Fresh Ideas

Fresh Ideas

Like senior citizens dancing the Electric Slide at a grandchild’s wedding reception and then having a video clip posted on YouTube.com to prove it, the family-dining segment is busting loose in its old age.

Reading demographic tea leaves that indicate the segment might be severely impacted in the next 15 years when millions of baby boomers begin leaving the workforce or dying, family operators are making plans now to cater to a younger crowd.

In what looks to be a virtually segmentwide transition, family-dining operators are rethinking every element of the business to target consumer bases not normally chased by the segment, such as office workers, home-based business entrepreneurs, club kids, nightclub prowlers and trend addicts who must have the hottest CDs.

With mounting research suggesting that the traditional nuclear family will be declining as a percentage of total households in the years to come, operators are also rethinking their allegiance to families and even the breakfast daypart and breakfast foods—historically the dominant sales driver of the category.

Up until now, “hip,” “cool,” “trendy,” “urbane” and “techsavvy” were words that never appeared in the same sentence with family dining.

But all that is changing as the oldest segment of the restaurant industry is breaking out with a new attitude about its business.

Even with combined sales up about 2.3 percent to $12.5 billion in 2006 for the 16 chains whose U.S. systemwide volumes qualified them for rankings within the Nation’s Restaurant News Top 200 universe this year, many brands may already be experiencing a flat rate of growth due to demographic and consumer shifts beyond the segment’s control.

Overall, the 16 family-dining chains measured in NRN’s annual census represent about 6 percent of the combined systemwide sales of $219 billion for the 200 brands in the Top 100 and Second 100.

Looking to get a larger slice of that pie and also investing today for a payoff tomorrow, family-dining chains are not only pursuing nontraditional consumer groups for the segment, but they are rolling out branch prototypes that look nothing like the coffee shops, log-cabin pancake houses or burger hangouts of their past. Instead, several brands are boasting about reimaging campaigns with prototypes featuring more glass, steel and even zany shapes and angles. Even staff uniforms are being updated to look cooler and more fashionable.

Wi-Fi connectivity is becoming a commonplace amenity throughout the segment.

Perhaps most dramatic of all, a small number of brands, including Cracker Barrel [3] Old Country Store, have seen lunch and dinner eclipse breakfast as their dominant sales drivers.

From top executive leaders of major national brands like Denny’s [4] to regional-but-ancient power-houses like Big Boy [5] to one-city chain favorites like Pittsburgh’s King’s Family Restaurants, confirmation is coming that their brands are in the midst of historic change. Such chains say they are gearing up to be more in tune with the times and to cater in a more timely fashion to consumer demands that did not exist when the category first began to emerge some 75 years ago.

But in transitioning to more modern stylings in looks, food and locations, family dining is encroaching on—and being encroached on by—casual dining, still the fastest-growing and most popular category of full-service restaurants.

Consider these brand-specific developments being implemented by family-dining operators to cater to younger, trendier and more urban-based diners:

Twenty-four-hour locations, sometimes in urban neighborhoods, long the exclusive preserve of Denny’s or Shoney’s [6], are increasingly giving IHOP, Cracker Barrel and Big Boy some of their highest-volume operations.

More urban development and less growth in suburbs, highways or rural areas are improving same-store sales averages for IHOP, Big Boy and Denny’s. In fact, one of the highest-volume IHOP units, which happens to operate around the clock Thursday through Monday, is in Harlem, Manhattan’s historic black community. Moreover, IHOP is boasting about the strong annual performance at its branch on I-635 and Josey Lane in Dallas, which plays to a young, multiethnic audience 24 hours a day.

Hipper-sounding marketing messages and market promos, at Denny’s, for example, represent a marketing push aimed at young and college-age kids, urging them to “Get Your Crave On.” Meanwhile, at Cracker Barrel, country music sensation Josh Turner has released a new CD exclusively through the restaurants’ adjacent gift shops—a marketing agreement similar to the one Starbucks [7] has formed with jazz great Herbie Hancock and exBeatle Paul McCartney.

