Casual Dining Is Dying - TGI Friday's On Life-Support

The very worst place to be in the restaurant business today is a full-service casual dining restaurant with a check average below $20. The lunacy we’re witnessing with the TGI Friday’s $10 bottomless appetizers promotion is one of many flagrant indicators that casual dining chains are desperate and disillusioned regarding market dynamics.

Casual dining chains are collectively losing hundreds of millions in system-wide sales to fast casual chains like Chipotle, Panera Bread, Starbucks, Five Guys and dozens more emerging players that are rocketing up the chain restaurant sales rankings at their expense. For the last decade, the restaurant industry's tectonic plates have been shifting at a very rapid place, putting multi-billion dollar restaurant chains on the brink of disaster. Many once beloved brands - like Chili’s, Applebee’s, Red Lobster and several other such chains - are set to expire and will disappear in the not too distant future.

Fast casual currently represents around $30 billion of the $680 billion in U.S. restaurant industry sales, but it is a category projected to reach more than $100 billion within the next decade. Essentially, fast casual chains – a hybrid restaurant concept that blends the speed and convenience of fast food with the higher quality ingredients and comforts traditionally associated with casual dining – are cannibalizing an industry category. Desperate to minimize their losses, casual dining chain restaurant marketers seem willing to sell the soul of the brands they shepherd for a few consecutive quarters back in the black.

Here's what casual dining chains like TGI Friday's should do instead:

1. Play to Their Strengths: Casual dining chains cannot be as fast, as convenient, or lower-priced than fast casual chains and succeed long-term. It’s like an oil tanker being jealous of a speedboat and trying to go faster and outmaneuver rather than leveraging its core strength and doing what the speedboat cannot do. If you are in charge of a casual dining restaurant chain, embrace what your model offers – FULL SERVICE. You can afford to do it if you stop trying to compete on price. Charge what you need to charge to offer the level of service and guest experience fast casual can’t.
   
   
2. Remember Value Doesn’t Mean Discounting: Certainly, the consumer appreciates value. But value and discounts should not be confused for the same thing. In fact, in a recent study, guests were charged $4 and $8 for the same meal but those who paid $8 rated the experience higher than those who had paid half-price. Fast casual isn’t beating casual dining because it’s cheaper. Discounting is a shortsighted strategy that signals desperation.
   
   
3. Honor Their Brand's Beginning: National restaurant chains often forget what made them famous in the first place. Applebee’s is a perfect example. What made them an international chain was becoming known as the “neighborhood bar and grill.” Yet today, an Applebee’s in Kansas City is just as irrelevant and disconnected from its local neighborhood as the Applebee’s in Kuwait City. Applebee’s needs to focus on a roots-up approach to marketing in order to become relevant again block-by-block, neighborhood-by-neighborhood.
   
   
4. Innovate and Renovate: Apple customers expect the company to come up with some next generation technology that obsoletes the current version every twelve months or so. Meanwhile, many national restaurant chains haven’t substantively reimagined their menus, décor, or marketing strategies since before the iPhone was even invented. While one could argue that restaurant companies and tech companies are held to different standards, I would argue that they share the same customer. Casual dining restaurant chains need to speed up their plans for innovations and renovations to survive.
   
   
5. Don’t Look Desperate: TGI Friday’s is chumming the water with its brand. When a brand starts discounting and placating to the discount-minded, it signals to investors, employees, media, partners, and franchisees that it’s no longer appealing on its merits. It’s like saying, “Look, what we offer isn’t worth the price we ask for so we’re going to train you to pay attention to us only when we’re doing some deep discount ploy.” The fact is though, consumers willing to pay full price don’t like being around consumers who are only attracted by a discount. The two don’t mix well.

TGI Friday’s - like other equally desperate brands - seems decidedly willing to trade long-term prosperity for short-term traffic. An all-you-can-eat appetizer, in exchange for any crinkled $10 bill, is a bold bribe that will work in the short-term but will also as assuredly undermine the brand's future.

For more restaurant industry trends and insights visit www.aaronallen.com.