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Casual dining raises stakes at lunch

P.F. Chang’s, Olive Garden, Applebee’s aim to lure customers midday with quick, flexible lunch options

While the recession tried to eat the lunch of casual-dining restaurants’ afternoon daypart, major chains fought back by retooling lunch promotions and offering guests time and menu flexibility.

A new round of lunchroom wars has been launched.

P.F. Chang’s China Bistro this week introduced its “more affordable” lunch program that offers more than 20 items in combos under $10, as well as a “pick two” Dim Sum Lunch at $7.45. Applebee’s also recently debuted a new “Pick ‘n’ Pair” lunch program that starts at $6.99 in most locations and offers 75 meal combinations.

These new offers follow Olive Garden’s $6.95 “Create Your Own” limited-time lunch, which debuted in March and runs through April 22; and Chili’s continuing $6-$7-$8 lunch combinations, introduced a year ago.

Watch Olive Garden’s commercial for its $6.95 lunch; story continues below

“Competition has gotten very heated during the lunch daypart, thanks to several factors,” Leslie Kerr, president and founder of the Boston-based consultancy Intellaprice said. “While the recession is one, there are others that are just as important. It’s not just guests’ wallets that are a factor here, but time and competition are also stirring the pot.”

P.F. Chang’s new lunch, which launched systemwide Monday, offers two levels of pricing and timing. The under $10 lunch combinations includes 21 entrées, ranging from almond-cashew chicken to pepper steak, and are served with soup or salad. But the $7.45 Dim Sum Lunch is a choice of soup or salad and a pick from among five steamed dumplings.

Watch a P.F. Chang’s commercial for its new lunch; story continues below

“Lunch diners are not just price-sensitive; they are also time-sensitive,” Kerr said in an email to Nation’s Restaurant News. “Most of them need to get in and get out in a short period of time and have many concepts from which to choose, including [quick serves] and fast casuals who can deliver quality and speed at the $7 and $8 price range.”

The combo is also good for the operator, she said. Operators can limit selections while seeming to offer choice because the guests can select from among their favorites.

“By keeping the message to a specific price point, restaurants can attract guests during a competitive time of day,” Kerr added. “While the ideal scenario would be to sell some steaks and a bottle of wine, that’s just not the lunch norm, at least in the casual-dining segment.”

Casual-dining executives have said that the new lunch combinations have boosted daypart sales. Raymond James securities analyst Bryan Elliott noted that P.F. Chang’s said the test of its lunch menu led to a 10-percent sales gain. Wyman T. Roberts, president of Brinker International’s Chili’s division, told analysts last spring that after Chili’s debuted its $6-$7-$8 lunch, it swung lunch traffic to the positive, and customers showed a surprising preference for the higher-end $8 items.

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Operators are also working to keep the lunch combos fresh. Applebee’s this week introduced three new items, including a fried green tomato and turkey club, a roast beef sandwich with bacon and mushrooms, and a Southwest-inspired Fiesta Chicken Chopped Salad.

“With 75 different combinations, you can literally eat lunch at Applebee’s every workday for nearly three months and enjoy a different combination each time — all at a great value,” said Becky Johnson, senior vice president of culinary and marketing for Applebee’s.

Value was also at play in P.F. Chang’s new menu move, said Lane Cardwell, president of the China Bistro division.

“The new menu offers a broad range of appealing dishes at an affordable price point,” he said in a statement. “We look forward to giving our diners a great combination of variety and value.”

Kerr said Chili’s, Olive Garden and P.F. Chang’s are helping the customer limit their lunch tickets.

“P.F. Chang’s is also driving the message of choice and value — they are catering to guests who have a $7 tolerance and a $10 tolerance,” she said. “Chang’s understands that it’s important to keep all of these diners, and it’ll be happy to do so.”

Intelliprice’s data has reflected the effect, she said.

“Our most recent casual dining study showed that prices for lunch offerings were down almost $1 in late 2011 versus 2010 for lunch offerings, and this is because diners have continued to tighten their belts,” Kerr said. “The continued repackaging of lunch offerings shows that it’s a necessity to keep these guests coming in and to drive home the point that lunch is affordable, flexible and quick at a still-sensitive time. It’s key to restaurants’ profitability.”

Some casual-dining operators are opting out of the lunch daypart for now, including OSI Restaurant Partners’ Outback Steakhouse chain.

“The decision to remain open for lunch hours is a big one,” Kerr said. “Outback has experimented with lunch, but for the most part, OSI’s concepts stick to their traditional 4 p.m. opening times. For operators who are open from 11 a.m. to 11 p.m., it’s crucial to attract customers to make the early hours profitable and keep the whole day financially sound.”

The other consideration is keeping margins on the lunch offerings profitable while still appealing to the customers’ ideas of value.

“As long as operators can maintain reasonable food costs, which they often can with these items, then maintaining or increasing traffic will help boost overall store profitability — with a capital P — and help defray the operating costs incurred throughout the day,” Kerr said.

“And it’s always about the halo,” she added. “If a guest comes in for the lunch combo but buys a beverage, so much the better for the restaurant.”

Contact Ron Ruggless at [email protected].
Follow him on Twitter: @RonRuggless

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