In this post, I wanted this discuss the dramatic number of Casual Dining restaurants we’ve been seeing closing up shop in the United States. Casual dining, like Applebee’s for example, have been getting crush and it appears it’s only going to get worse. Even more we’re going to discuss about why this is a big deal and why the average consumer should care.
What is happening to decimate the food industry?
Fewer and fewer people are eating out, especially at full service casual dining restaurants. There are several reasons for this.
The first is simply it is gotten too expensive to eat out. Typically, when restaurants are doing well, the economy is doing well. However, that’s clearly not the case. When going to a casual restaurant one can expect to pay quite a bit for even basic items. Case in point: I went to the Cheesecake Factory in North Carolina and ordered a cheeseburger with fries. It was $18. Even worse I got a soda and so did my wife- for two drinks it was $9. Price increases are pushing more of the middle to class to eat out less often.
One other important factor has to do with the experience. Today, one is often greeted by an unpleasant employee who provides a terrible experience. Even worse, is when one goes to pick up food or buys food for takeout an employee flips the screen around asking for a tip. This is a new phenomenon that seemed to arise during the pandemic. Still, the experience of dining out or even grabbing food needs to be a positive one and people should feel they are getting their money’s worth.
A Recent Report that highlights the problem
There was a recent report that came out in restaurant business magazine in April 2024. The article highlighted many things, but the key take away in this article is what the cost that one pays when dining out at a casual restaurant like Chili’s. It reported that the average person spends just under $15 when dining out. What’s really important about that number is that people perceive that they’re not getting good value from eating at casual restaurants.
In addition, the article talks a lot about what specific companies are looking to do in order to increase profit margins. For example, International house of pancakes or IHOP, are looking at things like bundles or special deals.
This raises the question why are casual restaurants struggling more than fast casual and fast food?
I think there’s a few reasons for this. One is that the prices of the food at fast food restaurants have gone up much higher. Fast food has gotten much more expensive in the last few years but people still buy it as often people need to eat on the go and sometimes prefer a brand they know.
In addition, many people prefer to sit down and eat a quick meal, rather than sit down with a full-service restaurant.
The second reason fast casual restaurants are hurting is the rise of fast casual dining that we’ve seen the last few years or really last decade. For example, restaurant chains like Chipotle and Chopt salad company give consumers an option eating something healthy at reasonable price compared to a full-service casual restaurant like Applebee’s. One thing to point out about fast casual restaurants, is that many of these restaurants locally source a lot of their ingredients. So, what goes into your food is usually much fresher than say from the Olive Garden.
A third reason is that many people sit down for a full-service meal is they’re going to want to eat something very nice. For example, they’re going to want to eat something like either filet mignon or a nice piece of fish. So, at an upscale casual dining restaurants one can get much better-quality food than casual dining restaurant. Not to mention, the service will almost certainly be better. As a result, people are deciding to eat out less and when they do eat out go for a much nicer meal.
It’s important to point out too that many people have also taken note of how many restaurant chains, have substituted to much lower quality ingredients in their food. For example, I’ve noticed Jersey Mike’s a year or two ago switched their cheesesteak beef to be something of much less quality.
Is casual dining a thing of the past?
In the 1980s and 1990’s casual dining restaurants like Applebee’s were very popular. It appears that customers preferences are changing though. We also saw in years past that there quite a number of buffets that were popular. We saw restaurants like Golden Corral and Old Country Buffett explode in popularity. However, today buffets have to be much smarter about how they operate. Many chains have closed down or dramatically reduced the number of stores. We saw Cici’s pizza struggle during Covid and I believe go out of business.
So, Did COVID cause this trend?
Even though the pandemic, really hurt casual dining restaurants, this trend or their declining sales began years before the 2020 pandemic. Of course, we all remember during the pandemic restaurants closed and those that could do takeout and did take out well did very well. Casual dining restaurants didn’t do as well because their food doesn’t transport as well compared to fast casual restaurants like Jersey Mike’s.
After the pandemic, fast food restaurants seem to recover pretty quickly as workers came back restaurants went back to normal operating hours and people who were frightened by Covid used the drive-through at places like McDonald’s and Burger King.
Companies struggling
There are many companies struggling such as Red Lobster. Red Lobster ran an all you can shrimp promotion that essentially crushed their business. Apparently, the promotion worked too well as a lot more shrimp was eaten than forecasted to be eaten. Now Red Lobster has reportedly considered filing for Chapter 11 bankruptcy
Still, we’re seeing more and more of these restaurants close. TGI Friday’s just closed a bunch of stores. Tijuana Flats Tex-Mex chain just declared Chapter 11.
Boston Market used to have 1200 stores. Now they have around 20, and their owner has filed for personal bankruptcy.
The list goes on and on and the message is clear. People don’t want to eat at these places.
What Will We See In the Future?
It seems like to me, many companies will simply go under while others will innovate and implement more robotics into the dining experience.
There’s a Mexican restaurant near my house that uses a robot to deliver food to your table. The robot doesn’t take your order, but it has several trays where food can be stored. In the kitchen, they will put the food on the trays and then the robot will roll to your table. There the waiter will pick up the food and set it on your table. It saves the workers quite a bit of work especially with big tables and when busy.
I expect that things like this will be the norm in the future. you might sit down at a table and order from a computer- this actually is already occurring. I expect to see things like this continue. Things like robot cooks as well. Overall, expect the experience to be less personal as restaurant chains need to cut expenses.
While no one has crystal ball, it’s evident the future will be very different in the casual restaurant industry
