Five ways to win in casual dining

by Monica Watrous
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KANSAS CITY, Mo. — At Ruby Tuesday, it’s called a “brand transformation.” At Denny’s, it’s a “brand revitalization strategy.” And at Applebee’s Neighborhood Grill & Bar, it’s simply a “reset.”

Casual-dining chains are scrambling to overhaul just about anything from menus, logos, even the wait staff’s wardrobe. The segment still suffers a post-recession lag, growing only 2 percent last year behind quick-service at 2.8 percent and fast casual at 11 percent, according to Technomic Inc., Chicago. And research from the NPD Group, Chicago, revealed consumer traffic to casual dining restaurants reached a six-year low for the year ended Feb. 28, 2014.

On recent earnings calls, several casual-dining operators shared results of strategies developed to reclaim lapsed traffic. Here are five ways in which executives are leveraging those learnings.

Move on from mistakes.

For Applebee’s, a business unit of Kansas City-based DineEquity, adopting a fast-casual format in addition to the traditional full-service model proved to be a flop. The chain last year tested the Express Lunch program, which allowed customers to order and pay at a counter, take a number and seat themselves. What Applebee’s didn’t account for was the confusion it may create for its consumers.

“I'm sure you’re going to say this seems like common sense, but one of the things we learned is for 50 years we have been teaching people to walk into a casual-dining restaurant, look at the hostess, the hostess says ‘how many in your party?’ and seats you, and suddenly after 50 years, we wanted you to walk into an Applebee’s and say, ‘no, I will take the fast-casual dining experience to the left’ or ‘I will take the regular dining experience to the right,’” said Julia Stewart, chairman and CEO of DineEquity, during a July 29 earnings call with financial analysts. “And that was both confusing and not necessarily working for our consumer base. So we believe there is a different way to think about each of the day parts and each of the ways we may bring it to life in an Applebee’s with a consumer base. So, the key learning is, if for 50 years you’re used to doing it one way and now we are teaching you to do another, we have to be much more mindful and thoughtful about how we do that, and we probably have to market differently to you and we have to educate you on the why and the wherefore.”

Change the menu — and not just what’s on it.

An important component of menu transformation at IHOP, a DineEquity brand, is simplification.

“While we are always testing new and innovative items, we have also been focusing on easing execution and reducing complexity,” Stewart said.

IHOP is releasing its new menu section by section. Crepes were the focus of February changes, with the addition of new sweet and savory crepes. In June, the chain evolved its lunch and dinner items with four new sandwiches and a burger. The third menu, slated for November, will concentrate on children’s offerings. As the new menu items debut, the menu itself has received a new look.

“Certainly, our test results have been that consumers loved the menu we rolled out in January, loved the menu we rolled out in June, just finished testing the one that rolls in November and, in general, people really do like the changes that we are making to the menu,” Stewart said. “Some of that is structural. Some of that is architecture. Some of that is engineered. Some of that is pricing. It’s more about pictures, where we put items. People read right to left, what that looks like. So, it’s the combination of all of those things, but a lot of those check increases came from us putting the prices on the sides and the drinks, and that was done last year. So, it’s less about pricing; it’s much more about engineering and architectural work.”

Ruby Tuesday has introduced more than 40 new or improved menu items in the past year.


At Ruby Tuesday, Maryville, Tenn., multi-year efforts to improve brand perception include a revamped menu with more than 40 new or improved items, including on-trend pretzel burgers and flatbreads.

“Menu transformation and more effectively communicating the casual, affordable and family-friendly personality of our brand positioning are critical components to the overall brand transformation strategy and key to reshaping consumer perceptions of Ruby Tuesday,” said J.J. Buettgen, chairman, president and CEO of Ruby Tuesday. “Since August 2013, we have introduced over 40 new or improved menu items, like our hand-battered fresh chicken tenders, Low Country Shrimp & Grits, fresh hand-cut salmon, or our Parmesan Chicken Pasta, to name a few.”

The chain also upgraded its sliders platform with new buns, burger patties, sauces and presentations, plus a new name: Mini Masterpieces.

Beyond the menu, Ruby Tuesday seeks to shed its image as “too dark, too quiet and formal” by highlighting a new playful and laidback positioning through ambiance and advertising.

“We have also gotten some good credit from our guests to some of the changes we’ve started to make in terms of some of the softer side of decor,” Buettgen said. “So, for example, people have noticed the changes in things like music and lighting; and most recently, the changes we’ve made to the server uniforms to make them more casual and more colorful.”

Invest in technology.

More casual dining brands are tapping into tabletop tablets. A roll-out is under way at Applebee’s, where the devices were added to address customer complaints.

“I think what we are much more interested and what we are solving for is consumers told us it was their No. 1 pain point at an Applebee’s was they didn’t like the fact that the food server left with their credit card and they didn’t like the fact that they would often have to wait for the check,” Stewart said. “So, that goes away with this new technology. The longer-term implications for what it does for the tip or what it does to speed of service or what it does to the average check, too soon to tell.”

Tablets were added at Applebee's restaurants to address customer complaints.

 

Buffalo Wild Wings, Minneapolis, is testing menu ordering on tablets that also feature games, music and other entertainment features. The tablets are currently in 440 units.

“Over time we will look at adding additional functionality, and as we get into the test I think later in the year we will be able to give a little more guidance on what we think the impact of the ordering will be,” said Jim Schmidt, COO of Buffalo Wild Wings, during a July 29 earnings call. “But initially it is going to be our core menu item that we're testing.”

Offer personalization.

Customization is now custom in restaurants, underscored by a proliferation of made-to-order beverages and build-your-own pizzas, burgers and burritos. Personalization is a pillar of Applebee’s recently implemented reset.

“So a good example of that would be a loyalty program where I know everything about you and I know how often you come in and what you eat and what you don’t eat and when you bring your friends and family and when you sit at the bar and I can talk to you one-on-one and really customize that experience for you,” Ms. Stewart said. “And certainly pay-at-the-table technology can do that. Certainly the way we talk to you via the loyalty program and the way we allow you to work with the menu so that you can customize within the menu. So there’s lots of different ways to take you and make your experience very special and very unique to you, and we are very again focused on that.”

Revitalize the restaurants.

Remodeling is another common move for casual dining chains. During the first half of the year, Denny’s Corp., Spartanburg, SC, upgraded 33 company-owned restaurants to showcase its new “heritage” image, which reflects a contemporary diner feel.

Remodeled Denny's restaurants reflect a contemporary diner feel.

 
“The great news is that the increases in the same-store guest traffic we are seeing at company locations are clear evidence of our success with the heritage program, and further proof that our America’s Diner positioning resonates very well with our consumers,” said John Miller, president and CEO of Denny’s, during a July 28 earnings call. “Our revitalization efforts to improve our food, service and atmosphere put us further down the path to consistently growing restaurant sales and margins.”

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