- Olive Garden: $3.6 billion
- LongHorn Steakhouse: $1.4 billion
- Yard House: $425.6 million
- The Capital Grille: $380 million
- Seasons 52: $214.9 million
- Bahama Breeze Island Grille: $205.1 million
- Eddie V’s Prime Seafood: $87.7 million
2014 was mostly upbeat for Darden, which shed low-performer Red Lobster in a bold move in July and saw success with its myriad brands, but continued to struggle with how to redefine its flagship restaurant, Olive Garden. Nonetheless, the Red Lobster move makes sense, Davis says; Darden could not continue to invest capital and time in revitalizing two brands, so it narrowed in on Olive Garden, the one with the most potential.
Despite a year-over-year increase of 10 units, sales slipped 1.3 percent at Olive Garden. For its favorite child, Darden prescribed a regimen of heavy changes: A national remodel began last year, along with the rollout of an updated website, an online to-go platform, and a new logo. The changes will continue, with tabletop tablets expected to be in all locations by the end of 2015. Darden expects Olive Garden’s sales will increase 0.5 percent to 1 percent this year.
On the plus side, each of Darden’s other brands enjoyed sizable sales gains, most prodigiously Yard House (up 15 percent) and Eddie V’s (up 25 percent).
Darden also expects its Specialty Restaurant Group—Seasons 52, Yard House, The Capital Grille, Eddie V’s, and Bahama Breeze—to see a same-store sales increase of 3–3.5 percent in the current year. Davis adds that Darden has strategically positioned itself to have a portfolio of brands with untapped, raw potential, laying the groundwork for future success at the restaurant group. Positioning seems key to this success: Upscale steakhouses like Eddie V’s and beer-centric taverns like Yard House are experiencing a revival, led by brew-happy Millennials and a rejuvenation of consumer spending.
- Applebee’s: $4.57 billion*
- IHOP: $3.01 billion*
Boasting two mature brands, it’s little surprise that DineEquity’s properties continue to grow. Applebee’s was once again the top-ranking full-service chain in terms of sales, pulling in $4.57 billion in revenues last year, while breakfast heavyweight IHOP raked in a sizable $3 billion and improved its average check—not bad for a nearly 50-year-old brand.
DineEquity in 2014 generated positive traffic growth at IHOP for the first time in eight years, while increasing the brand’s systemwide sales 3.9 percent. Applebee’s increase of 1.1 percent in domestic systemwide same-restaurant sales resulted from an increase in average check, though Applebee’s also experienced a decrease in customer traffic for the year.
The challenge for these brands, Davis says, will be to ensure that transactions stay high—not just their average ticket or overall revenue—so that they grow by increasing the number of guests over time as well.
Remodels continue at both chains, and part of DineEquity’s desire is to put the bar emphasis back in Applebee’s grill and bar concept. That began in February of this year with the introduction of Snacks, Pub Plates, and Shareables, and will continue through an expansion of similar bar food offerings. Applebee’s is also addressing consumers’ health concerns with its Under 600 Calorie menu, and though IHOP also has a lighter set of dishes, the pancake brand is finding success with its motif of all-day breakfast indulgence.
- Outback Steakhouse: $2.488 billion*
- Carrabba’s Italian Grill: $714 million*
- Bonefish Grill: $622 million*
- Fleming’s Prime Steakhouse & Wine Bar: $275 million*
- Roy’s: $71 million* (sold in January)
Growth was strong at Bloomin’ Brands in 2014 as total revenues increased 7.6 percent. In January, the restaurant group also shed its 20 units of Roy’s, a brand it acquired in 2000. While some restaurant groups are struggling with how to redefine their mainstay brands and increase relevance, Bloomin’ Brands is not struggling with those issues; instead, its primary concern is to find new avenues for growth. One of those is the rollout of a national lunch program at Outback announced this spring.
“It’s not going to be easy to crack, but I think there are ways Outback can offer a lunch item that still delivers on the experience,” Davis says. “The challenge is going to be that lunch is a crowded market.”
