Casual dining is in some serious trouble. Americans have been told for decades, in cheery voiceovers, that inexpensive sit-down meals at national chains meant “Eating good in the neighborhood,” where “It’s always Friday.” Every mall or major intersection was given a Chili’s, an Olive Garden or an Applebee’s – sometimes all three.
Yet the casual-dining industry has largely worn out its welcome. Customer traffic to these restaurants has declined in nine of the past 13 years, according to retail-research firm Black Box Intelligence. Even as the U.S. economy began healing and consumer spending recovered, beginning in 2010, same-store sales were stagnant, based on Black Box estimates.
In December, industry-wide sales at restaurants open at least a year slid by 2%, even as the unemployment rate hit a five-year low and the stock market hit all-time highs. For sure, harsh weather didn’t help, but that can’t account for tepid nationwide results.
As the chart below makes clear, even some of the biggest, most familiar chains have struggled for years to draw diners and spur consistent gains in sales. The chains have been caught in a self-perpetuating cycle of “value menu” discounting to draw consumers with plenty of cheap eating-out or food-delivery options.
While the companies all talk about trying to increase the “average ticket” size, overall price increases for Darden Restaurants Inc.’s (DRI) Olive Garden and Red Lobster, and Brinker International Inc.’s (EAT) Chili’s chains was just 1.4% in the year ended Nov. 30 – well below the 2.1% inflation rate for all restaurant meals.
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