As high-end steakhouse chains drive a herd of value-meal deals into the market-place to cope with recession-trimmed traffic counts, their executives are keeping a watchful eye on preventing check-average erosion and the tarnishing of the high-end patina.
The deals are galloping across the map. Morton’s is offering a steak dinner for two for $99.99, or a single dinner for $58. Sullivan’s is offering its “Summer of $69” three-course dinner for two, or $35 per person. The Palm is promoting a $39.95 three-course meal through Sept. 30. And Fleming’s Prime Steakhouse & Wine Bar is proffering a $35.95 three-course meal through Sept. 22.
The restaurant chains are seeing some positive results as they offer more of these high-end happy meals.
The steakhouse chains say they are offering their customers “price certainty,” as Mike O’Donnell, chief executive of Ruth’s Hospitality Group, recently told analysts. He said Ruth’s Chris’ $39.95 three-course meal, which was introduced in February, “has been well-received by our guests and is representing a sizable portion of our sales mix.”
Called the “Ruth’s Classics,” it offers a choice of a starter, one of four entrées, a side and a dessert.
The fixed price has gained customer appreciation, he said.
“It is, however, having an impact on our average check, which was down approximately 6.5 percent, to $70 from the prior year,” O’Donnell said. “We will continue to promote this strategy throughout the summer. Our early week $19.95 steak and fries promotion is still in test in three locations, as is a bistro menu available in our lounges at six locations.”
Jon Jameson, founding partner of the Bellwether Food Group Inc. consulting firm, said the potential for these deals to negatively impact the brands is real, just as it is with value pricing in the fast-casual and casual-dining categories.
“The goal that I think Ruth’s Chris, Morton’s and many others have is to maintain their traffic of core brand users by offering value to stimulate visits,” Jameson said. “The trick—and the most important component of doing so—is to maintain the quality and service that people expect and demand from the brand. Even better are the brands that are maintaining the quality of their food, staying true to their core users, and improving service and operational performance.”
Some dinnerhouses are succeeding in offering value propositions and still understanding “the importance of protecting the brand DNA,” Jameson said, citing P.F. Chang’s China Bistro and The Cheesecake Factory as examples.
“P.F. Chang’s has recently added six $9.95 entrées and a complete dinner for two for $39.95,” Jameson said. “But most importantly, the quality of the product meets or exceeds the quality of their menu and drives innovation while they stayed true to their core consumers.
“They are not trying to be all things to all people,” he continued. “But you notice high levels of service, operations that are focused on protecting the bottom line, while not squeezing the consumers.”
For steakhouses in particular, Jameson said, “I think that with the dramatic falloff of traffic due to discretionary spending of consumers today, that their ability to offer high-quality products at a value price, probably helps maintain loyalty when their consumers are looking for a great experience or special-occasion meal.”
O’Donnell said consumers have indicated appreciation for the Ruth’s Classics menu because of the price certainty.
“I think that we still have our special-occasion diners that are comfortable with spending at what I would say is a premium level,” O’Donnell said.
He said the check average “may trade down a couple more dollars, it may go up a couple more dollars based on seasonality.”
Restaurants in the early part of the decade were able to raise prices without severe impact. But those days are gone.
“It seemed to be that there was an unlimited ability to take price [increases],” O’Donnell said. “Obviously, that’s reset itself.
“So we’re not only trying to continue to maintain viability with our core group of people that want to come for the full experience and want to come and celebrate their great anniversary, but we also need to find ways to celebrate the moments to savor in that you can come and have a dining experience at Ruth’s Chris that maybe is not quite as complicated and not quite as expensive,” he said. “We’re working on both reach and frequency. So we’re trying and working and testing a lot of things to see where that might be.”
From a larger brand perspective, Adrienne Weiss, a branding expert and founder of the Adrienne Weiss Corp. in Chicago, said, “A brand is a story that carefully unfolds in all aspects of a business. It is also a club that people want to join. When a brand takes a detour in its strategy it must be careful to communicate the new idea through the creative filter of their unique voice. Failure to do this will result in creating confusion and the brand could perhaps lose the power of affinity.”
She said the message of “value steakhouse” may not fit into the classic high-end steakhouse customers’ pictures of themselves or their lifestyle.
“However,” Weiss said, “if the same ‘value message’ is done in a creative way, called something unique and own-able, it could become an advantage and actually enhance the brand and stimulate new energy and interest.”
The limited offers, such as Sullivan’s “Summer of $69” promotion, fit into that category, she said.
The recession has made it clear that “people want to continue their dining-out experiences and social gatherings but are careful about how they spend their monies,” Jameson said. “They may have less dollars to spend, but they still want quality, service and innovative new products.”
He warned, however, that standards even in providing the value-priced occasions must be kept high.
“All these brands are staying true to their DNA and letting their customers know that they understand the need to take care of them in all economic times,” he said. “The brands that continue to downsize service and reduce quality to reduce price, will suffer a real awakening when the economy does rebound.”— [email protected]