National Post (Latest Edition) - - FINANCIAL POST - Hol­lie Shaw in Bar­rie, Ont. Fi­nan­cial Post hshaw@ na­tion­al­post. com Twit­ter. com/ Hol­lieKShaw

Swiss Chalet’s new­est restau­rant model has a de­cid­edly adult con­tem­po­rary style, es­chew­ing the chain’s decades- old fam­ilystyle util­ity de­sign for a mod­ern/rus­tic din­ing room with roomy leather ban­quettes, wood ac­cents and large built- in fire­places.

Sit­u­ated on a busy thor­ough­fare in Bar­rie, Ont., about an hour’s drive north of Toronto, flanked with big- brand restau­rants and gas sta­tions, the first out­let to show­case the ven­er­a­ble chicken chain’s mod­ern vi­sion opened last month, fea­tur­ing an up­dated menu and trendier plat­ing styles to match the new dé­cor.

The sig­na­ture Chalet sauce that ac­com­pa­nies chicken din­ners is of­fered in a tiny ma­son jar; there are sal­ads with kale and shaved beets; and t he lineup of new side dishes in­cludes sriracha honey Brus­sels sprouts.

“It’s a fam­ily restau­rant that does things ex­cep­tion­ally well that I don’t think it was get­ting credit for, be­cause it wasn’t mod­ern­ized,” said Tal­lis Voakes, Swiss Chalet’s cor­po­rate chef, who de­signed t he up­dated menu.

At the Bar­rie out­let, the burger — yes, Swiss Chalet sells a burger — and a hand­ful of pasta dishes are no longer on of­fer, re­placed by stom­ach- fill­ing fare such as pou­tine and ro­tis­serie beef. “The new menu is ac­cen­tu­at­ing what we do best,” Voakes added. “We wanted to fo­cus on the strengths, the things that are very close to the brand.”

But there’s still no guar­an­tee the chain will be able to draw more din­ers when the new menu and lay­out are rolled out to Swiss Chalet’s other out­lets over time.

Swiss Chalet and its fam­ilystyle din­ing con­tem­po­raries are part of a full- ser­vice restau­rant sec­tor that has been in de­cline for close to a decade, with an­a­lysts point­ing out that sit-down fam­ily restau­rants have been slow to in­no­vate and risk los­ing rel­e­vance in a mar­ket that has seen a steady in­crease in com­pe­ti­tion from all sides.

Aside from the usual low­er­priced fast-food ri­vals, there has been an in­crease in mid- priced “fast ca­sual” chains such as Chipo­tle, meal kit com­pa­nies that en­cour­age fam­i­lies to as­sem­ble and heat pre- por­tioned fresh in­gre­di­ents in their homes, and ev­er­more- so­phis­ti­cated take­home of­fer­ing from gro­cery stores.

Sales at full- ser­vice restau­rants de­clined two per cent in 2017 and now ac­count for about 40 per cent of Canada’s $52 bil­lion food­ser­vice mar­ket, com­pared to more than 50 per cent in 2008. Mean­while, over­all sales at quick- ser­vice restau­rants, such as McDon­ald’s and Freshii, grew three per cent last year.

The ca­sual and fam­ily din­ing seg­ments of the restau­rant in­dus­try — typ­i­fied by chain restau­rants such as Swiss Chalet, Bos­ton Pizza, East Side Mario’s, and Golden Grid­dle, but also by smaller in­de­pen­dent restau­rants — “are not ex­pe­ri­enc­ing growth,” said Robert Carter, ex­ec­u­tive direc­tor of food­ser­vice at re­searcher NPD. “In­de­pen­dents, for the most part, are the ones drag­ging down the traf­fic, but the chains are also suf­fer­ing.”

Con­se­quently, the big­ger play­ers are look­ing for ways to re­vamp in an ef­fort to at­tract new cus­tomers.

The makeover at Swiss Chalet in Bar­rie is part of a strat­egy that its Vaughan, Ont.- based par­ent com­pany, Cara Op­er­a­tions Ltd., has been im­ple­ment­ing since go­ing pub­lic in 2015, about two years af­ter it be­gan swal­low­ing up its ri­vals in earnest.

Though the con­glom­er­ate in­cludes quick- serve chains such as Har­vey’s and New York Fries, Cara is king of the ca­sual din­ing space in Canada, with 1,194 restau­rants un­der 16 ban­ners. It spe­cial­izes in crowd­pleas­ing fare for the masses in restau­rants such as Mon­tana’s, Kelsey’s and Mile­stones. The de­signs and menus may ap­pear nom­i­nally different, but all share a sim­i­lar at­mos­phere.

Cara has man­aged to out­per­form many in­de­pen­dents, but same- store sales are weak and sev­eral of its brands are long over­due for rein­ven­tion.

In the 39 weeks ended Sept. 24, same- restau­rant sales were flat com­pared with the same pe­riod in 2016. But that was bet­ter than the 1.7- per- cent drop in 2016.

