash cows for the media giant. Operating income at the company's Cable Networks business, which includes the sports network, increased $39 million to $1.2 billion in the second fiscal quarter, driven by increased ESPN affiliate fees and advertising revenue.

In the end Disney has decided to stick to what it does best -- entertainment -- and leave the restaurant business to others.

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