Restaurants Feeling The Squeeze On Traffic And Sales, Especially Midpriced Chains
Chain restaurants, especially those that occupy the middle ground between fast food and upscale dining, face an uphill battle as consumer tastes change. Part of that battle, it turns out, involves building traffic any way they can.
Last week, Glendale, California-based Dine Brands Global, one of whose brands is IHOP, started styling the name IHOb on social media without explanation. On Monday, the company said the "b" stands for "burgers," a temporary change to promote IHOP's Ultimate Steakburgers.
The entirety of the restaurant industry is feeling pinched, despite a strong U.S. economy.
Same-store traffic in the industry dipped 2.9% year over year in May, which also represented an annual 1.5% drop from April, Restaurant News reports. Traffic growth year-to-date is down 2.5%, which is a bit better than the 3.2% drop for the same period in each of the previous two years.
"The underlying issues of restaurant oversupply and increased competition from outside the chain restaurant sector still prevail and will likely haunt the industry for the rest of the year," TDn2K reports.
Other unconventional examples of restaurant chains eager to expand brand awareness (beyond advertising) include Domino's "Paving for Pizza," in which the company partners with towns to fill potholes, and a number of chains that rolled out deals to encourage people to eat more on April 20 (4/20), recognized as a day to celebrate marijuana use, whether or not they use cannabis.
It isn't clear how effective these tactics will be.
"The worst place to be is a full-service restaurant with a check under $20," restaurant consultant Aaron Allen told Today Food.
Brands such as Applebee's, Ruby Tuesday and Chili's haven't changed much in at least a decade, Allen said. But customers expect new things, and restaurants can easily be perceived as outdated, especially by millennials.
Dine Brands' other chain, Applebee's, suffered a drop of 5.3% in same-store sales last year, though sales ticked up in early 2018. In a February conference call, Dine Brands Global CEO and Director Stephen P. Joyce called Applebee’s “a company in transition.”
In recent years, Applebee's has rolled out interior renovations, new menu items and food delivery in some places. Dine has also closed underperforming locations, and will close 60 to 80 this year.
According to Dine Brand leaders, the business is about market share now, not about a return to growth, especially for casual dining, Bloomberg reports.