Opinion: Why Casual-Dining Restaurant Chains are in Crisis

red chairs on a restaurant

Casual dining is about to implode. It has already started.

Full-service restaurants that were popular in the 1980s and ‘90s – old brands – I think they’re going to be cut in half. TGI Friday’s just closed a bunch of stores. Red Lobster has reportedly considered filing for Chapter 11 bankruptcy. They became irrelevant.

Similarly, the Tijuana Flats Tex-Mex chain recently declared Chapter 11, as did ice cream chain Oberweis Dairy. Boston Market’s owner has filed for personal bankruptcy.

The problems of struggling restaurant chains often stem from sales problems. You can only do shenanigans like all-you-can-eat shrimp for so long before it burns you. If customers are only coming to your restaurants because you’re doing loss-leaders, then you’re losing money to bring them in.

Because those aging brands have become irrelevant, they’re rarely busy and, as a result, they start throwing low prices around. And that compounds problems, because then those restaurants have a hard time keeping quality employees. When you start offering deals like all-you-can-eat shrimp, now you’re going to get a bunch of customers to come in only because of that discount offer, so those restaurants must start utilizing B- and C-level staffs – because great waiters don’t want to work shifts during discount promotions, since they can’t make any money.

Restaurant operators need great, energetic staffs, but you can’t pull that off when you’re struggling.

If modern consumers don’t like your restaurant chain much anymore and you’re not busy, it’s tough to attract quality employees. And a key reason why people go out to a full-service restaurant is because they want an experience. Well, you won’t get that at a poorly staffed business. So, everyone’s frustrations mount.

On the other end of the spectrum, I went to a Red Robin the other day for lunch and had a phenomenal experience. It was one of those locations that’s adjacent to a mall and it was packed. The staff was great, and the operators were smart; they put kiosks at every table. So, the things that often frustrate me at a restaurant – like not being able to get a waiter’s attention – are largely eliminated. They have a kiosk right on the table, so I can pay easily, for example. As a customer, you’re in control that way. That’s an example of a restaurant today that’s doing great.

But if restaurants have to offer frequent discounts, and they’re offering a mediocre experience, then it’s time to short that stock. There’s so much other good food out there. Think about how many cool restaurants are out there where you can’t even get a reservation and where they’re not doing any price discounts. Ultimately, customers vote with their wallets; the tide seeks its own level.


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