His prices are good, though not the cheapest in the region, and he has attracted the tourist, the fisherman, and the locals who want a good meal. But now his neighbor, observing his success and his growing business, decides that what is good for his neighbor should also be good for him. So he opens up a restaurant down the street from his neighbor. The two restaurants are not identical, the hours are slightly different, the menu is different, and the service is not the same. But the fact that there are now two restaurants in this small town means that each restaurant is going to get some of the business, which means the first restaurant is going to lose some business.
Capitalism is working, both men are free to work and to risk and to work at what they like.
None of these options are very good options for the first restaurant. The second restaurant has even worse options. On the surface, it appears that the customers come out the winner, more restaurants in town, more menu options, lower prices. But service suffers, profitability suffers, and soon people stop going to either restaurant because they have become poor places to eat. Both were free to work, to risk and to venture.