Wi-Fi connectivity, not only for budget-conscious college kids and the Internet addicted, but also for office and medical professionals, is giving Big Boy and King’s Family Restaurants access to newer consumer bases.

“Family dining, perhaps more than any other segment in foodservice, is looking for ways to remain relevant,” says Barb Churchill, a founder and partner at Louis & Partners Design, a Bath, Ohio-based firm that has helped IHOP and is helping King’s Restaurants roll out more sophisticated prototype outlets.

“Family dining has matured on an aging demographic that grew up on some of the oldest brands in the industry, and so they are now in this place where they have to change, not only in appearance and in menu, but in overall attitude about what they do and who they are,” Churchill says.

Because some chains are becoming less dependent on breakfast as they grow more prosperous lunch and dinner dayparts, Churchill adds that fast-casual chains, most of which do not serve alcohol or have bars, may represent more competitive pressure for family brands in the years to come than does casual dining.

What also is expected to force family dining to become hipper and more youthful in the future is the changing age demographics of America and the number of families it will produce.

According to the Census Bureau, as early as 2030, just five years after the youngest baby boomers, born around 1964, are eligible for full Social Security benefits, 40 percent of the nation’s estimated 419 million people then will be 44 to 74 years old.

What that means, demographers say, is that a predominantly young workforce, combined with an older population, will force retailers and the restaurant industry to respond to needs that may not even be contemplated in the current retail environment.

However, Mike Woodhouse, chairman and chief executive of Cracker Barrel, says most of the unfolding demographic trends fit in neatly with the chain’s strategy.

Enabling Cracker Barrel to access new users, Woodhouse says, is its lessening dependence on breakfast, its higher-quality and more exciting lunch and dinner options, and consumers who would eat at a casual-dining outlet were it not for Cracker Barrel’s presence in the market.

He says women and young people have become a growing fan base, all the more so thanks to the Josh Turner connection and forthcoming exclusive releases with such stars as Alison Krause & Union Station and Amy Grant.

“Josh Turner is the third-most-popular country artist among females,” Woodhouse says. “That is tremendous reach given that he is country and given our exclusive with him, it reinforces our brand image of country.”

With IHOP disclosing a $2.1 billion offer to purchase Applebee’s [8], few developments in the restaurant industry speak louder to the “blurring” between casual and family dining than the prospect that the 1,319-unit pancake brand would acquire the 1,943-unit casual-dining chain.

But Patrick Lenow, a marketing official at IHOP, insists that most of what his chain is doing to become more urbane, contemporary and hip has little to do with the purchase of Applebee’s, which has tended to call itself a neighborhood bar and grill and has focused on urban and suburban residential locations.

“Family dining was once considered a sleepy category with minimal innovation or promotion taking place,” Lenow says. “Over the last few years, we have taken the lead through product innovation, creative advertising and new-media strategies. These strategies have served us well, and guests have responded by rewarding us with 17 consecutive quarters of sales increases.”

Another move IHOP has taken of late to bolster a more contemporary look actually borrows a page from its past.

The chain’s newest prototype is a throwback to its early days when IHOP used an A-frame-shaped building. Initially introduced and most dominant in the Cincinnati metropolitan area, the new footprint is being rolled out nationwide.

Churchill, the designer for IHOP, says that unlike the boxy look that had an element of staleness to it, the A-frame stands out and is immediately recognizable to regulars, new and old. She says IHOP’s A-frames fell out of favor years ago mainly because landlords feared that if the business were to fail, only another restaurant could move in, versus box buildings whose retail flexibility is broader.

“When you build with a box, it’s almost an anti-branding statement because it really doesn’t make a statement about you, and if something goes wrong with your business, anything can go in there,” she says. “But with an IHOP A-frame, consumers know what they are getting.

“Studies have shown that when you are riding down the road, you first detect shapes, then colors, then words, as in ‘IHOP.’ I bet you didn’t know that it was their customers who invented the word IHOP, not the company.”

