The Bob Pritchard Column
Casual dining restaurants such as TGI Fridays, Ruby Tuesday, Olive Garden, Outback Steak House and Applebee's are facing sales slumps and restaurant closures, as casual-dining chains have struggled to attract customers and increase sales.
The sit-down restaurants' struggles can be blamed on millennials who are more attracted than Generation X, Baby Boomers and the Silent Generation to cooking at home, ordering delivery from restaurants, and eating quickly in fast-casual or quick-serve restaurants. There are now many, many options that people are using to replace chains.
Many of these options involve cooking at home. Grocery chains are increasingly competing with restaurants, thanks to lower prices, pre prepared meals, free pick-up and delivery and new technology. Meal-delivery kits like Blue Apron are taking the market by storm. They are focused on getting millennials on subscription plans to persuade them to stay in and cook a certain number of days a week.
Convenience is also a factor, both when it comes to delivery and speed of service. Casual-dining chains are still playing catch-up regarding delivery yet the only part of casual dining that's growing right now is the off-premise side.
Cheesecake Factory is expanding delivery to half of its 194 US locations through DoorDash, a third-party service. TGI Fridays, Chili's, and Maggiano's Little Italy are all now on Grubhub, and Buffalo Wild Wings and Red Robin are testing the service. Outback Steakhouse is using third-party services while it builds one of its own.
While delivery is a very compelling option, it isn't a simple service for restaurants to add. Customers generally spend less when ordering delivery than they would when eating at casual-dining chains, most of which rely on alcohol orders to drive sales. In-house delivery means added complexities, paying drivers, and additional insurance costs. Using a third party could mean losing control over the food's quality.
More convenient chains have also attracted millennial customers away from casual-dining options. The growth of fast-casual chains such as Chipotle and Panera have made a significant impact. These chains offer lower prices to millennial customers, who are less enthused about spending more money just for the experience of sitting in a booth at a casual-dining joint.
The fast-casual industry grew by 550% from 1999 to 2014. By 2020, the fast-casual market in the US is expected to reach $66.9 billion. They have more of a healthy perception and quicker service times. The bottom line is that casual-dining brands just aren't cool anymore.
The alternatives are creating buzz and excitement.