The nation’s top 10 restaurant groups collectively managed more than $33 billion in 2012 revenues and more than 12,000 restaurants .
From DineEquity’s completed push to franchise 99 percent of the Applebee’s system to the retirement of venerable Ruby Tuesday executive Sandy Beall, America’s highest-performing restaurant groups made waves of strategic plays to bolster relevancy, heighten profitability, and attract guests.
A quick rundown of the key movers and shakers highlights how they are continuing to grab sales, share, and success.
Darden Restaurants
Strategic positioning: Entering 2013, Red Lobster steadied itself from past struggles, LongHorn continued thriving under national marketing and Darden’s managerial touch, and sales at The Capital Grille surged 14.2 percent. Olive Garden, the only weak link in the otherwise sturdy Darden portfolio, rebranded with new menu items and re-imaged restaurants.
“Darden is one of the best operating companies in the business. They know how to evaluate business and the consumer,” says Dennis Lombardi, executive vice president of foodservice strategies for WD Partners.
In July of 2012, Darden expanded its portfolio with the $585 million purchase of Yard House, a 39-unit chain boasting average unit volumes (AUV) of $8.4 million. While the move fits neatly into the existing Darden roster—joining other promising growth concepts such as Eddie V’s, Seasons 52, and Bahama Breeze—Piper Jaffray restaurants analyst Nicole Miller Regan sees another important, yet often overlooked, motivation—the creation of career-advancement paths.
“Darden needs growth concepts to keep their own people,” Regan observes. “Nobody wants to be the incubator of human capital.”
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*Technomic estimate / Source: 2013 Technomic Top 500 Chain Restaurant Report
Darden Restaurants
Bahama Breeze; The Capital Grille; Eddie V’s; Longhorn Steakhouse; Olive Garden; Red Lobster; Seasons 52; YardHouse
DineEquity
Applebee’s; IHOP
Brinker International
Chili’s Grill & Bar; Maggiano’s Little Italy
Bloomin’ Brands
Bonefish Grill; Carraba’s Italian Grill; Flemings Prime Steakhouse & Wine Bar; Outback Steakhouse; Roy’s Hawaiian Fusion
Sun Capital Partners
Bar Louie; Friendly’s; Restaurants Unlimited; Smokey Bones Bar & Fire Grill
The Cheesecake Factory
The Cheesecake Factory; Grand Lux Café; Rock Sugar Pan Asia
Landry’s
Chart House; McCormick & Schmick’s; Morton’s The Steakhouse; Rainforest Café; and numerous other brands
American Blue Ribbon Holdings
Bakers Square; Max & Erma’s; Ninety Nine Restaurants; O’Charley’s
Ruby Tuesday
Marlin & Ray’s; Ruby Tuesday; Truffles; Wok-Hay; Lime Fresh Mexican Grill
Golden Gate Capital
California Pizza Kitchen, On the Border
DineEquity
Mission accomplished: At the end of 2012, Applebee’s completed its multi-year process of selling more than 500 corporate restaurants to franchisees. Like IHOP, its DineEquity sibling, Applebee’s has now become a 99 percent franchised system.
“Now, our focus is 100 percent on franchisees and helping with the top and bottom lines,” DineEquity CEO Julia Stewart says.
By the end of this year, the majority of Applebee’s system—at least 75 percent—will have benefitted from the chain’s $225,000 per unit remodeling package. Stewart says operators of remodeled shops have already recorded single-digit comp sales improvement.
And as the world continues to re-engage with breakfast concepts, Stewart says DineEquity will energize IHOP with a reengineered menu, more impactful advertising, a focused strategy on optimizing media, and operational improvements for greater efficiencies.
Brinker International
On the rebound: In 2012, Chili’s sales grew 2 percent to an estimated $3.7 billion, thanks in part to Brinker’s ongoing remodeling of the brand’s restaurants and integrated value offerings into its core menu, highlighted by the popular “$20 Dinner for Two” promotion.
Regan says that Chili’s recovery provides an intriguing reminder to an industry sometimes quick to write off struggling concepts.
“Thirteen hundred stores are not going away overnight,” she says. “Brinker has shown that big, legacy concepts like Chili’s can be more flexible and nimble than people think.”
Bloomin’ Brands
Optimism reigns: On the heels of a 3 percent climb in sales from 2011 to 2012, Outback’s foray into lunch provides optimism that the steakhouse chain will generate even stronger unit-level economics in 2013 and beyond.
Furthermore, Lombardi predicts Bloomin’ will place increased emphasis on Bonefish Grill, a premium casual-dining concept that Lombardi calls “well thought out and well executed.” Last year, sales at the 174-unit chain jumped 11 percent to more than $512 million.
