Casual Dining Chains Flip Switch On New Hours To Grow Sales
02 Septembre 2009 - 5:39PM
Dow Jones News
With fewer customers during their regular times, some casual
dining chains are expanding into their traditional off-hours to
grow sales.
Ruby Tuesday Inc. (RT) is launching weekend brunch at most of
its 845 U.S. stores in the coming weeks, after successful tests at
about 50 locations earlier this year. IHOP, the pancake house owned
by DineEquity Inc. (DIN), is trying to expand dinner sales and
enticing families to visit during dinner by offering kids a free
meal, through mid-September.
Darden Restaurants Inc.'s (DRI) Red Lobster is also growing its
lunch business, while Buffalo Wild Wings Inc. (BWLD), one of the
few casual-dining chains with positive sales, is eyeing more
late-night sales.
Restaurants already pay for real estate, so expanding into a new
meal occasions can help bring in more sales to offset the sizable
fixed cost.
"Every restaurant is trying to get the most utilization out of
the assets they have," IHOP President Jean Birch said.
Many fast-food chains have adopted the strategy with breakfast,
snacking and late-night businesses, though not without controversy.
Burger King Holding Inc.'s (BKC) requirement for stores to expand
into late-night hours is being fought by some franchisees who argue
the added costs of later hours aren't justified by higher
sales.
At IHOP, dinner currently makes up 12% of IHOP's business,
compared to 36% of sales at breakfast. The company acknowledges it
will take time to build sales in the later time slot but hopes it
can replicate some of the success it had with growing its lunch
business, which now makes up 29% of sales, in recent years.
With customers staying at home and cooking their own meals,
restaurants are looking at new avenues to grow sales, which have
suffered through a multi-year slump and accelerated with the
recession. Casual-dining chains have suffered most, with same-store
sales falling 8.4% in July, according to Knapp-Track, despite
facing much easier comparisons from last year's sales levels.
Investors still hope restaurants can post positive same-store
sales later this year, when the year-ago hurdle becomes even easier
to top.
Expansion into new dining hours could help, but even that's not
as easy as flipping on the switch during some extra hours. Labor
costs need to be managed for the new times, while parking could
also become in issue if a neighboring tenant depends on the lot
during those hours.
Red Lobster found customers wanting faster turnaround times for
lunch, plus its menu didn't have standard lunch dishes at
attractive prices. It worked to shave three minutes off lunch
service while launching a new menu last November with
lunch-relevant food at $6.99.
The launch was moved up more than six months than the chain
anticipated, "when it became apparent that the economy was headed
into a severe recession," Red Lobster President Kim Lopdrup said.
Since then, Lopdrup said, Red Lobster's percentage of sales coming
from lunch has increased, though he didn't provide specifics.
Ruby Tuesday's brunch expansion is one of several initiatives to
grow sales and help it stand out from competing bar-and-grill
chains like DineEquity's Applebee's and Brinker International
Inc.'s (EAT) Chili's Grill & Bar, said Steve Rockwell, Ruby
Tuesday's vice president of finance.
While it may take time to convince customers to get eggs
Benedict at a place best known for its handcrafted burgers, Ruby
Tuesday's foray into brunch adds a business line where customers
could potentially spend more.
"People are more willing to treat themselves at brunch than they
are with lunch," said Darren Tristano, executive vice president at
foodservice consultant Technomic Inc.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com