Casual Dining Leverages its Assets

dish on white ceramic plate

Casual dining concepts have seen 58% less traffic since the start of the pandemic, whereas fast food restaurants only experienced a 30% decrease, according to a report from TOP Data.

However, staples in casual dining, including Applebees, Chilis, and Olive Garden, as well as chain steakhouses like Texas Roadhouse, are beginning to dominate America’s return to sit-down restaurants. In order to achieve this, chains have had to pivot to solutions like curbside pickup, makeshift drive-thrus, and grocery sales, reported Forbes (Aug. 13).

For Chili’s and Maggiano’s Little Italy parent Brinker International, a virtual brand was an emerging opportunity. During Brinker’s fourth quarter earnings call, CEO Wyman Roberts announced the launch of It’s Just Wings in late June, which marks the company’s first virtual brand—operating out of existing Chili’s and Maggiano’s locations. Same-store sales of company-owned Chili’s restaurants themselves fell 32.2% during the recent quarter, and dropped 66.7% at Maggiano’s restaurants, reported MarketWatch (Aug. 12).

It’s Just Wings offers three styles of wings—boneless, bone-in, and smoked—smoked in-house. Each order includes curly fries and ranch sauce, with 11 additional sauce choices available. The CEO claims the concept hasn’t been done by anyone else in the segment at this scale and expects the brand to exceed $150 million in its first year, “which would secure It’s Just Wings a spot in the top 200 restaurant brands.” It’s Just Wings is facilitated by the company’s exclusive partnership with DoorDash, which was announced last summer.

For Brinker, the idea of a virtual brand was in the works for about two years when the company put a small innovation team in place. Roberts said the team is tasked with looking at opportunities that can grow the company and drive it forward, ideas like food trucks and shared kitchens.

“We’ve tested some of those things and it’s clear to us the bigger opportunity is to leverage the assets we’ve already invested in,” he said.

Euromonitor expects a $1 trillion ghost kitchen market globally by 2030, which could replace up to half of all dine-in volume as early as 2022. As consumers rely more on delivery, existing companies are more likely to take advantage of their current space to reach them this way.

“This whole idea that casual dining is overcapacity, we want to turn the tables on that. It’s just underutilized. Leveraging those assets is our primary thought right now,” Roberts said.

Meanwhile, FAT Brands Inc. will pay about $25 million to acquire the Johnny Rockets brand, reported The Wall Street Journal (Aug. 13). Johnny Rockets has about 700 locations.

FAT Brands is betting that owning multiple chains will be valuable when casual dining recovers. Sales have already jumped in some markets thanks to outdoor seating and delivery, according to CEO Andy Wiederhorn.

“If working from home becomes a bigger component of daily life, that just adds to the demand to be able to socialize in some way,” he said.

Wiederhorn also noted that FAT Brands would consider bringing more casual dining brands into a portfolio that includes Fatburger and Hurricane Grill & Wings. He added that, by buying regional chains, FAT Brands can gain scale and negotiate better deals for advertising and supplies.

“There is an opportunity now to take casual dining chains and get a consolidation of similar concepts,” he said.