Roundup of The Week's Biggest Restaurant Stories
These past five days were probably the most eventful for full service since the calendar turned over. Applebee’s, Outback, Red Robin, The Cheesecake Factory, Cracker Barrel, Bloomin’ Brands, and Texas Roadhouse were among those reporting quarterly financials. And for the most part, it was a very promising string of results. Traffic is climbing at some legacy brands, like Outback, and others, such as Applebee’s, are seeing comps turn back into green territory. These numbers, of course, are measured against 2017’s declines, which lend credence to the wait-and-see approach. But let’s look at it another way: Just because numbers were bad in 2017 doesn’t mean they couldn’t have gotten worse in 2018. What’s driving this? Off-premise and tax reform are probably the two topics creating the most significant short-term buzz. It’s up to brands to figure out how best to allocate these funds and meet a challenging future head-on. Welcome to one of the most transformational times in casual-dining history.
Here were the biggest stories of the week.
Comparable same-store sales growth of 5.8 percent (at company stores) in the fourth quarter. As impressive as those numbers are, they didn’t move the stock market needle all that much. That goes to prove something, though. If you’re looking for a consistent brand with a rock-solid business model, search no further than Texas Roadhouse. Wall Street didn’t react much because investors expected the 527-unit steakhouse chain to get it done. There was one figure that jumped for me: a guest count increase of 3.6 percent for the year and traffic up 4.7 percent in the fourth quarter. It’s been a good while since Texas Roadhouse really struggled (32nd consecutive quarters of positive comparable restaurant sales growth). So the fact Texas Roadhouse continues to build traffic should tell you everything you need to know about its future prospects. Given the brand’s ability to satisfy guests and grow comps, more traffic, even with great traffic already, is providing a glimpse into an even brighter future.
Here’s the sad truth, according to our expert contributor: Chipotle could have avoided its public relations nightmare with the proper foresight. Naturally, this is hindsight, but restaurant operators can learn from Chipotle’s food-safety crisis and all that’s followed. One tip: actionable insights only work when action is actually taken. Click below for more on how to protect your brand before it’s too late.
The Dallas-based churrascaria wasn’t a public company for long. Fogo went public behind an $88 million IPO in June 2015. Rhône Capital is set to take it private again after Tuesday’s announcement that it was purchasing the brand for $560 million in cash. Fogo de Chão, which opened its first restaurant in Brazil in 1979, currently operates 38 U.S. restaurants, nine Brazil units, and two join venture locations in the Middle East (Jeddah, Saudi Arabia, and Dubai). Fogo said the move completes what was a “thorough evaluation of the options available.” Apparently this was a process in the works for some time. The company had its challenges in 2017, mainly hurricane related in the U.S. and Olympic looped in Brazil. Fogo also hit the 50-restaurant milestone in November. This move could help stabilize some international growth for the chain as Rhône says it focuses on “market-leading businesses with a pan-European or transatlantic presence and global growth opportunities.”
MTY Food Group made the move to add 27-unit Grabbagreen to its massive portfolio. The company already owns Blimpie, Cold Stone Creamery, Built Custom Burgers, The Counter, Tasti D Lite, Planet Smoothie, Pinkberry, and much more. This deal gives it a growing health-focused chain with a solid pipeline already in place. Grabbagreen said it has “dozens” of agreements in place to grow, and is averaging about two new locations per month since franchising began in 2015. There are restaurants in Arizona, California, Colorado, Idaho, Maryland, Minnesota, North Carolina, Tennessee, and Texas.
Quick story. When I applied to college, my guidance counselor suggested the University of Florida. Renowned journalism school, sure. But mostly, it’s on the beach! Clearwater Beach to be exact. For those of you who have spent time in Gainesville, Florida, you understand how tragic this lie was. Love Gainesville, but it is in the middle of a forest hours from the water on all sides. This came up when I was chatting with Lynette McKee, who is heading up a franchising program for Cody’s Original Roadhouse. The growing chain has a five-year goal of 100 locations, but wants to build out Florida first. This is almost like building out Texas or California. Step into Jacksonville and Miami and try to pretend they’re in the same state. Florida is a great testing ground to see how your concept will perform. Audiences hours apart might literally have never visited the other market. It’s just how Florida goes. Forget New York. If you can make it in the Sunshine State, you can make it anywhere.
CKE Restaurants is launching a campaign meant to separate Carl’s Jr. and Hardee’s as distinct brands. I think that’s a great strategy. I have come across more people than I would like to admit who don’t understand the relationship between the brands. They simply don’t get that they’re the same, but different. The more I type that the more confusing it gets. CKE under Jason Market, the former KFC U.S. president, has really come a long way in reshaping its identify. The brand’s racy ads are a thing of the past. The focus now is more on food, although there’s definitely an eclectic vibe going on.
Rumors of a Cheesecake Factory limited-service concept stretch back to 2016, maybe even earlier. In this week’s earnings call, the iconic, massive-menu chain finally offered some concrete details on what’s coming next. The company is finalizing lease negotiations for a space in Los Angeles and is projected to launch later this year. If all goes well, this could scale around the country. David Overton, the brand’s CEO, said it could take only six months to figure out it had legs. “Then we would look for another site once we feel really good about it and make sure that we've done all the right things operationally,” Overton said. “We're excited. We're working on a little bit everyday, and we'll see where it goes.” I’m not sure what this will look like. I do know we’ll all be paying close attention.
There is simply a lot going on at Wendy’s right now. Store redesigns are accelerating through the system (43 percent end of 2017). Average-unit volumes hit record highs at $1.61 million. Global systemwide sales eclipsed $10 billion. DoorDash is delivering about 20 percent stores right now. All of this provided a lengthy and interesting call about the brand’s three-year goals on Thursday. Wendy’s wants to have 7,250 stores and $12 billion in systemwide sales by 2020. There are very few reasons to bet against Wendy’s. The chain has produced 20 consecutive quarters of positive same-store sales.
DineEquity is now Dine Brands Global. Rolls a bit easier off the tongue, if I’m being honest. It also sounds like it has more to do with food than equity, which is probably good from a branding standpoint. “We are a company in transition,” said Steve Joyce, CEO of Dine Brands. “The new name reflects a shift in our culture and our way of thinking, and a new strategy. We are currently implementing several initiatives to transition to a growth company for our shareholders.” Applebee’s comps rose 1.3 percent in Q4—great news. There’s a lot driving that number. Last year. The closures. Much more. Yet, no matter how you spin it, Applebee’s is going to be in much better shape this year, especially on the stock market, if it can stay away from those high single-digit comp drops that have plagued it in recent quarters.