And then there's the sudden one-two punch of off-premises and trying to figure how sticky the business really is.
Q4 (announced last week) sales outside the four walls mixed 33 percent at Olive Garden, 19 percent at LongHorn, and 16 percent at Cheddar’s Scratch Kitchen thanks to technology enhancements to online ordering and the introduction of to-go capacity management and the “Curbside I’m Here” notification, the company said.
In a telling remark, CEO Gene Lee said there hasn’t been cannibalization with dine-in, meaning, off-premises customers are using the restaurant as a home meal replacement as opposed to replacing a dine-in visit. Again, it's an introduction of Olive Garden to a wave of new guests brought on by COVID. Sixty-four percent of Olive Garden’s to-go orders were placed online in Q4, and 14 percent of Darden’s total sales were digital transactions.
Earlier in the pandemic, Lee guessed off-premises would flame out in time for casual-dining users. "I think you're right, and I was wrong," he told investors last week, "that some of this off-premises was stickier than what we thought. And I think a lot has to do with the capabilities we created through the pandemic, and make it a lot less friction. But I'm searching, we're searching, for equilibrium, understanding when and where the business is going to is going to come from. I think we're still in the early innings of that. I think we still got a lot more upside."
Texas Roadhouse, like Darden, didn’t invest in third-party delivery; it poured resources into carryout and curbside. Systemwide, to-go pushed more than $23,000 per week in Q1 for the steakhouse leader, or 18.7 percent of total sales. The brand rolled an app upgrade, which made it easier to order and pay for to-go, get on a waitlist, and use offers and gift cards for pickup. It implemented pickup windows in some stores and tested “a couple” of drive-up windows (not drive-thru) where customers can text, stay in their car, and grab food from the hand-off point.
Back in February, Outback said 80 percent of its customers for virtual brand Tender Shack had never ordered from any of Bloomin’s legacy brands, Carrabba’s, Fleming’s, and Bonefish Grill included.
At Applebee’s, off-premise comparable same-store sales in Q1 increased by 122.7 percent. In March and April, restaurants averaged $54,000 per week. As dine-in came back, off-premises volume maintained between $17,000–$18,000.
This past April, Applebee’s sales mix consisted of 67 percent dine-in, 20 percent Carside To-Go, and 13 percent delivery.
The picture is clear, and it's a casual-dining conversation that lends credit to the benefit of scale again—something that wasn’t as vivid in a pre-COVID operating arena. But then there’s this, as well: “The convenience driven occasion has very clear drivers, but that dine-in occasion is about connection, it's about indulgence, it's about being served and being relaxed and a little escape from home,” brand president John Cywinski said in May. “We love our position on that front.”
Is a casual-dining resurgence in order? Have customers started to give some of America’s iconic sit-down brands credit where they weren’t before? Did COVID, and its after-shocks, breathe life into legacy dining?
The American Customer Satisfaction Index released its 2020–2021 Restaurant Study on Tuesday. The company based the results on interviews with 19,423 customers. They were asked to evaluate recent experiences with the largest companies in terms of market share, plus an aggregator category consisting of “all other” (or smaller) companies in those industries.
It’s been quite a stretch for LongHorn, which shares the top spot with Texas Roadhouse and sister brand Olive Garden. The 533-unit chain captured a record $118 million in segment profit in Q4, or a 982.6 percent rise compared to 2020. The concept also saw same-store sales grow 9.9 percent, 16 percent, and 15.5 percent in March, April, and May, respectively.
LongHorn was, in actuality, better suited for COVID shifts than Olive Garden in some respects. If for no other reason than logistical layouts. Olive Garden typically has twos, fours, and sixes in regards to seating options. It offers tables for large parties and boasts an average party size of 2.3. LongHorn, though, is essentially one big box. Olive Garden is comprised of rooms, nooks and crannies, and shorter booth backs. And thus, it couldn’t create the same yield adhering to local jurisdictions as LongHorn out of the restrictions gate, or develop the same percentage occupancy.
As a result, off-premises sales boosted LongHorn’s recovery by hitting $28,653, or 41 percent, of pre-virus volumes by the third week of April 2020—nearly four times higher than early March. And it was also starting from a lower level than Olive Garden, which had its own fulfilled delivery program and a more concerted to-go operation in general.
Either way, you can credit LongHorn’s rise to improvements made well ahead of COVID. LongHorn headed into 2019 as a tighter, more operationally sound concept. It spent the previous year slicing its menu more than 30 percent, removing complexity throughout the system, increasing the size of steaks, and investing heavy in quality.
Darden COO Rick Cardenas, when asked about LongHorn’s run, said it began in earnest about five years ago “since Todd’s come back and he and his team have just done a great job of improving the value perception.”
After a two-year stint as chief operations officer of Ruby Tuesday, Todd Burrowes returned to LongHorn as president in July 2015. He served as EVP of operations at the steakhouse from May 2008–June 2013 and was a member of Darden’s team since 2002.
Burrowes’ homecoming ran alongside Darden’s early efforts into a full-throttle simplification project, or back-to-basics operating model, as the company refers to it. In 2014, when Darden began the process, it was designed around a rather uncomplicated point: Grow guest counts with better execution through simplification. A focus on food, service, atmosphere and stronger employee engagement.
LongHorn, in particular, worked to create promotions that leveraged core menu items that shift mix favorably. The brand, in another separator from Olive Garden, benefits from a strong add-on sales business.
Back in Q3 2019, as a case point, LongHorn saw inflation tick up, mainly due to beef. Cost of sales as a percentage was unfavorable compared to the rest of Darden’s concepts, by about 10 basis points. However, LongHorn’s quality efforts pushed more customers toward higher-end steaks, which boasted a higher cost of sales. A T-bone steak versus a sirloin, and so on. LongHorn’s investments shifted the conversation. Darden nudged customers where it wanted.
That quarter, LongHorn achieved a record high steaks cooked correctly score. The fact that’s a metric at Darden tells you all you need to know.
And all of these held up well during the COVID hammer.
The good news for full-serves is that customer experience benchmarks were up across the board. It appears customers appreciated the COVID lengths brands had to take.
"People are slowly starting to enjoy sitting down at restaurants again, but don’t discount the value of convenience,” David VanAmburg, managing director at the ACSI, said in a statement. “During the pandemic, folks got a taste for what it’s like to have food from their favorite restaurants delivered right to their door. And now that they’ve gotten used to this service, there’s no going back. Restaurants need to continue to give customers all the options they’ve become accustomed to over the last year and a half. If not, they might grab a bite somewhere else.”
And further proof of that here:
What appears clear is guests are eager to get back to dining out. It’s now up to brands to meet that demand with something that lasts beyond a trial visit. And in a lot of ways, this is an opportunity inspired by the pandemic. A chance to reset.