Dire times require extreme measures. If you doubt it, these developments must have slipped past without notice this week. Here are some of the game-savers chains are trying in their quest for a sales rebound.
1. Applebee’s frets about franchisees’ financial health
There was a time when being an Applebee’s franchisee was akin to owning an oil well nicknamed The Gusher. Now the chain’s franchisor is acknowledging it may have to bail out some of the operators financially, and as many as 60 of their stores may have to close.
The world’s largest casual-dining chain revealed this week that same-store sales fell during the first quarter by 7.9%, one of the steepest declines reported for the period by a public restaurant company. Most direct competitors have blamed their downturns on difficult conditions within casual dining. “While the category has certainly been challenged, I believe that much of Applebee's recent underperformance has been somewhat self-inflicted,” said John Cywinski, who’s returned to the brand as president after serving during its heyday as CMO.
One of the missteps, he told financial analysts, was forgetting who came to Applebee’s: guests who are “very much middle America, middle income.”
Instead of focusing on that midmarket customer, prior management repositioned the brand “in a somewhat aspirational manner” as a “modern” bar and grill, Cywinski said.
Applebee’s parent, DineEquity, has retained Bain & Co. to guide the brand back to a prosperous track, but the results won’t be seen for awhile, Cywinski warned. In the meantime, the company is working with Trinity Capital and Bain to provide loans and other forms of financial assistance to any of the 33 franchisees who need it.
The operators will have to stem the bleeding by closing stores, Cywinski said. Acting DineEquity CEO Richard Dahl said 19 of the chain’s 1,800 restaurants fired down their ovens during the first quarter. By year’s end, 40 to 60 will have thrown in the napkin, the executives indicated.
2. BWW to turn PizzaRevs into delivery/takeout wing shops
Buffalo Wild Wings plans to convert two PizzaRevs into scaled-down BWW-branded delivery-and-takeout shops as part of the casual chain’s simultaneous efforts to snag more off-premise business and shrink its restaurants.
BWW is an investor in PizzaRev, and operates several franchises as part of the arrangement. Two of its stores in the Minneapolis area will be closed during the current quarter and reopened a few months later as small-sized BWW units, CEO Sally Smith told financial analysts.
Months ago, management said it intended to test smaller BWWs, both to fill in existing markets and as a way of riding the takeout and delivery boom.
3. Bravo Brio eyes new concept
A new seafood restaurant quietly opened by Bravo Brio on the West Coast could be a model for new outposts of the company’s two main operations, the Bravo and Brio polished-casual chains.
The 5-month-old Brio Coastal Bar & Kitchen sports a “more casual look and feel” and a “lighter, healthier menu,” Bravo Brio CEO Brian O’Malley said this week. He also described the cocktail menu of the Torrance, Calif., prototype as being more in tune with prevailing tastes than what’s available from the bars of Bravo and Brio.
He and his team “have already identified opportunities to incorporate these new culinary and designed elements into our existing restaurant base,” O’Malley added.
He did not divulge sales figures for Coastal, but said it “continues to be well received.” For the first quarter, Bravo’s same-store sales decreased 2.9% and Brio’s slipped 1.9%. The parent company said that it intends to close four Brio units and two Bravos during 2017.
4. Dunkin’s silver bullet?
A streamlined food menu will be rolled into an additional 800 Dunkin’ Donuts units following a test in about 300 stores to date, parent company Dunkin’ Brands revealed this week. The pared-back bill of fare is intended to simplify operations and prompt a sigh of relief from franchisees for that reason alone. But it’s also aimed at improving order accuracy, speeding service, boosting throughput, checking food costs and even braking employee turnover, since there will presumably be less stress on the staff.
The cutback is a marked change in direction for Dunkin’, which has been expanding its food offerings to snare more lunch and dinner traffic.
Dunkin’ Brands executives declined this week to share results from the 300-store test, saying only that the slimmer menu has been what they called a P&L boon. They were quick to add that the results are preliminary.
5. Potbelly’s $7.8-million closure
The Potbelly sandwich chain was left with no recourse after getting an extended middle finger from its hometown of Chicago. City Hall alerted the franchisor that it was losing the lease to a showcase restaurants, the unit in Midway International Airport, and had to be out by mid-May.
It’s one unit, and not even a large one at that. But the loss is a material blow. In addition to introducing the brand to hundreds of thousands of travelers, the store generates $7.8 million in annual sales and $2 million in pretax income.
The anticipated impact prompted Potbelly to restate its financial guidance for the remainder of the year.
The fast-casual franchisor posted a net income of $1.3 million for the first quarter.