Family dining—typically defined by check averages below $12 and with very limited or no alcohol service—faces an all-out battle for relevancy amid sharpening competition and shifting consumer-dining habits.

Shuttered stores and falling sales stand a common reality for the nation’s largest family-dining brands. Among the top 10, unit count dropped an average of 2.9 percent while sales averaged a 2.1 percent decline.

“Unfortunately, this is a long-term trend, as many consumers don’t see these chains as being innovative or fun to visit,” says Mary Chapman, director of product innovation at Technomic. “People are finding what’s craveable, fun, and new elsewhere.”

For instance, family-dining brands like IHOP and Denny’s have long been the gatekeepers of breakfast but those sales have increasingly flowed elsewhere. Various quick-service restaurants such as McDonald’s and Panera Bread have provided competition in the family-dining wheelhouse as have a growing array of upstart breakfast and lunch chains, including First Watch, The Egg & I, and Another Broken Egg Café.

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*Technomic estimate / Source: 2013 Technomic Top 500 Chain Restaurant Report

Four of the category’s top five—IHOP, Denny’s, Bob Evans, and Waffle House—had 2012 sales hovering near or just above their 2011 tallies. However, the fifth, Cracker Barrel, continues its run as family dining’s shining star.

Tennessee-based Cracker Barrel captured a 5.1 percent jump in sales in 2012, more than double the 2.5 percent gain recorded by category runner-up Waffle House. Cracker Barrel’s unit count also increased 2.1 percent in 2012, while its average unit volume (AUV) of $3.35 million dwarfed family dining’s other contenders.

“Cracker Barrel’s long done better than their family-dining competitors, largely because they appeal to a higher-end consumer, differentiate themselves with homestyle cooking, capture different dayparts, and appeal to travelers,” says Steve West, a restaurant analyst with ITG.

Alongside Cracker Barrel, Denny’s stands as another category bright spot bucking the negative trends. The South Carolina-based chain ended 2012 with higher sales at fewer units, one of the rare brands to record that feat. Powered by AUV approaching $1.7 million, Denny’s dropped three stores, yet recorded a 1.2 percent jump in sales.

Denny’s CMO Frances Allen says the chain has embraced its core DNA as a diner concept and worked to deliver classic American comfort food with a twist. Over the last year, the chain has gained guests’ attention with customizable dishes, including pancakes and grand slam meals; fun-infused LTOs, such as Baconalia and Tour of America; and menu extensions like spaghetti and meatballs and slow-roasted pot roast. The brand has also heightened its consumer-engagement efforts with social media campaigns aimed at Millennials, Hispanics, and mothers.

“We believe we understand who we are … and what we need to do to be successful,” Allen says, adding that Denny’s also launched a new coffee program in early 2013 to coincide with the brand’s 60th Anniversary.

Sadly, family dining’s good news stops after its top five concepts. The bottom half of the category’s top 10 is littered with struggles.

Perkins, Friendly’s, Shoney’s, Village Inn, and Sonny’s Real Pit Bar-B-Q all recorded negative year-over-year sales growth, including a decidedly unfriendly 14.2 percent drop at Friendly’s. Massachusetts-based Friendly’s joined Shoney’s in sharing a 13 percent drop in unit count as well.

In today’s operating environment, Chapman says many corporate leaders are content to close underperforming stores as a way to keep the pack healthy and running strong.

“People get tired of throwing good money after bad,” she says.

Restaurant insider Jon Jameson, founding partner of the Bellwether Food Group, says family dining has struggled from consumer slotting. Largely pigeonholed as breakfast concepts, these chains have scrambled to break into other dayparts. Jameson says late-night visits might be the category’s only potential revenue driver. Unfortunately, the category battles established quick-service concepts for that market as well.

• More Reports in this Feature
• Introduction
• Top 10 Casual-Dining Chains
• Top 10 Family-Dining Chains
• Top 10 Upscale-Dining Chains
• Top 10 Restaurant Groups
• 10 High-Performing, Stand-Along Restaurants