Operations

How a kick in the assets could help casual dining

Chains in search of new revenue streams might want to rethink how they’re using excess space in their restaurants.
Enlivened bars and patios could give casual dining a boost. | Photo courtesy of Chili's Grill and Bar

Sit-down chains have struggled recently to generate traffic and sales growth as consumers appear to be smarting from higher menu prices. 

It has not been for lack of trying: Brands are investing in a number of new traffic-driving measures, including discounts, TV ads and menu overhauls, to create buzz and get people in the door. But results have been mixed so far: In the second quarter, median same-store sales growth among publicly traded casual chains was just 1.8%, according to Restaurant Business’ same-store sales tracker.

It suggests that the segment may be in need of some fresh ideas to drive revenue as consumers trade down to cheaper options or cook more meals at home. One restaurant analyst believes the answer could be repurposing some of that excess capacity.

“If you’ve got a dead restaurant, then start using parts of the restaurant in different ways to produce revenue,” said John Gordon, founder of Pacific Management Consulting Group, in an interview.

Here are three strategies that appear to be gaining some traction. 

Sports betting

In 2018, the Supreme Court overturned a federal law prohibiting sports betting, opening the door for states to create their own guidelines. “I saw that right away and I said, ‘Wow, that could be a new platform for some brands,’” Gordon said.

A handful, including Buffalo Wild Wings, Dave & Buster’s and The Greene Turtle, have begun to embrace the gambling business, at least in the 34 states where it’s legal.

Some efforts have been as simple as promoting sports betting and providing a space to watch the games. Hooters, for instance, has partnered with betting companies to display odds and promotions on its TVs, giving customers an extra reason to come in on gameday.

“It’s just a natural accelerant on an already successful sporting business that we have,” said Sal Mellili, CEO of Hooters of America, in an interview last March.

Other brands have taken it even further. The Greene Turtle, a 36-unit Maryland-based sports bar chain, has opened two restaurants with on-site sportsbooks where guests can place bets at kiosks or with a live teller and watch sports on TVs throughout the space.

Although the chain has said little about the financial performance of the sportsbooks, they caught the attention of high-profile investor Bill Ackman, whose Table Management recently made a $6 million equity investment in The Greene Turtle.

Private dining

Private dining has traditionally been the domain of upscale chains like Mastro’s and Ruth’s Chris, which offer the space and equipment needed to hold corporate meetings and other events over a nice meal.

This tends to be a profitable business because large groups yield large checks, and they can be prepared for in advance, which eases operations. And it could be a business more casual chains could get into, Gordon said. 

TGI Fridays took a step in this direction recently with the launch of party packages. This allows groups of 10 or more to reserve space at Fridays in advance. They also choose from a selection of preset menu and bar packages. The chain expected group bookings to drive $5 million in incremental revenue in the fourth quarter.

Reviving the bar and patio

Gordon also sees an opportunity to turn bars and patios into special events spaces rather than just additional seating areas: “Really building up the bar as a creative area of revenue with special events and the like, so that the bar is really known for special events and it’s not just a quiet place to go to,” he said.

Chili’s is one casual-dining chain that has been looking to enliven the bar recently. That area had become less of a focus during the pandemic, for obvious reasons, but the brand is now refreshing the menu and leaning into its signature beverage, margaritas. It also brought back the NFL Sunday Ticket streaming service this football season in hopes of making its bars into gameday destinations, and has been encouraging staff to wear the jersey of their favorite team to add to the fun.

The bar is one of a number of efforts by Chili’s to get back into customers’ good graces, and they appear to be having an effect: The chain’s traffic turned positive in October for the first time in a long time, executives said.

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