Sun Capital Partners
The rare breed: Sun Capital is an anomaly as a restaurant operator—a private-equity firm with a portfolio of nearly 1,900 restaurant locations crisscrossing restaurant segments.
The Florida-based firm, which has more than $10 billion under management, has a penchant for acquiring brands it believes have growth potential either through a turnaround and enhancement process—Smokey Bones Bar & Fire Grill being one example—or growth opportunities, such as the case with Bar Louie.
“[Sun Capital] isn’t the least bit intimidated [about acquiring] a brand not hitting on all cylinders,” Lombardi says.
The Cheesecake Factory
Celebrating the sweet spot: The entire Cheesecake enterprise—which includes Grand Lux Café and Rock Sugar Pan Asia in addition to the group’s namesake concept—captured a third consecutive year of positive year-over-year comp sales and traffic increases in 2012.
With positive brand equity and same-store sales gains, Regan says Cheesecake is cooking up a “perfect recipe” with its signature concept, which is augmented by healthy third-party retail sales that underscore the brand’s strength.
Next up: International expansion. Three Cheesecake Factory restaurants opened in the Middle East last year, and a Cheesecake unit is slated to debut in Mexico City early next year.
Landry’s
Juggling concepts: While many restaurant groups concentrate on core brands, Landry’s covers more than 39 different concepts across more than 400 locations, which can pose challenges to field-level management and brand relevancy.
“Like a restaurant with too many menu items, it becomes hard to execute well on all of them,” Lombardi says.
The company recently acquired Morton’s The Steakhouse, which ended 2012 with sales of $265 million—a 4.5 percent drop from 2011. McCormick & Schmick’s, another banner brand in the Landry’s portfolio fell an even more alarming 9.2 percent from 2011, recording sales of $287 million last year vs. $316 million in the year prior. And the fun-loving, casual Rainforest Café also plummeted 6.5 percent, dropping to sales of $257 million.
On the flip side, two of the group’s chains performed admirably: Chart House revenues climbed a modest 1.6 percent in 2012 to $128 million and Saltgrass Steakhouse made a notable 4.2 percent leap to hit $197 million.
Landry’s also operates premium stand-alone concepts, including Denver’s Simms Steakhouse, Austin, Texas’ Willie G’s, and the Grotto in Houston, Las Vegas, and Atlantic City.
American Blue Ribbon Holdings
Brand reinvention: With O’Charley’s and Ninety Nine Restaurants in the strained casual-dining segment, American Blue Ribbon faces an uphill climb to extract quality, unit-level economics.
“The good news is that both concepts have the average unit volume to perform well,” Lombardi says. “But as with many restaurant groups, leadership will have to watch how much energy and attention they devote to smaller, regional concepts that can easily claim more resources than they should.”
That said, O’Charley’s recently announced renovations to the brand, including a new logo, new look in the restaurants, and a revamped menu. Mickey Mills, who took over as O’Charley’s president in February, says 40 to 50 locations will be remodeled this year.
Ruby Tuesday
A changing of the guard: With the retirement of longtime executive Sandy Beall, who created and built the Ruby Tuesday chain over four decades, former Darden CMO, J.J. Buettgen, takes the helm. His first bold move: The closure of Marlin & Ray’s, Wok Hay, and Truffles restaurants.
It’s a clear sign that the Ruby Tuesday’s core full-service brand will receive leadership’s primary attention, along with the company’s 2012 acquisition of the fast-casual concept, Lime Fresh Mexican Grill. In 2013, the company has said it will open eight to nine company-owned Lime Fresh units. Franchisees have announced plans to open one domestic Lime Fresh, and international franchisees have announced plans to open four to five new units, two of which will be Lime Fresh and the remainder will be the signature Ruby Tuesday brand.
Golden Gate Capital
Smart money: Another private-equity investor that’s partial to consumer brands in the retail and restaurant space, Golden Gate Capital lays claim to popular casual-dining concepts California Pizza Kitchen and On the Border. Both concepts date to the 1980s, and both are continuing to expand their presence throughout the U.S. as well as venturing into international markets.
Most recently, California Pizza Kitchen fortified its offering with the launch of a new beverage series that includes wine flights, new craft beer selections, and an innovative Diet Pepsi mixology program. Each progressive wine flight includes a sampling of three 3-oz. pours for $12 and guests can choose from a list of Whites, Reds, and Adventurous wines. The craft beer list was expanded to include Crispin Artisanal Cider, Newcastle Brown Ale, Arrogant Bastard Ale, and Rogue Brutal IPA—all served in 22-oz. bottles. The Diet Pepsi mixology program rounds out the bar scene with lower-calorie combinations for cocktails.