Founded in 1947, the 480-unit Steak n Shake chain also is in the midst of a major push to be more contemporary, says Steven Schiller, its chief marketing officer and senior vice president.

Although Schiller says he does not want to be in the middle of the road because “that’s where you get run over,” he nonetheless makes the argument that plowing into the baby boom generation despite its looming retirement while also responding to their kids’ and grandchildren’s needs is a two-fold task that Steak n Shake can handle.

“It’s not really about catering to a younger consumers or the baby boomers, but serving two sets of needs,” Schiller says. “The baby boomers are in a lifestyle and financial condition that, while changing, still wants value, good-quality food and the great service we can provide.

“The up and coming generation is different only to the degree that their tastes are evolving as their affluence grows. So the task for us is to make sure that we are in place to capture boomers as well as the up-and-coming generation.”

One way Steak n Shake is doing that is with more 24-hour locations, Schiller explains.

Like its segment rivals, the chain is remodeling stores and rolling out a new prototype that is more streamlined and architecturally modern in shape and design.

Unlike other family-dining chains that appear eager to take casual dining head-on, Schiller argues that Steak n Shake’s strategy is wrapped up in the past.

“We are clearly focused on the idea that the public sees us as an indulgent concept—salads, milk shakes, burgers, steak sandwiches, all on a menu with great choices and high-quality foods,” he says.

Steak n Shake’s segment and menu rival, the $440 million, 455-unit Big Boy chain of Warren, Mich., is rolling out a blizzard of operational and marketing refinements to become more user-friendly to current guests, says president Tony Michaels.

Even at age 73 and as a senior citizen of the genre, Big Boy is installing Wi-Fi and developing more urban locations in such cities as Orlando, Fla., Atlanta and Detroit, even though the chain’s suburban operations are generally enjoying good same-store sales growth, Michaels says.

He notes that even with Big Boy’s constant tinkering with its menu over the years, the brand still probably caters far less to families than do many of its peers.

“It’s our goal to have a product line that no one can say ‘no’ to,” Michaels says. “Whether it’s breakfast or dinner, the goal is to keep the menu exciting and fascinating, which is why you can walk through our restaurants from 7 a.m. to late night and see business people working on computers dining next to construction workers dining next to college kids dining next to an older couple.

“But on the weekends, we are packed with families.” While breakfast sales have softened at Big Boy over the years, the brand is bullish about the changing consumer landscape and dining preferences.

“I think we are experiencing a real resurgence for Big Boy,” Michaels says. “We’re even sticking to our old marketing slogan, ‘Big Boy makes you say, Oh, boy.’ ”

Coming alive after a long slumber of no advertising, decrepit units and no prototype to speak of, King’s Family Restaurants—a $60 million, 35-unit chain principally based in Pittsburgh and its suburbs and known for hand-made ice creams and home-style cooking techniques—is on an aggressive roll of “reinvention,” says chief financial officer Chris Whalen.

Being made more contemporary, he says, are an updated menu that keeps crowd favorites alongside newer, more exotic and flavorful items; a new and slicker-looking store prototype that borrows from P.F. Chang’s [9] closet; redesigned staff uniforms; and new styles of advertising.

After nine years without a single television or radio ad, Whalen says, the chain is back on the air-waves to remind guests the King’s brand is new and improved.

“We recognized we needed to do something,” Whalen says. “We wanted to get the right unit economics in place to start a remodeling program, and it is paying off with a younger demographic without losing our old customers.

“We were in bad straits for a long time. We lost focus. We lost direction, but I think we have the right people in the right place to make a real turnaround, and we are excited about it.”

Wi-Fi access, entrées that sound more like dishes stolen from casual dining’s playbook and the broader use of the chain’s mascot, Frownie—a talking brownie with a kind of hip-hop, street sneer usually associated with King’s “mean desserts”—are helping to generate more traffic, he says.

While all of that is going on, Whalen says, the chain recently got 250,000 customers to sign up for the chain’s loyalty program, called Royal Awards. Kings gives a $5 gasoline gift card to members who spend more than $50 on the program.