Casual dining’s trailblazers must branch out to compete with a slew of new competitors.
Chains featuring american favorites—steaks, chicken, burgers—launched the casual dining phenomenon. T. G. I. Friday’s celebrates its 40th anniversary this year. But those chains are facing stiff competition from newer casual dining formats, steakhouses, Italian, and other ethnic eateries such as P. F. Chang’s.
The head of Applebee’s International, the largest casual dining chain, expressed disappointment with sales the last few months. Ruby Tuesday is fighting to wean itself from the couponing that it—and others in the segment—used to drive sales over the past year or two. O’Charley’s deemed a recent quarter “challenging.” Many of the pioneering American casual dining chains showed comparable-store sales increases in recent quarters of less than 3%, sometimes significantly less.
“There’s more competition from the ethnic chains and steakhouses. Those meals are all coming from somebody,” notes Ron Paul, president of Technomic, the Chicago restaurant consulting firm.
They’ve also taken a hit in their lunch business from the upscale fast-casual chains. “They’re not in trouble yet, but it is not the heyday of the ’90s,” Paul adds. “These chains have to broaden their menus, they have to add ethnic items, more seafood, more entrée salads, to eliminate any veto vote. They have to reinvent themselves slightly.”
Promoting takeout is one step chains have taken. Technomic reports that takeout sales in full-service restaurants were estimated at $14 billion in 2004, close to 10% of total sales, and that takeout from full-service chains has grown about 8% a year for the past three years.
“Takeout has helped a great deal, otherwise many of these chains would be down in same-store sales. And their comp-store increases are also coming in part from price increases. The traffic is not that robust,” notes Paul.
Technomic found about 75% of consumers use takeout or delivery from full-service restaurants at least once a month.
Chains are also revising their menus and decor. T.G.I. Friday’s has earmarked $200 million for a “major brand revitalization.” The red-and-white stripes, dark wood, and pop culture décor are being phased out in favor of lighter colors, more natural light, new signs, and a brick front. About 20 menu items have been cut. Bennigan’s Grill & Tavern introduced 20 new menu items, ten under $10, and a new children’s menu in a bid to broaden its family appeal.
Houlihan’s Restaurants is testing a new prototype in two suburban Chicago locations. It, too, is trading in the pub look of dark wood, road signs, and fraternity memorabilia for a sleek contemporary bar, large patio area, and display kitchen. Houlihan’s introduced 20 new menu items as well, including miniature desserts for $2.
These chains also continue to expand. In the next year, Applebee’s plans 135 new restaurants; Chili’s, 122 to 130 new units; Cheesecake Factory, 18, including two Grand Lux Cafes; and O’Charley’s, 13 to 15, plus another 10 to 12 in its Ninety Nine chain.
Nine full-service American chains and what they’re up to.
Applebee’s The Kansas-based chain is up to 1,730 units, just under a quarter of them company-owned, and expects to open 135 new restaurants in 2005. Despite recent “disappointing” sales, the company continues to project comp-store increases of at least 3% for fiscal 2005. The national advertising budget is up 30% this year.
Chili’s Grill & Bar The largest, by far, of the Brinker chains, Chili’s had 1,074 restaurants open at the end of its fiscal year in June and plans 122-130 new units this fiscal year. Same-store sales were up 2.9% for the year.
T. G. I. Friday’s Friday’s has earmarked $200 million for a “major brand revitalization”—remodels, menu development, and a “younger look” for its 256 company-owned units. There are 526 Friday’s restaurants in the U.S. and another 237 international units. Two other concepts, Friday’s Front Row Sports Grill and Friday’s American Bar, play off the original brand.
Ruby Tuesday The chain has about 805 units—579 company-owned, 188 U.S. franchised, and 38 international locations. It is projecting comp-store sales increases of 3-5% for the coming year, after seeing comps drop 7% last year against numbers driven by intense couponing.
Cheesecake Factory The chain is up to 95 restaurants, plus five Grand Lux Cafes. It plans to open 18 new units this year, including two more Grand Luxes. It’s also experimenting with a Cheesecake Factory Express limited-menu, self-service format inside DisneyQuest in Orlando.
O’Charley’s The company operates about 230 O’Charley’s, primarily in the Southeast and Midwest, and expects to open another 13-15 in 2005. The parent company also operates 102 Ninety Nine Restaurant & Pub locations in the Northeast and projects another 10-12 of those this year. It is beginning to franchise the O’Charley’s brand.
Bennigan’s Grill & Tavern Part of the Metromedia Restaurant Group, with over 800 restaurants, Bennigan’s plans to open 13 this year. The chain recently introduced a new menu with 10 of the 20 new items priced under $10 and a revised children’s menu to attract families.
Houlihan’s Houlihan’s operates 77 U.S. restaurants in 21 states, plus two in Mexico. The chain will open a new prototype, getting away from its pub atmosphere, in two Chicago-area locations by the end of the year. The design will include a display kitchen and patio dining. Twenty new units are planned by the end of 2006.
J. Alexander’s The chain operates 27 restaurants in the Midwest and Southeast, and will open a new unit in its hometown Nashville by the end of the year. Expansion plans call for two new units a year, starting in 2006. For the first half of this year, comp-store sales were up 3.8%.
Takeout Tuesday: Ruby Tuesday is scoring big at the curbside
Ruby tuesday took first place in Technomic’s recent survey of consumers’ favorite full-service restaurant for takeout, putting it in the forefront of this sales-generating trend. Ruby Tuesday has had its To Go Curbside program in place for about two years in all 767 of its U.S. restaurants except those in shopping malls, says spokesperson Perrin Anderson. To Go Curbside accounts for 6-7% of total restaurant sales, he notes, and is “growing consistently,” with margins comparable to those for dine-in meals, though without the alcohol sales.
Ruby Tuesday has not found that the takeout business cannibalizes dine-in sales. “Our experience tells us, as does consumer research done by others, that these are incremental visits,” Anderson says. The majority of the chain’s To Go customers are women, and over 66% of the takeout orders come during the week rather than on weekends.
Ruby Tuesday has “a dedicated service person and designated parking spaces, either near the front or side entrance,” for takeout customers. Those customers place their order by phone, indicate when they will pick up the order, and specify the make and color of their car. The staff member brings the order to the car when the customer arrives.
At Ruby Tuesday, all menu items are available for takeout, including the chain’s signature salad bar. Customers can order a salad bar portion to be prepared by the staff, or can pick up a To Go container and make their own salad bar selections when they come to pick up the order.
Anderson notes the most popular To Go items are the same as the most popular items in the dining room with the exception of fewer salad bar orders from To Go customers.
Ruby Tuesday promotes its To Go program with in-store banners and posters, in check presenters, and with other point- of-sale materials. The chain, based in Maryville, TN, also introduced a new menu in mid-May, featuring 30 varieties of burgers and 20 new appetizers, plus enhancements to the salad bar.
Ruby Tuesday had used discount coupons heavily to drive business, and is now trying to move away from that tactic in favor of a national cable television campaign, hoping to build more repeat business, notes Sandy Beall, CEO. The chain’s recent comp-store sales results have suffered against the coupon-driven traffic of previous reporting periods.
But in the fourth-quarter report, Beall expressed optimism about the near future, predicting comp-store increases of 3-5% for the second half of 2005 after negative comps earlier this year.