Trendier fare takes bite out of casual dining
Fast-casual restaurants have also eaten into customer base
Thursday, March 7, 2013
Casual dining is in the throes of a midlife crisis.
A quarter-century ago, consumers feasted on fried appetizers, unlimited breadsticks and big desserts at Applebee's, Olive Garden and Chili's. Today, many Americans are trading those restaurants in for cheaper, faster fare or splurging a bit for a trendier experience.
Midpriced, sit-down restaurants — known as casual dining in the industry — have seen on average about 2 percent fewer customer visits each year since 2008. That translates into a total drop of almost 600 million annual visits, to 6.4 billion in 2012.
"They've been around quite a while and many of them have not stayed as relevant in meeting consumers' wants and needs of today," said Bonnie Riggs, a restaurant analyst with research company NPD Group.
The world's largest casual-dining company, Orlando, Fla.-based Darden Restaurants, has been hit especially hard. Company executives cut sales and earnings expectations last month, acknowledging to analysts their major brands such as Olive Garden and Red Lobster have suffered because they've been too slow responding to major shifts in how Americans eat out.
"It is clear to us that given our current business situation, we are indeed in a new era," Chief Executive Officer Clarence Otis told analysts.
Other companies have experienced similar turbulence. Earlier this month, Applebee's and IHOP owner DineEquity reported declining traffic at both brands for its fourth quarter, while Chili's parent Brinker International toned down its profit forecast.
"We know casual dining is not the bright, shining star that it used to be," Brinker Chief Executive Officer Wyman Roberts told analysts.
Tony Roma's has dwindled from 157 U.S. restaurants to 40 during the past decade — though the company says it's still opening new eateries.
The industry is trying to reinvent itself with lower-priced meals that are quicker and more healthful. Darden, for example, said last week it plans to speed up Olive Garden's lunch service, jump on culinary trends more quickly, attract younger diners with more technology and lure back lower-income customers with good deals.
The economy has played a major role in slowing sales. American budgets are taking one hit after another — most recently from increased payroll taxes and rising gas prices.
Americans cut their dining-out budgets dramatically during the economic downturn, from which many in the middle class haven't fully recovered.
"Many consumers have had to adjust to having less — and spending less," said a recent report from NPD Group, noting that nearly 75 percent now consider their spending cautious. So when they eat out, they are often finding cheaper alternatives.
Visits to "fast-casual" restaurants, which include brands such as Chipotle, rose by 8 percent last year compared with 2011, according to NPD Group.