On the Margin
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Can takeout save casual dining?

Casual-dining chains have been beaten by years of traffic declines and sales weakness.

This post is part of the On the Margin blog.

If you can’t beat them, join them.

Casual-dining chains have been beaten by years of traffic declines and sales weakness, as consumers increasingly get their meals at counter-service options and independent concepts.

Their solution, increasingly, is to join those competitors by offering their meals to go. Bloomin’ Brands Inc. said that it is looking into increasing takeout orders. Applebee’s is testing delivery. And on Wednesday, Bravo Brio Restaurant Group said it is rolling out delivery at its locations this year.

It’s certainly not a bad idea. Traffic at casual dining has been falling for a decade now, suggesting lower demand for dine-in, service heavy concepts that cater to the masses.

Giving customers an option where they take their food with them, much like they do at Chipotle or McDonald’s, is one potential strategy to get some of those lost customers.

Yet it’s uncertain whether takeout at casual dining generates more actual sales and traffic. Casual-dining concepts have to-go options, and some chains have emphasized these options more than others.

Photo: Buffalo Wild Wings

It’s not entirely clear if takeout helps casual-dining sales or not.

At Buffalo Wild Wings Inc., for instance, takeout is now 16 percent of sales at company owned restaurants and the chain is increasingly emphasizing that business — staffing its takeout area with its best employees, for instance.

Same-store sales have fallen in each of the past three quarters. Yet few argue that its emphasis on to-go business is anything but good given the ability for chicken wings to travel and its popularity with group events.

Olive Garden, meanwhile, gets 11 percent of its sales from takeout orders, which have grown 50 percent over the past three years. Its same-store sales have been outperforming casual dining in recent quarters, including a 1.3-percent increase in the period ended Aug. 28.

Photo: Jeffery Patrick Photography/Olive Garden

One of the most aggressive chains out there when it comes to takeout is Bob Evans Restaurants.

The family-dining chain has separated out its reporting of dine-in and carry-out same-store sales since 2014, when it started focusing more intently on the takeout business.

At first, it appeared, the takeout business was a boon to Bob Evans. In that first year, takeout same-store sales rose 22.6 percent. That more than offset a 1.5-percent decline in on-premise same-store sales and the chain’s overall comparable sales that year rose by 1.5 percent.

But that impact has waned since. Off-premise same-store sales rose 2.6 percent in its most recent fiscal year, which ended April 29. But dine-in same-store sales declined 3.4 percent and overall same-store sales that year fell by 2.5 percent.

As such, on a two-year basis, Bob Evans' takeout same-store sales are up by 25.2 percent. Yet overall same-store sales are down by 1 percent.

A decline of 1 percent at a dine-in restaurant over two years isn’t bad, but Bob Evans’ rival family-dining concepts have been strong over this same period. So the 1 percent has underperformed its category.

Photo: Bob Evans

It’s possible that Bob Evans’ focus on takeout as actually saved its chain from a worse fate on the sales front.

It’s also possible that takeout is cannibalizing some of Bob Evans’ dine-in orders — and sacrificing average check in the process. On average in the most recent quarter, off-premise orders were $16.59, nearly $3 less per ticket than the $19.23, on-premise average.

That takeout business has weakened further this year, by the way. Off-premise same-store sales fell 3.2 percent in the quarter ended July 29, only slightly better than the 4.5 percent decline in dine-in orders and the 4.3 percent decline for the chain as a whole.

Ultimately, we believe that delivery and a greater takeout emphasis will work better for some casual-dining chains than for others. And success likely requires sustained emphasis and effort from the concepts themselves.

Mostly, we think that chains that perform best overall are more likely to have a strong takeout business.

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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