OPINIONFinancing

Bar and grill chains are still struggling

Despite improvement at Applebee’s and BJ’s, demand at varied menu chains remains weak, says RB’s The Bottom Line.
Photograph: Shutterstock

The Bottom Line

I’ll admit that, for some time, I was skeptical about the improvement at Applebee’s. Strong same-store sales this year have come atop weak sales the year before, and they are still down on a two-year basis. And it closed some locations.

I’m no longer such a skeptic. The chain has figured out a way to get customers enthused about its restaurants again. Its regular $1 drink promotions have reminded diners of the “bar” side of the bar and grill.

But that doesn’t mean I’m on the bar and grill bandwagon. It’s still the most difficult sector in the restaurant business and will continue to be until the supply and demand reach more of an equilibrium.

For this, we go to data from Technomic, a Restaurant Business sister company.

According to the Technomic Chain Restaurant Index, sales at varied-menu chains and sports bars were down 7.3%.

Traffic was worse, down 10.5%.

By comparison, overall sales were up 0.8% for the entire restaurant business and down 3.7% for casual dining and fine dining.

To date, according to Technomic Transaction Insights, Applebee’s sales are down 0.2%, as 82 closures have offset a 5.5% increase in same-store sales. But sales at BJ’s Restaurant & Brewhouse are up 3.8% so far this year.

But several other chains are down. That includes Chili’s, Applebee’s primary rival that itself has seen same-store sales improve but remains down overall on the year.

Buffalo Wild Wings, however, is down this year, according to Technomic. Chains such as Red Robin, TGI Fridays, O’Charley’s, Cheddar's Scratch Kitchen and Ruby Tuesday are all down year to date.

To be sure, this isn’t terribly surprising. Consumers have been shifting spending away from varied-menu chains and toward more specialty concepts and independents. Or they’re eating at fast-casual chains or simply staying home and ordering takeout or making their own food because grocery costs are so low.

That’s been true for a decade, and it certainly hasn’t changed in 2018. It’s unlikely to change in 2019.

The overall dwindling market for these chains makes the performances of Applebee’s and BJ’s all the more remarkable. It’s one thing to have, say, a successful fast-casual chicken chain in 2018. But to generate growing sales at a varied-menu casual diner at a time when consumers are clearly dining out less at such concepts is an accomplishment.

As we noted, Applebee’s has been able to generate enthusiasm for its bar business, which has helped its franchisees generate sales there. And it has been aggressive in courting takeout orders. Like it or not, takeout is the future of the restaurant business.

Similarly, BJ’s has been aggressive in courting takeout and delivery and has been at the forefront of experiments on alcohol delivery, which some hope could help such chains offset profitability weakness with delivery orders.

Perhaps these chains could provide a roadmap for their competitors to generating customer count growth in the coming years.

But it’s still a long climb out of a decadelong abyss for bar and grill chains.

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