Maggiano's Little Italy
Much has been written about whether or not casual dining is witnessing a resurgence. The sales figures reflect that to a degree. This past year, according to TDn2K’s Black Box data, fast casual and casual dining turned in the best same-store sales growth of any segment. But there’s no denying part of that boost came from what TDn2K called “a previous year of abysmal results.” Those segments were also the worst performers in 2017. So the fact casual dining had soft comparisons to build on definitely didn’t hurt the general “comeback” storyline.
Not withstanding, though, casual dining turned in a promising 2018 from a variety of angles. At least compared to where it was headed—2017's results didn’t really suggest things were going to improve. Innovation needed to unfold, especially for legacy players, and, across the board, it mostly did thanks to tech improvements, simpler and more defined menus, loyalty pushes, and additional, incremental channels. Moving forward, declining traffic and increased labor costs are going to challenge even the most efficient brands and lead some restaurants to the brink, as you’re seeing with the increased rate of bankruptcies. But those who figure it out, relatively speaking, are going to thrive. Brands that can “hire, train, and retain frontline employees to bring their brands to life are going to win,” Darden CEO Lee said earlier in the year. Higher prices and additional sales outlets, such as to-go and delivery, helped drive results. Meanwhile, with average check growth sub-2 percent (during the previous three years, average guest check growth never topped 2.5 percent, according to TDn2K), larger restaurant brands upped ad spend as they became more value and promotional focused, and aggressive in price, which is something smaller restaurants couldn’t compete with on scale.
And what about the less measurable vitals? Market Force Information’s annual study—one of the most cited in the industry—showed customer satisfaction levels are on the rise across casual dining, in nearly every category. Additionally, innovative chains are putting serious heat on larger brands. You could argue that’s one of the reasons bigger chains are generating better guest scores—they are reacting to up-and-comers and micro-chains, kind of like how fast casual spun the quality wheel for fast food a few years back.
“Stats show that casual dining hasn’t suffered the same sales slump as the fast-casual sector, but they’re not completely out of the woods,” Brad Christian, chief customer officer for Market Force, said in a statement. “To continue same-store sales growth, casual dining chains rely on repeat visits from loyal guests, particularly since they’re more expensive than fast casual and [quick-serves]. These brands should be looking at options such as third-party delivery services, additional promotions, and simplifying the ordering process with tablets to continue their strong returns.”
The study polls more than 6,700 consumers to reveal America’s favorite casual brands in seven categories, including menu, pizza, breakfast, steakhouse, Italian, and seafood.
Let’s dive into the results.
FLICKR: JAZZ GUY
The overall champion
Brinker’s upscale Maggiano’s Little Italy took this year’s title with a Composite Loyalty Index Score of 64 percent. It just edged Texas Roadhouse (63 percent). First Watch and Cracker Barrel tied for third with 58 percent, while Cheddar’s Scratch Kitchen came in at No. 4 at 57 percent. Last year’s top chain, Bloomin’ Brands’ Bonefish Grill, fell four spots to tie for fifth alongside Darden’s Longhorn Steakhouse and quick-serve Blaze Pizza.
Check the full list below.
Market Force Information
Additional charts throughout the story will spotlight where 52-unit Maggiano’s shined. A couple of quick notes about the brand, though. In July, the Chili’s parent named Kelly Baltes EVP and president of the Italian chain. Baltes previously held leadership positions at Cheddar’s, Red Lobster, and Olive Garden. He was chairman and CEO at Cheddar’s, helping double its footprint. Baltes’ time with Red Lobster was spent as EVP of operations. The move was a strong one for Brinker.
"It's an incredible honor for Maggiano's to be named America's Favorite Casual-Dining Chain," Baltes said in a statement. "At Maggiano's, our passion is to make our guests feel special, no matter the occasion. The attention to detail that's executed by each of our talented executive chefs is incomparable, ensuring that we always serve the best dish possible. Additionally, all of our teammates go above and beyond to create a level of service second to none. It's exciting to know that our guests appreciate our dedication to exemplary service, craveable food and memorable experiences."
Maggiano’s net comps sales were flat, year-over-year, to start fiscal 2019. One positive indicator: To-go business was up 20 percent on the strength of its double-your-portion carryout strategy.
