Consumers coming out of the pandemic couldn’t get enough experiences. They flocked to chains like Dave & Buster’s and Topgolf enough to spawn a bunch of competitors. They couldn’t get enough of fine-dining chains as they spent at chains like Ruth’s Chris and STK.
That’s not the case any longer.
Same-store sales at either upscale or experiential concepts averaged a decline of 6.5% last quarter, which would be, by far, the lowest of any sector that we track. That includes a 5.8% decline for Darden Restaurants’ upscale brands, 7.7% declines at Dave & Buster’s and Main Event and an 11% decline at Topgolf. STK’s same-store sales declined 11.1%.
That might not tell the full story. To wit:
Dave & Buster’s same-store sales have now declined seven straight quarters. Chris Morris, the engineer of the chain’s comeback plan, has resigned.
Topgolf, the brand that helped jumpstart the “eatertainment” trend, is being spun off its parent company, Topgolf Callaway Brands, less than two years after said company bought the chain and added its name to its moniker. We’re guessing the valuation on the brand isn’t strong enough for an outright sale.
Pinstripes was just poked by the New York Stock Exchange over the trading of some of its public warrants in connection with its 2023 merger with the SPAC Banyan Acquisition Corp. And it also cut on staff amid profit challenges.
Things don’t look much better for upscale restaurants. STK’s same-store sales have fallen six straight quarters, the past two in double digits. Parent company The One Group’s other two concepts, the polished casual chain Kona Grill (down 17%) and new acquisition Benihana (down 4.2%), are also showing negative numbers.
Darden’s upscale concepts have declined for seven straight quarters and the company just doubled down on the sector with its Ruth’s Chris acquisition.
(Check out RB’s same-store sales page.)
The chains that we are including in this are all quite different. Ruth’s Chris is a very different chain from Dave & Buster’s, with different menus and price points and business models and consumer bases. But they are all based on the concept of a good time. Customers go to Dave & Buster’s to play a few video games and watch some sports. They go to Ruth’s for a great steak.
And those types of experiences were rather popular in 2021 and 2022, when the chains recovered from the pandemic and then some. Triple-digit same-store sales numbers were not uncommon as the brands recovered sales lost during the pandemic and gained a bit more on top of it. STK once reported a 726% same-store sales figure that we’re still struggling to reconcile.
It made sense. Consumers were cooped up at home, not doing anything during the pandemic. When they felt safe enough to do so, they splurged. They certainly had the finances to do it: Businesses had to pay up for workers, so a lot of us got raises. Those that didn’t had government funds.
Workers also flocked to corporate events like conferences, pushing attendance to them to record highs in many cases. Such events frequently work in upscale restaurants’ favor.
Independent restaurants that often capture some of this business also took a bit longer than chains to ramp back up again.
Such eras have clearly come to an end. Consumers got their pent-up demand out of their system, removing that tailwind. But there may be a few other factors.
Inflation may be taking a toll on such chains. Consumers have been cutting back on dining, and while we’ve spent much of the past year focused on the impact such cutbacks have had on fast-food chains, some of that is bound to be felt on the other end. This is especially true for chains like Dave & Buster’s and Topgolf, which have lower-income consumers than Capital Grille.
Corporate events may be slowing, which could put some pressure on upscale concepts. Similarly, growing competition from rebounding independent restaurants could be putting some pressure on sales. Then again, a number of high-volume independent restaurants are seeing sales declines, too.
Upscale brands will always have some demand and heavy competition. Sales declines coming off ultra-strong years buoyed by unleashed pent-up demand should probably be expected.
With the food-and-games chains, however, we wonder whether the demand is there to the extent many of us thought was there. Certainly it’s fair to question whether there’s enough demand to justify the number of openings in that sector.
Either way, there is an apparent limit to consumers’ demand for experiences. A lot of people are content to just stay home, apparently.
UPDATE: This story has been updated to correct the name of Kona Grill.