To say that The Capital Grille and Eddie V’s Prime Seafood outdid expectations this summer would be putting it lightly.
“I never thought in my wildest dreams I'd see the kind of absolute numbers that we saw this summer in fine dining,” said Gene Lee, CEO of the upscale concepts’ parent company, Darden Restaurants.
The two brands were a bright spot in Darden’s earnings for the quarter ended Aug. 29, when they exceeded their pre-COVID performance for the period by 24%.
By comparison, its more traditional casual chains (Bahama Breeze, Seasons 52, Yard House and Cheddar's Scratch Kitchen) grew sales a combined 5%, while sales were flat at the flagship Olive Garden.
As those results suggest, consumers unleashing their pent-up desire to dine out this summer tended to gravitate toward more upscale, experience-driven places for celebrations and other gatherings.
“People want to go out, they’re going out in groups, people haven’t seen their friends in 12 to 14 months,” said Joe Pawlak, managing principal with Technomic, a sister company of Restaurant Business. “That certainly is very conducive to that higher check-average occasion.”
That dynamic might have taken a bite out of more midscale competitors over the summer. Cracker Barrel, for one, said that consumers’ preference “for more celebratory, higher-check occasions” contributed to its softer-than-expected sales for the quarter ended July 30.
“People are looking for a competent experience where they can get really interesting food, and experience is the key word.” —Jack Gibbons, F-B Society
F-B Society, a restaurant group with a number of polished-casual brands including Sixty Vines and Whiskey Cake, has been on the positive end of that behavior. Sales are up at its restaurants compared to 2019, and its finding strong demand for its experience-focused concepts.
“People are looking for a competent experience where they can get really interesting food, and experience is the key word,” said F-B CEO Jack Gibbons. “We’re in growth mode, and I think a lot of polished-casual restaurants are in growth mode.”
Pawlak noted that many top chefs are pursuing a more upscale-casual vibe with new restaurants rather than doing traditional white-tablecloth places.
“People want more casual, eclectic, than what I would consider to be true fine dining,” he said.
Full-service restaurants, in general, appear to be benefiting from some tailwinds coming out of the pandemic. Many have reported that customers are returning to dining rooms while also continuing to order delivery and takeout at elevated rates, yielding incremental sales.
But neither Darden nor F-B have fully committed to to-go, choosing instead to emphasize the dine-in experience above all else.
“The business in polished casual is the experience people get when they walk into the restaurant,” Gibbons said. “You can’t exactly recreate that at home.”
“There's still a heavy drag on fine dining in the major cities.” —Gene Lee, Darden Restaurants
The pandemic also disrupted peoples’ routines and changed how and when they use restaurants in a way that’s benefiting upscale places. F-B has seen an influx of customers who are trying its restaurants for the first time. And at Darden’s upscale concepts, the reduction in business travel has resulted in more traffic on weekends. Sunday has suddenly become a key sales day for the company.
“Pre-COVID, [it was] a throwaway day at most,” Lee told investors. “But Sunday is a real legitimate day now, which operationally has taken some adjustments.”
Business travel remains the key factor holding back fine dining in America’s downtowns, Pawlak said. Indeed, the success of Darden’s concepts skewed toward its suburban restaurants.
“There's still a heavy drag on fine dining in the major cities,” Lee said, adding that its three Manhattan locations remained down 40%.
And Pawlak noted that Darden’s success could be more the exception than the rule when it comes to true fine dining.
“I wouldn’t say fine dining is booming,” he said. “The segment will start seeing some more sustained recovery when business travel starts coming back.”
The delta variant has thrown a wrench into progress on that front. Darden’s upscale concepts have seen a flurry of large event cancellations in recent weeks as a result, Lee said. But he still expressed high hopes for the key holiday season at Capital Grille and Eddie V’s.
“I think that the consumer is still fairly healthy from a financial standpoint,” he said. “I would expect this to be a robust holiday season if the variant is under control.”