General menu chain visits on the rise
A very positive result in this year’s survey: general menu results rose and more repeat guests came through the doors of casual brands. Eighty-six percent of those polled had dined at a general menu restaurant in the past 90 days, up from 79 percent in 2017—the largest increase of any category. (note: general menu is a term that reflects much of the casual-dining space).
Market Force Information
The improvement stretched across the board. Satisfaction scores for nearly all of the general menu chains studied rose significantly over the previous year. Cracker Barrel gained 12 percentage points to overtake Cheddar’s for the top spot, and it also ranked first for friendly service and atmosphere. This is a major win for Cracker Barrel, which struggled with traffic throughout 2018. Same-store sales declined 0.4 percent year-over-year in Q4 and guest traffic fell 3.5 percent. And Cracker Barrel lamented a decline in guest experience metrics due, in part, to a lack of emphasis its value proposition. “Service and hospitality has always been foundational to the Cracker Barrel brand,” CEO Sandy Cochran said in Q4. “We continue to believe that it is a differentiator and a strength, but we must do a better job in consistently delivering this experience our guests expect.” Market Force’s data shows Cracker Barrel is on the right track to fixing some of these concerns.
Cheddar’s led on food quality, fast service, and value. BJ’s, which saw an 11-percentage point lift, ranked third. Hooter’s also stood out thanks to a 12 percentage-point jump over 2017, ranking best on delivering an experience, rather than just a transaction.
Cheddar’s is an interesting note given its top-line struggles in past quarters. Darden’s integration process has taken some time to resonate with the 158-unit brand. Its comps fell 4 percent in Q2, marking six straight negative periods. However, Darden said guest satisfaction scores improved, especially on Friday and Saturday nights now that “we have managers positioned in the right place,” Lee said.
In December, Lee said guest satisfaction scores lifted for the last six months and were at the highest they’ve been since Darden acquired Cheddar’s for about $780 million in April 2017.
Market Force Information
The breakfast boom
First Watch cracked Market Force’s study for the first time. Overall, breakfast and daytime-only chains showed growing popularity. This is a trend we’ve explored before and it’s not slowing down (a 2017 study on breakfast consumption saw dining out rise in every segment).
First Watch won the category with a score of 58 percent. It dominated in areas such as quality and healthy food, although it ranked last in value. Bob Evans was second at 51 percent, with Waffle House coming in at No. 3 with 49 percent. Village Inn, the 2017 leader, dropped 8 percentage points to rank sixth and slip past Denny’s.
Market Force Information
First Watch, which is only open for breakfast and lunch and closes at 2:30 p.m., now has 283 eateries, and opened close to 60 new stores in 2018. Its president, Chris Tomasso, who took the CEO job in June, told FSR that offering two meals a day enables it to be a specialist. “We’re not trying to be all things to all people,” he said. Advent International, a firm with investments in Party Cit, and The Coffee Bean & Tea Leaf, made a majority investment in First Watch in late 2017.
Market Force Information
Texas-sized winner
Texas Roadhouse is as consistent as it gets. For the fourth straight year, the chain earned the top spot among steakhouse chains. Its 63 percent score was an improvement from last year’s 47 percent mark. LongHorn landed in second again at 56 percent, while Outback came in at No. 3 (50 percent), and recently dealt Logan’s Roadhouse was fourth with 47 percent. Texas Roadhouse won on value and service. Outback was found to offer the healthier choices.
Texas Roadhouse’s value discussion is shifting a bit. The 544-unit chain has continued to post healthy figures—5.4 percent same-store sales and 4 percent traffic in Q3—but remains challenged by labor costs. In response, Texas Roadhouse, which has turned in a ridiculous 35 consecutive quarters, or nearly nine years, of comparable restaurant sales growth, said it would raise prices to offset some of the cost burdens. A planned 1.7 percent hike was expected for this past November and, depending on how much inflation Texas Roadhouse experiences going forward, could happen again during the first half of 2019, CEO Kent Taylor said in October.
Texas Roadhouse reported a significant drop in restaurant margin of almost 1.6 percentage points to 16.2 percent last quarter. And the hit would have been worse if not for lower taxes related to the tax reform of late 2017, which helped trim tax expense by more than half compared to the previous year’s third quarter. In Q3, labor as a percentage of total sales increased 194 basis points to 33.5 percent, and labor dollars per store week were up 10.5 percent compared to the prior-year period.