While Outback and Carrabba’s are Bloomin’ Brand’s two heavy hitters, the restaurant group says Bonefish Grill is its top domestic priority in 2015. In the next three to five years, Bloomin’ says it has the potential to add upwards of 100 Bonefish Grill units, developing beyond the Southeast. The company also sees potential growth for Fleming’s. In 2014, both Outback and Fleming’s experienced same-store sales growth above 3 percent.
Outside of the U.S., Bloomin’ Brands has targeted Brazil as its top international development priority. It sees the potential to increase the number of Outback locations to 100—there were 64 units in Brazil at the close of 2014—and plans to introduce Carrabba’s to the country this year as well.
Golden Gate Capital
- Red Lobster: $2.43 billion
- California Pizza Kitchen: $713.9 million
Golden Gate has made strategic moves since acquiring Red Lobster last summer, beginning with a departure from the brand’s price promotion strategy and all-you-can-eat offerings. It also introduced a new menu in November to appeal to a broader range of customers, adding new dishes like Wood-Grilled Lobster Tacos and on-trend items such as the Crispy Shrimp Lettuce Wraps.
Red Lobster’s target demographic is Middle America, though Davis adds that like everyone else, the brand is trying to shift its market younger, hence the more adventurous menu. “The big challenge is that Red Lobster has to stick with the brand DNA, and it can’t push too far,” he explains. Red Lobster’s sales dipped 0.5 percent in 2014.
Golden Gate is also doing well with its slightly more upscale California Pizza Kitchen, which posted 3.7 percent sales growth last year. The brand regularly releases seasonal menus and in December began testing new décor—with reclaimed wood, natural stone counter tops, and an herb garden.
- Chili’s Grill & Bar: $3.54 billion
- Maggiano’s Little Italy: $391.2 million
Chili’s hunkered down on differentiation in 2014, seeking to separate itself from the casual-dining pack by leaning on its Southwest roots. The brand debuted an enhanced Mexican platform called Fresh Mex, which includes guacamole prepared table-side, and guests can expect to see new Fresh Mex items as well as improved food quality this year. Ziosk tablets also were seated at Chili’s, while the restaurant further invested in its loyalty program, to-go business, and online and mobile ordering platforms. This year, Brinker says an opening on the Las Vegas Strip is in the plans.
“Chili’s, as much or more than any of the other chains, is seeing the opportunity in this huge quick-service/fast-casual market, and is trying aggressively to get some of that business,” Davis says, referencing Chili’s Express.
After five years of stagnation, Maggiano’s began opening new restaurants in 2014. The two latest units are a smaller prototype than usual, with a strategically sized kitchen and no banquet spaces. Brinker plans to add four new units this year. Another focus at Maggiano’s was the Lighter Take menu, which cut one-third of the calories in dishes such as Chicken Parmesan and Fettuccini Alfredo.
Sun Capital Partners
- Friendly’s: $384 million
- Johnny Rockets: $215.8 million
- Bar Louie: $191.5 million
- Smokey Bones: $178.2 million
- La Place, Fazoli’s, and Restaurants Unlimited, a collection of various restaurants, completes the Sun Capital portfolio.
Johnny Rockets continues to be a strong performer for the global investment firm, which acquired the brand in 2013. This year the brand has made an agreement to enter China with 100 stores over the next 10 years, building off last year’s development of a quick-service, drive-thru version of the brand.
“Johnny Rockets has a strong brand and people love it,” Davis says. “Whether full-service is integral to that brand, I’m not sure. If it can still deliver the designer kicks, the good food, the shakes, and do it more efficiently and faster, the customers [could be] just as happy.”
Smokey Bones, meanwhile, announced it would open three new restaurants in 2015—the first new units since 2006, which will come with a new design and a modernized interior. And Bar Louie continues to be a hip place for young customers, achieving 14.1 percent sales growth last year.
The Cheesecake Factory
- The Cheesecake Factory restaurants: $1.79 billion*
- Grand Lux Cafe: $120 million
- Also owns one RockSugar Pan Asian Kitchen in Los Angeles.