Still, there ap­pears to be some­thing com­pelling to in­sti­tu­tional investors in a restau­rant cat­e­gory des­per­ately in need of spice: De­spite the ca­sual din­ing sec­tor’s tepid per­for­mance, or more likely as a re­sult of it, there has been a flurry of merg­ers and ac­qui­si­tions in the past few years.

The charge in Canada has been led by Cara, which merged with ri­val Prime Restau­rants Inc. in 2013 to add brands such as East Side Mario’s Bier Markt to its grow­ing sta­ble.

The M& A spree is a trend re­flected in the U. S.: In 2017, there were 36 ac­qui­si­tions of restau­rant chains with at least 15 lo­ca­tions, ac­cord­ing to an anal­y­sis by Restau­rant Busi­ness, a 90- per- cent jump over 2016, when there were 19 ac­qui­si­tions, and 44 per cent higher than 2015, when there were 25 such deals.

In Canada, Cara ri­val MTY Food Group Inc. of Mon­treal di­ver­si­fied its fam­ily- din­ing foot­print in De­cem­ber with the pur­chase of Imvescor Restau­rant Group Inc., owner of 262 restau­rants across the coun­try, in­clud­ing the ca­sual din­ing chains Pizza De­light, Ba­ton Rouge and Scores.

“MTY is buy­ing a high- qual­ity op­er­a­tor” in Imvescor, Leon Ag­haz­ar­ian, Na­tional Bank an­a­lyst, said in a note to clients af­ter the ac­qui­si­tion an­nounce­ment.

He noted the deal would more than dou­ble MTY’s pres- ence in the fast ca­sual mar­ket, to seven per cent from three per cent, and give it ac­cess to the grow­ing break­fast seg­ment through the newer Ben & Floren­tine chain.

NPD’s Carter said in­dus­try con­sol­i­da­tion “is a good, if in­evitable strat­egy” for the big play­ers be­cause in the ab­sence of real sec­tor growth all they can do is steal mar­ket share from each other and from weaker in­de­pen­dent fam­ily restau­rants.

“Growth is go­ing to be very lim­ited be­cause of the na­ture of the in­dus­try,” he said.

He noted the over­all de­cline in the ca­sual din­ing cat­e­gory slowed some­what last year, but at­trib­uted that to the added sales boost from so- called on­line de­liv­ery ag­gre­ga­tors such as Just Eats, Skip the Dishes and Uber Eats.

In the mean­time, gro­cery stores have been nib­bling away at restau­rants’ mar­ket share, said food ex­pert Syl­vain Charlebois, dean of man­age­ment at Dal­housie Univer­sity in Hal­i­fax, par­tic­u­larly point­ing to “gro­cer­ants” — larger gro­cery stores that al­low cus­tomers to take home a broad­en­ing va­ri­ety of fresh- pre­pared meals or sit down at a ta­ble to eat the food on site.

In­deed, the fastest- grow­ing meal seg­ment in 2016 was ready- pre­pared meals at gro­cers, meal kit com­pa­nies and other re­tail­ers, NPD con­firmed, with an eight- per- cent mar­ket share and growth of 20 per cent a year.

“The worlds of food re­tail­ing and food­ser­vice are col­lid­ing, and that is go­ing to con­tinue for a while,” Charlebois said. “Gro­cery stores don’t want to lose traf­fic in their stores.”

Ca­sual din­ing chains have also reaped the up­side from putting their prod­ucts into gro­cery stores.

For ex­am­ple, Cara ex­tended it­self sig­nif­i­cantly into su­per­mar­ket aisles through its ac­qui­si­tion of the St. Hu­bert chicken chain, whose re­tail prod­ucts in­clude meat pies and soups, and it also sells sauces and pot pies un­der the Swiss Chalet brand.

Although Cara has been steadily ac­quir­ing chains, clos­ing un­der­per­form­ing lo­ca­tions and mod­ern­iz­ing its mar­ket­ing through tar­geted dig­i­tal of­fer­ings and food- or­der­ing apps, a lot of its work has been “play­ing catch- up” to in­dus­try trends, Ray­mond James an­a­lyst Ken­ric Tyghe said in a note to clients af­ter Cara’s third- quar­ter re­sults were re­leased in Novem­ber.

“While some of what they’re do­ing will likely im­prove their po­si­tion­ing, we haven’t seen any game chang­ers, which is what a num­ber of these brands need,” he said.

It’s an ob­ser­va­tion that ex­tends be­yond Cara to many of the decades- old fam­ily restau­rant chains. “For many years, the ( quick- ser­vice restau­rants) were the only ones do­ing the i nno­vat­ing,” Carter at NPD said.

That means for the fore­see­able fu­ture din­ers will likely only see an in­flux of trendy flavours added to old sit- down restau­rant stand­bys — from ro­tis­serie tacos at Swiss Chalet to roasted beet and peach salad at Bos­ton Pizza — rather than the whole­sale changes they may need.



Swiss Chalet’s new­est restau­rant model favours a more mod­ern vibe, with leather ban­quettes, wood ac­cents and built-in fire­places. The chicken chain has also rolled out an up­dated menu.

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