Chili’s, Olive Garden, And Other Sit-Down Chains Defy The Slump In Fast Food Dining
There’s a clear winner in the latest restaurant wars: Casual Dining. Think: Chili’s and Olive Garden vs. McDonald’s and Sweetgreen. And it’s the opposite of what many analysts expected, as Americans have started to pull back on spending.
BABY BACK, BABY BACK: Chili’s has staged a remarkable turnaround, with a 24% increase in same-store sales in its most recent earnings report compared to the year before, and double-digit increases in the past five quarters. Other sit-down chains like The Cheesecake Factory, Applebee's, and Olive Garden also saw gains in the past few months.
AMERICANS WANT VALUE
Compare that to fast-casual and fast food chains like Sweetgreen, Cava, Pizza Hut, Popeye’s, and Wendy’s, which have been struggling as young people and lower-income Americans are cutting back.
Analysts say it’s all about value.
The cost of eating out is rising everywhere, but menu prices at sit-down chains have increased at a smaller rate, 34%, than at fast food restaurants, 38%.
That’s partly because sit-down chains are more centrally managed than fast-food restaurants, so management has more control over pricing, according to JP Morgan.
Chili’s, which is owned by the larger company Brinker International, also recently invested in better ingredients and restaurant technologies, and added staff hours, making for a better dining experience. Guest traffic increased by over 16% during the most recently completed quarter.
I Want You Back: Fast food chains are now offering better pricing to win back budget-conscious customers. McDonald's announced that it’s slashing combo deal prices, and Pizza Hut is rolling out “Crafted Flatzz,” a thinner version of its Personal Pan Pizza, for $5.