Casual dining is in danger — and millennials are to blame.
Brands such as TGI Fridays, Ruby Tuesday, and Applebee’s have faced sales slumps and dozens of restaurant closures, as casual-dining chains have struggled to attract customers and increase sales.
“Casual-dining restaurants face a uniquely challenging market today,” Buffalo Wild Wings CEO Sally Smith recently wrote in a letter to shareholders.
According to Smith, these sit-down restaurants’ struggles can be blamed on a frequently besmirched generation: millennials.
“Millennial consumers are more attracted than their elders to cooking at home, ordering delivery from restaurants, and eating quickly, in fast-casual or quick-serve restaurants,” Smith wrote.
While blaming millennials has become a trend to the point of cliché in retail, Smith isn’t wrong to zero in on younger customers’ changing tastes as a major factor in casual dining’s downfall.
“Now there’s many, many options that people are replacing chains with,” Victor Fernandez, the executive director of insights at the restaurant-industry tracker TDn2K, recently told Business Insider.
Many of these options involve cooking at home. Grocery chains are increasingly competing with restaurants, thanks to lower prices and perks such as pick-up and delivery, new technology, and trendy features like wine bars and to-go meals. And meal-delivery kits like Blue Apron are focused on getting millennials on subscription plans to persuade them to stay in and cook a certain number of days a week.
Convenience is also a factor, both when it comes to delivery and speed of service. And casual-dining chains are still playing catch-up regarding delivery.
“The only part of casual dining that’s growing right now is the off-premise side,” Bonnie Riggs, a food-service industry analyst for NPD, recently told Nation’s Restaurant News.
Cheesecake Factory said earlier this year that it would expand delivery to half of its 194 US locations through DoorDash, a third-party service. TGI Fridays, Chili’s, and Maggiano’s Little Italy are all now on Grubhub, and Buffalo Wild Wings and Red Robin are testing the service. Outback Steakhouse is using third-party services and building one of its own.
While delivery clearly is a compelling option to offer, it isn’t a simple service for restaurants to add. Customers often spend less when ordering delivery than they would when eating at casual-dining chains, most of which rely on alcohol orders to drive sales. In-house delivery means added complexities, paying drivers, and additional insurance costs. Using a third party could mean losing control over the food’s quality.
More convenient chains have also drawn millennial customers away from casual-dining options.
The growth of fast-casual chains such as Chipotle and Panera have been especially harmful. These chains can offer lower prices to millennial customers, who are less enthused about spending more money just for the experience of sitting in a booth at a casual-dining joint.
The fast-casual industry grew by 550% from 1999 to 2014, The Washington Post reported. By 2020, the fast-casual market in the US is expected to reach $66.9 billion, according to the market-research company Technavio.
“They have more of a healthy perception, there’s quicker service times,” Wedbush analyst Colin Radke told Business Insider in March. “The healthiness and the speed of service — that’s been taking market share from casual dining.”
Trends aside, when Smith says millennials’ tastes differ from what casual-dining chains can offer, she’s avoiding a blunter statement: Casual-dining brands just aren’t cool anymore.
“When you look at the alternatives out there in the marketplace today and who’s creating buzz and creating excitement, it’s gone away from chain casual dining,” John Antioco, the former CEO of TGI Fridays, told Business Insider.