Continuing to open new restaurants and grow comparable sales at a steady pace, Cheesecake Factory opened 10 company-owned stores in 2014, including several in new markets. Restaurants that opened in the past three years continue to deliver 10 percent higher sales per square foot compared with the company average, and dessert sales continue to range between 15 and 16 percent of restaurant sales. The company is still working toward its goal of 300 company-owned locations in the U.S.
Cheesecake Factory is consistently ranked on consumer favorite lists, but it’s not content to simply rest on its laurels; the brand is testing mobile payment in restaurants through a proprietary branded Cheesecake Factory app.
“What it’s selling is a good time and that it’s a special place, and I think that really works for them,” Davis says. “Their challenge in this marketplace is going to be one of cost and keeping profit margins up in a market that is, to some extent, price-driven; they’re still competing in a realm where a lot of competitors are offering values.”
- Morton’s The Steakhouse: $270 million
- McCormick & Schmick’s: $262.7 million
- Rainforest Café: $227.8 million
- Saltgrass Steak House: $221.9 million
- Claim Jumper: $210 million
- Bubba Gump Shrimp Co. Restaurant & Market: $208.7 million
- Mastro’s Restaurants: Chart House: $128.4 million
- Landry’s Seafood: $67.4 million
- The Oceanaire: $63 million
Landry’s owns many high-end restaurants in the U.S., and growth strategy appears to revolve around strategic acquisitions. In November, Landry’s acquired the pair of Mitchell’s brands—18 locations of Mitchell’s Fish Market and three Mitchell’s Steakhouses—from Ruth’s Hospitality Group for $10 million. McCormick & Schmick’s and Morton’s remain its calling cards, while less-affluent brands such as Saltgrass and Chart House continue to perform well. In the near future, Landry’s may focus more on awareness of some of its casual-dining brands, Davis says, noting that chains such as Saltgrass, with 52 units, clearly have successful distribution but aren’t doing as much advertising.
Sentinel Capital Partners
- TGI Fridays: $1.6 billion
- Huddle House: $240 million
Global hospitality and travel company Carlson sold TGI Fridays to Sentinel in May 2014 for an undisclosed amount, scooping up the troubled neighborhood bar concept. Sales slipped 1.5 percent while unit count dwindled 2.8 percent.
TGI Fridays’ strategy of wanting to be the best corner bar is effective for some brands, Davis says, but poses a challenge for TGI Fridays itself. “There are new chains out there doing that,” he explains, “and they do it really well. Then you’ve got Fridays trying to compete against that—not that it can’t do it, but I see big challenges. Certainly it has a large national footprint and tons of awareness, but it’s always hard for a national chain to win on being local.”
Despite closing 11 locations, Huddle House enjoyed moderate growth, and is continuing to evolve and differentiate through its real estate strategy. Having focused on small towns in the South and Midwest for 50 years, Huddle House is slowly entering more urban markets in other regions, such as New York state and New Jersey.
American Blue Ribbon Holdings
- O’Charley’s: $517.8 million
- Village Inn: $347.4 million
- Ninety Nine Restaurants: $280 million
- Max & Erma’s: $128 million
- Bakers Square: $79.2 million
Leading O’Charley’s and Northeast regional player Ninety Nine Restaurants, American Blue Ribbon’s strength is that it purchases older concepts and refocuses them on what made the chain great to begin with. O’Charley’s managed to grow sales 2.9 percent last year at a time when traditional casual-dining restaurants are struggling, while Village Inn boasted a 5 percent sales increase.
Of course, ABRH still has its struggles: Max & Erma’s sales dipped 4.5 percent and Bakers Square’s dipped 1 percent. But for the most part, the restaurant group has found success by remodeling or rebuilding stores to revitalize old brands—something Darden, Golden Gate, and Sentinel may want to take note of.
“You can’t change your stripes; you really do need to be who you are,” Davis says. “You may need to do it better or differently—and in all the cases, when you look at the chains American Blue Ribbon has purchased, it’s done just that.”