On the Margin
Applebee's

For casual-dining chains, less bad is more

Blog: Applebee’s and Outback had a great October, but is it sustainable?

This post is part of the On the Margin blog.

Don’t look now, but casual dining seems to be gaining steam. 

On Thursday, DineEquity Inc. executives said that same-store sales turned positive for Applebee’s, crediting "a combination of initiatives." 

That news follows previous indications from Bloomin’ Brands Inc that sales turned positive for all four of its concepts in October, including flagship Outback Steakhouse and Carrabba’s Italian Grill. 

“All our brands are performing very strongly in October,” CEO Liz Smith said.

And, indeed, same-store sales turned positive during the month, according to Black Box Intelligence. 

To be sure, this is just one month. And one should not get too excited about a one-month blip. This is casual dining, after all, and the long-beleaguered sector has periodically experienced false positives like this.

And at least some of the improvement can be attributed to the hurricane rebound, as sales in both Florida and Texas were strong in the month. 

But a few things suggest to us that this could be a good holiday season for chains with wait staff.

For one thing, comparisons are easy. Casual-dining same-store sales declined 3 percent in December of last year, according to MillerPulse. Nothing makes companies and management teams look quite as good as easy comparisons. And this year Thanksgiving is one day earlier, on Nov. 23, while Christmas is on a Monday.

In addition, casual-dining chains have been quicker to slow growth and cut units than have, say, fast-casual concepts that keep growing despite relatively weak same-store sales themselves.

More to the point, casual-dining chains’ takeout orders continue to grow as the chains improve their online presences, get more aggressive with delivery and simply realize that this is how consumers want to eat. 

Bloomin’ Brands, BJ’s Restaurants Inc., Darden Restaurants Inc., Buffalo Wild Wings Inc. and others have all increased their takeout sales considerably in recent quarters. And they are a lot better at this than they were a year ago, meaning they’re not quite so reliant on hungry holiday shoppers for their late-year sales.

None of this is to say that casual dining is suddenly the place to be. Traffic, after all, was still down in October, and the sector needs to gain customers. Plus, the restaurant business is still super competitive and overstocked with locations.

“We don’t know yet what the new normal is,” Smith said. “We don’t have a crystal ball. We still have a shifting landscape. So I think it’s prudent to assume it’s going to be challenging again in November and December.”

But at least it appears to be less bad than where it had been. And that’s something.

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: @jonathanmaze

This post has been updated to reflect the following correction:

Correction, Nov. 9, 2017: A previous version of this post identified the wrong attributed reasons for Applebee's improvement in October.

TAGS: Finance
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish