If there's one moment that crystallizes the sorry state of the casual dining industry, it's Ruby Tuesday's rt gambit this summer to blow up a store "live" online.
Kaboom! Bye-bye, old store.
There's growing sentiment that this is something the whole $75 billion casual dining industry needs to do. We know their names — such as T.G.I. Friday's, Chili's eat, Applebee's din— but over the years, too many of the nation's 81,000 casual dining restaurants have come to look, taste and feel the same.
The segment's same-store sales (a key retail measure comparing stores open at least 16 months) are down 1.8%, and same-store traffic is down 4.3% through the first eight months of this year, reports Knapp-Track, which tracks industry sales.
And that was before the economy really went south. Now, who's got dough to blow at a sit-down restaurant with prices rising at a rate that will make you sit up?
Ruby Tuesday didn't really blow up a store. It was a made-to-go-viral online video stunt supposedly ending with a rival's store being blown up by mistake. And it was a Web hit that was a Hail Mary attempt to shine lights on the fact that Ruby Tuesday just spent $70 million to reinvent itself with new décor, a new menu and even new duds on its servers.
Even with the publicity bump, the chain's same-store sales are off.
"We rested on our laurels too long — and now we're paying for it," says Sandy Beall, CEO of Ruby Tuesday, speaking not only of his company, but of all casual dining — known for full service, alcoholic beverages and check averages of $10 to $23 a person.
These tough times are forcing the industry to rethink, retrench, reprice, redesign and even re-imagine — just as the credit squeeze has been choking access to financing to do it.
Meanwhile, competition is coming from all directions. Improved fast-food menus are stealing business.
So-called fast-casual chains such as Panera Bread and Chipotle — no waiters and higher quality than fast food — keep stealing share. Ever-expanding prepared foods sections in supermarkets keep gobbling business.
"What worked yesterday isn't going to work tomorrow," says Doug Brooks, CEO of Brinker International, parent to Chili's. He's in the midst of reinventing Chili's with new décor and menus, along with technology to speed service.
Casual dining's leaders may want to mimic what McDonald's did five years ago when the then-struggling chain went on a tear to improve food quality, speed up service and boost public perceptions. It worked.
"McDonald's mcd is the poster child for proper strategy," says consultant Malcolm Knapp. "They were written off as dead, but they found a way to become relevant."
That's where casual dining wants to get. But it won't be easy. Even McDonald's has recently felt the pinch of tightening credit. Last month, it warned franchisees that Bank of America had squeezed lending to restaurant owners but later said sufficient credit was there.
Reducing the glut
With way too many restaurants serving far too few customers, at least 1,000 casual dining units will close over the next 12 months — helping to lessen the glut of casual dining spots, says Ron Paul, president at researcher Technomic. "In the eyes of consumers, these restaurants are the same. There are too many. They are too similar. And their prices got out of whack."