Casual chains trying to dish up growth again
Chili’s Grill & Bar is going on a diet to fatten its sales—just one of the strategies casual-dining chains are using to reverse a slowdown in growth.
Chili’s is slashing the number of items on its menu by 40 percent, to 75 from 125, to focus on its core offerings, such as burgers, fajitas and baby back ribs. The chain is trying the leaner menu in hopes of stemming a sales drop.
“We had to take control of what we could control,” Chili’s President Kelli Valade said. “We had potentially lost our way.”
The entire sector of publicly held, mid-priced U.S. restaurant chains seems to be struggling to find its way back to growth. The brands face stagnant or slumping sales and shifts in consumers’ dining habits.
They include not only Chili’s, a division of Brinker International Inc., but also DineEquity Inc., which owns Applebee’s and IHOP; BJ’s Restaurants Inc.; and Ruby Tuesday Inc. Cheesecake Factory Inc., a more upscale member of the casual-dining group, also has seen its sales growth stall for the first time in eight years.
“The past 24 months have been extraordinarily difficult,” Applebee’s President John Cywinski told Wall Street analysts last month.
Americans still love eating out. Consumer spending at restaurants and other food vendors, including beverage sales, stood at an inflation-adjusted annual rate of $605 billion in the second quarter, up 4 percent from $584 billion two years earlier, according to the U.S. Commerce Department’s Bureau of Economic Analysis.
But much of that growth has been outside the casual-dining sector in areas such as inexpensive fast-food chains, “fast casual” outlets such as Chipotle Mexican Grill Inc. and Panera Bread Co., takeout and delivery services, and independent restaurants—both mid-priced and upscale—that deliver a higher perceived value, analysts said.
“We’ve seen a lot of growth in the fast-casual segment,” said Victor Fernandez, executive director of insights and knowledge at TDn2K, a firm that tracks the restaurant industry.