For Top 500 family-dining chains, it's back to the future

The segment's old guard is striving to amp up its traditional strength of providing value, but with more relevant and higher-quality menu options.
Menus are being pared back, as are prices. | Photo: Shutterstock

When traffic slid last year for family dining stalwart Cracker Barrel Old Country Store, its like-named parent embarked on a $16 million effort to diagnose the problem. Fans, lapsed users and consumers who preferred competing brands were asked to rank the chain on a number of key attributes, from value, food quality and experience to the physical appearance of stores.

“We generally rank in the middle of the peer set, and we do not lead in any of these areas,” CEO Julie Masino acknowledged in downloading the results of the research to Wall Street and media. “We’re just not as relevant as we once were.”

In a webcast, Masino spent an hour detailing the findings and how Cracker Barrel plans to respond. Among the main objectives she set were simplifying the menu, streamlining store operations and amplifying the brand’s value perception, in part by changing the way it set prices. 

About a year earlier, arch-rival Denny’s had done its own in-depth research on the segment and where it fit. CEO Kelli Valade—like Masino, still new to her position—was less forthcoming about the findings than her sister CEO was. But she could have borrowed her counterpart’s script in highlighting the implications of the data. Among the imperatives it revealed for Denny’s was a need to simplify the menu, operate more efficiently and alter the way pricing is set.

The strategies of the two segment powerhouses differ in significant ways. Cracker Barrel, for instance, has more cosmetic work to do, having admittedly neglected the building maintenance and refreshes a 55-year-old concept warrants. And Denny’s has the added dynamic of striving to live up to its historic strength as a 24/7 concept, a challenge it has struggled to meet post-pandemic.

But the similarities provide a strong indication of where conventional family dining is heading. It’s a familiar direction: Emphasizing value while trying to pare back expansive menus whose complexity detracts from the quality of execution, all while striving to draw a younger clientele.

If Yogi Berra were alive and flipping pancakes, he might say it’s déjà vu all over again.  The segment has been striving for those goals for years. Now, armed with the validation of research, the market’s major players are doubling down on the efforts—in the instance of Cracker Barrel, to the tune of $700 million in capital expenditures over the next three years.

An intensified focus on the menu

Menu changes, and price tweaks in particular, figure large in the dash back to the future, not only for Cracker Barrel and Denny’s but also for the family dining segment’s leader, IHOP.

Cracker Barrel recently added an early-bird menu of seven entrees starting at $8.99. Available only Monday through Thursdays from 4 p.m. to 6 p.m., they feature smaller portions of items that the kitchen staff already knows how to cook.  Management says the initiative checks the boxes of delivering value without complicating operations.

The mini-menu was added while at least 20 items were deleted from the regulator bill of fare, according to Masino.

Similarly, Huddle House added a value menu this year with prices starting at $5.99. The eight selections range from a breakfast bowl to a cheeseburger platter.

Nostalgia figures prominently into the venerable chains’ efforts to showcase value. Denny’s, for instance, brought back the Super Slam, a riff on what may be its best-known menu item, the Grand Slam breakfast platter. The Super Slam was returned to the menu at a price of $7.99.  In addition, the chain has experimented with offering the Grand Slam for $5.99.

At the start of the first quarter, IHOP brought back one of its signatures, the Rooty Tooty Fresh ‘n Fruity breakfast platter, “at a value price of $7,” John Peyton, CEO of parent company Dine Brands, told financial analysts.

As a result,” he continued, “IHOP's comp sales outperformed the Black Box family dining segment in four out of six weeks during the promotion.”

During Lent, family dining stalwart Bob Evans Restaurants offered a revision of its Fish Fry Platter. Instead of providing one big cod fillet, it revamped the dish to use three smaller pieces that added up to an equal or slightly larger portion. Yet the price was shaved to $11.99.  Sales of the seasonal item were triple what they were a year ago.

Meanwhile, nipping at their heels …

Despite those success stories, traditional family dining chains continue to feel the challenge of the surging daytime-dining subsegment, the market vertical populated by Top 500 brands like First Watch (No. 54), Another Broken Egg (No. 218) and Snooze (No. 299). Because they serve only breakfast, lunch and brunch, the upstarts are spared the bruising challenge of competing with casual dining for dinner customers, a breed that’s been particularly difficult for family dining’s greybeard brands to attract.

Cracker Barrel, for instance, has seen its steepest drop-off in traffic in the evenings. Denny’s is augmenting the drawing power of its namesake brand with three nighttime-focused virtual brands: The Burger Den, The Melt Down and Banda Burritos.  About 250 units are also expected to become the production facilities for virtual concepts, the result of a deal announced this year with ghost kitchen and virtual brand matchmaker Franklin Junction.

Similarly, IHOP recently struck a deal with Virtual Dining Concepts to feature three virtual concepts. The chain estimates that 960 of its 1,700 units now serve as ghost kitchens for other brands, none of them presumably breakfast concepts.

Being open during school hours also helps the daytime dining concepts attract parents as employees. Plus, while the segment’s seniors may offer beer or wine, many of the daytime dining specialists sport a full bar, and drink sales can run as high as 30% of store revenues.

While the traditional chains increase their low-priced items, daytime-dining leader First Watch is steering clear of discounts, according to CEO Chris Tomasso. Instead, he recently explained to financial analysts, the chain intends to court value-seeking customers by touting proven favorites like shrimp and grits. The dishes may even carry a premium price but still appeal to penny-pinchers because there’s no worry about throwing away money on an unsatisfactory choice.

If you can’t beat ‘em …

The emerging breakfast-and-lunch-only market is so attractive that both Cracker Barrel and Denny’s have acquired their own entrants in the field.

Denny’s has been testing the viability of growing its upstart, Keke’s Breakfast Café, beyond its home state of Florida. Its plan is to continue developing stores in southern cities as a ramp-up to blitzing the rest of the nation. Denny’s officials say the initial ventures beyond Florida have validated the concept’s strength and portability, with Denny’s franchisees already expressing interest in developing the concept.

Cracker Barrel, in contrast, has alerted investors that it’s slowing the rollout of its daytime concept, 63-unit Street Biscuit Co., until it’s righted 660-store Cracker Barrel.

The scale of that effort should not be underestimated, Masino told Wall Street. It was drafted not as a one- or two-year fix, but “for the next 10 years and beyond,” the CEO said.

As she stressed to investors, “we simply have to invest in the future.”

And there is indeed an attractive future for the segment, according to James O’Reilly, a veteran chain leader who has worked in fast food, casual dining and now the family dining sector. He recently left his job as CEO of the Smokey Bones casual chain to become CEO of Advent Hospitality Management, parent of the family focused Huddle House and Perkins chains, both of which are well past their teen years. Huddle House was founded in 1964, and Perkins six years earlier.

“I am extremely bullish on the family market” he told Restaurant Business in explaining his career move. “The resilience of restaurant brands that have great value propositions for customers absolutely have latent opportunity. The latent potential, the undiscovered potential of our sector, was a greenlight.”

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