Financing

Turnaround plans yield results in casual dining

Almost to a brand, the nation’s publicly owned casual-dining chains reported strong financial results for the last quarter of 2017, a rebound that caught even some of the operations by surprise.

To a company, they attribute the improvements not to changes in casual dining’s environment, but to alterations made in operations, menu and overall strategy. The turnabout at Outback Steakhouse, for instance, “is not a one-legged-stool situation,” declared Liz Smith, CEO of parent company Bloomin’ Brands. She cited a long list of reasons for the chain’s 4.3% rise in guest counts during the fourth quarter, the best traffic quarter for Outback since 2011.

The factors she stressed: more focus on digital marketing, a general investment in technology, exterior remodels, a simplification of kitchens and menus, a focus on building takeout and delivery sales, a pruning of weak units and a slowdown in expansion.

“The investments we made ahead of growth are bearing fruit,” said Smith.

A great deal of foundational work has been put in place over the past two years, and we are now seeing the results,” echoed Guy Constant, the CFO of Red Robin. The full-service burger concept heartened investors this week with a 2.7% rise in Q4 same-store sales on a 1.9% rise in traffic.

A similar litany could be heard from other casual chains that reported during the last two weeks. A boost in off-premise business was trumpeted in particular. Smith, for instance, said she believes that orders sold for consumption outside of Bloomin’s restaurants could eventually generate 25% of total sales.

Applebee’s revealed that 9% of its sales now come from meals sold for off-premise consumption, and pledged to double the mix through programs such as a revamped curbside delivery service.

Applebee’s, Red Robin and BJ’s Restaurants stressed the importance of new everyday value offers as crucial to their improved performance. Red Robin noted that its everyday-bargain-priced Tavern burger line now accounts for 14% of total sales.

Applebee’s stressed that value will be a key part of the strategic five-year turnaround plan it unwrapped last Wednesday. “If there’s one attribute that’s tied to Applebee’s performance, it’s value for the money,” said President John Cywinski.

Despite the upswing after a prolonged tough slog for casual dining, segment leaders seemed guarded in their assessment of the near future. Even with virtually all metrics moving in a positive direction, “We know we also need to continue to evolve our service model, make smart investments in technology and maximize growth of new channels,” said Red Robin CEO Denny Post.

She foresees continuing fundamental change in the sector. Red Robin recently gathered its total management for a corporate “reset,” a new model for overseeing field operations.

She also predicted dramatic changes in the casual restaurant of the future. “Full service, as we have defined it, likely won’t hunt in the changing cost and operating environment ahead,” she said, noting that Red Robin is looking at smaller units and seatless stores.

Bloomin’ revealed that it plans to continue building delivery and takeout-only Express restaurants, with a bill of fare combining selections from Outback and Carrabba’s, its Italian sister. Three are currently open, with five more scheduled to open before the end of the year.

Applebee’s is about to test a variety of limited-service formats in the Middle East, revealed Steve Joyce, CEO of parent company Dine Brands Global.

The Cheesecake Factory, one of the few big brands in casual dining to see a slide in fourth-quarter comps, said it will unveil a fast-casual riff by the end of the year. Same-store sales for the polished brand declined 0.9% for the September-through-December period.

The other laggard performer among the segment’s dominant brands was Chili’s, whose company-run units suffered a 1.5% decline in same-store sales on a 4.4% drop in traffic.

With noticeable improvement on the top line of casual concepts, the bottom line is getting intensified attention. Part of the reset at Red Robin, executives revealed, was a reorganization of the corporate structure, a move that is expected to save the franchisor $14 million.

Applebee’s has hired PricewaterhouseCoopers to identify cost-cutting opportunities at the unit level.

The Cheesecake Factory will use market-based pricing to mitigate wage spikes in some areas, management revealed Wednesday.

Casual dining could use a reversal of fortunes. Technomic’s just-released ranking of the Top 500 chains shows casual players on the list generating just a 0.1% rise in sales for 2017, despite a 1.4% contraction in the sector’s unit count.

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