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For casual dining, delivery isn’t necessary for success

Differing approaches by BJ’s and Texas Roadhouse show there’s no single approach, says RB’s The Bottom Line.
BJ's Restaurants

The Bottom Line

Should casual-dining chains go all-in on delivery? Probably. But the answer isn’t so simple, as some recent sales results demonstrate.

On Monday, for instance, Texas Roadhouse reported 5.7% same-store sales growth in the second quarter at company restaurants, numbers that were a bit lower than expectations and led the stock to plunge on Tuesday.

Still, the company has been among the most consistent performers over the past years, despite an insistence by CEO Kent Taylor that it not delve into delivery.

“We encourage all of our competitors to do as much delivery as they can so they can deliver lukewarm food to their people,” he famously said last year.

Lest you think he’s changed his mind, it sure doesn’t seem that way based on the company’s earnings call this week.

“When I look back four years, we are up 22% versus some of our competitors,” he said. “I think we kind of do it the old-fashioned way.”

Texas Roadhouse is perhaps the biggest and most notable contrarian when it comes to delivery. And its success in generating sales almost certainly allows for that stand. The story would be different if same-store sales were down 5.7%.

Still, the result suggests that consumers will go into restaurants that give them what they want, such as quality food, good service and the ability to throw peanut shells on the floor of the waiting area.

But other casual-dining chains have succeeded in part by making their offerings more available to the general public through as many touchpoints as possible.

Which brings us to BJ’s Restaurant & Brewhouse.

BJ’s same-store sales rose 5.6% in the company’s second quarter.

The Huntington Beach, Calif.-based chain has been among the most aggressive companies in the country when it comes to delivery. The chain notably started alcohol delivery last year in a bid to offset some of the decline in beverage sales that naturally comes along with having food brought to a person’s home.

The company’s off-premise sales, which include delivery, now account for 7.6% of the company’s business, and CEO Greg Trojan said on the company’s earnings call last week that there is an opportunity to increase that business by 50% in the coming years.

And Trojan insists that the growing delivery business isn’t taking away from its in-store business. “We’re experiencing very healthy traffic and sales increases on both sides of the business,” he said, saying there is no correlation between on-premise occasions and off-premise.

“These are fundamentally different occasions,” he said.

Consumers are rapidly moving toward takeout, which means that companies of all types outside of upscale chains should be taking a long, hard look at delivery. Giving consumers more options to get your food is, in general, a good thing.

Yet some prognostications about delivery remain a little too aggressive for my taste.

Delivery remains a tiny percentage of overall sales. It is hardly a necessity at this point for any restaurant chain to offer the service, especially when everything the chain is doing at the moment appears to be working.

Texas Roadhouse is proof of that.

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