Texas Roadhouse has stood firm by the long-term view that service and hospitality, as well as consistency, win at day’s end. So the chain will stick to its staffing guns to guard that fact. It will just need to balance the labor battle moving forward, especially as minimum wage hikes spread around the country
Olive Garden
Maggiano’s keeps the Italian run going
Maggiano’s topped the Italian category for the fifth straight year. Its 64 percent is a 4-percentage point lift over last year’s results. Bloomin’s 224-unit Carrabba’s was second with 54 percent, while Darden giant Olive Garden clocked in at No. 3 with 50 percent. Maggiano’s won on food quality and value.
Carrabba’s reported same-store sales declines of 0.6 percent in Q3 following the same drop in Q2. It was up 0.9 percent to start the fiscal year. Bloomin’ is working on improving the guest base at its Italian brand by slicing discounting (37 percent just this past year alone). It said it wants to rebuild traffic based on superior food and execution, not deals. Carrabba’s also shifted its marketing strategy from more complicated and disruptive LTOs to “excellent execution of the core menu and special occasions,” CEO Liz Smith said last quarter.
“We are also targeting more proprietary programs, such as our successful wine dinners and Amore Mondays as well as growing off-premises via Family Bundles and delivery platforms to drive healthier traffic,” Smith added.
It will be interesting to see if Carrabba’s rises in next year’s rankings after these guest-driven changes.
Olive Garden, meanwhile, continues to churn along. With same-store sales growth of 3.5 percent in the second quarter of fiscal 2019, the classic 858-unit chain has reeled off 17 consecutive periods of positive gains. Guest counts did fall 0.8 percent, though. But Darden, given its position of market share strength, took this hit intentionally in some ways as it stripped incentives from Olive Garden’s promotional calendar. It ran 16 fewer weeks last quarter and that included some weeks where Olive Garden presented multiple offers last year. “We felt it was—with the demand environment being strong—it was a good opportunity to remove some of that incentive so that in the future, if need be, we could add it back in,” Lee said.
In other terms, watch out when Olive Garden decides to inject these promotions back in.
Pizza shifts
Blaze and Mellow Mushroom entered the rankings for the first time. They beat Pizza Hut and California Pizza Kitchen. Blaze won in fast service, value, and healthy options. Blaze’s 300th store opened in Miami in November, and the company said it would open a new restaurant every five or six days this year, with the 500th location probably arriving by 2021, which is pretty crazy. Here’s a deep dive into the brand’s history and what’s to come.
Market Force Information
The buffet scores
Buffet growth overall has been stagnant—just 24 percent of respondents said they dined at one in the past 90 days (the same as 2017. Golden Corral, however, was the clear leader, followed by Cici’s Pizza and Pizza Hut, whose red roofs are on the decline stateside with dine-in sales accounting for less than 10 percent of total sales at the YUM! Brands chain. Golden Corral topped variety and healthy margins handily. Cici’s won on value.
Seafood slugs through
Seafood restaurants failed to increase visitors over the previous year as well. In fact, it had the fewest visits of any category in Market Force’s study. Bonefish Grill led the category at 56 percent despite dropping 12 percentage points from the previous study.
It edged Pappadeaux (55 percent) and Red Lobster (48 percent). Bonefish won on atmosphere and cleanliness, as well as food. That’s the segment it made the biggest leap over Red Lobster.
Bonefish’s same-store sales lifted 1.8 percent in Q3 after a 1.4 percent increase in Q2. Smith said Bloomin’ continues to migrate marketing resources away from national toward impactful local programs in an effort to make Bonefish the unchained chain of choice. It’s on track of record profitability as well, Smith said, thanks to less discounting and healthier traffic.
Smith added that Bloomin’s effort to simplify execution, while investing in food and the dining experience “returned the brand to its polished casual roots, known for fresh fish, innovative drinks, and superior service.”
In October, Bonefish rolled out a new brunch menu and expanded brunch to Saturday. “We continue to migrate our marketing resources away from national toward more impactful local programs,” Smith said. “This local philosophy helped define Bonefish as the 'unchained chain' and it's paying off in sales and profitability.”
