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Casual-dining chains show sales resilience during COVID-19 health crisis

Latest sales results show positive trends as chains prepare to reopen

Casual-dining chains are showing some grit as they report their sales and earnings for their most recent quarter. For sure, the COVID-19 pandemic has set some chains back from growth, steady trajectories or the rebounds their executives had been strategizing. While some in the restaurant industry have questioned the long-term value proposition of legacy casual-dining chains, these operators have shown, at least in the short term, that they can operate in a scenario of shifting challenges.

Take Chili’s, which was posting 3.3 percent comparable restaurant sales during its third quarter up until 3/8 at company-owned stores. Although the chain dropped to (62.9) comparable sales the week ending 4/1, it later increased comparable restaurant sales to (42.6) by week ending 4/22. As a result, company-owned Chili’s restaurants posted a 5.3 percent decrease in 2Q, which is, in fact, impressive in the current state of state.

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Sister chain Maggiano’s had been running a comparable sales increase of 0.6 percent at company-owned restaurants. During the week ending 4/1, it had dropped comparable sales by 77 percent, then increased slightly to 73.7 percent. Consequently Maggiano’s posted a 9.9 percent decrease in comparable restaurant sales in 3Q.

At these Brinker International chains combined, delivery sales in 1Q were 20 percent with 70 percent of orders being generated online. In its latest earning news, the company stated that it was capturing an impressive 57 percent of total restaurant sales in recent weeks in April while basically operating in off-premises mode only.

At Applebee’s, which is operated and franchised by Dine Brands Global, as is IHOP, domestic comparable restaurant sales increased 3.2 percent quarter-to-date (QTD) as of 3/8. By 3/29 it had posted comparable sales of (80.6) percent, then increased to (64.4) percent by week ending 4/26. IHOP had been running (0.6) percent QTD before it dropped to (84.6) percent by 3/29, and then increased back to (75.4) percent by 4/26.

Applebee’s is now capturing 35 percent of last year’s sales volume in off-premises mode. Off-premises volume has tripled to $17,7K per week compared to what it was back in 1Q. The grill-and-bar chain reported a 10.6 percent 2Q decrease in comparable sales.

At IHOP, curbside business has been popular and shown some promise. However, off-premises gains have been less robust than at Applebee’s. Delivery sales at IHOP increased 57 percent from last year’s mark based on 1Q results and at the end of the quarter, accounted for 39 percent of all sales, thus showing a gradual increase.

Breakfast sales can be more challenging to market to customers who are at home during the COVID-19 health crisis. This has been an impediment to a fast-ramp-up of off-premises business at IHOP, although curbside pick-up did gain 6 percentage-points from March levels to 76 percent of sales mix during April. IHOP posted a 14.7 percent decrease in comparable sales during its second quarter.

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As states reopen dining rooms, some experts question how restaurants will be able to operate dining rooms with ongoing restrictions and reduced capacity. It takes a certain amount of labor to keep the doors open. And that was a question posed to Brinker International executives during their 3Q earnings call. They were optimistic. “And it’s (labor spend) going to be very much guided by those traffic increases that we see,” said Joe Taylor, Brinker chief financial officer, according to a transcript by Seeking Alpha. “Again it’s looking at how we balance the go off-premise side of the equation, and bringing dining back in.”

At Dine Brands, on a 1Q earnings call, executives said that after reopening restaurants, it will be mostly managers that will work the dining room. For Brinker and Dine Brands Global, a more robust off-premises sales engine could be part of a new, necessary normal. While some fine-dining chains and independent restaurateurs may not open their restaurants until they can operate without restriction, these casual-dining chain leaders see it differently. The future is about maintaining off-premises gains, while treating post-reopening, on-premise dining as incremental.

Photo credit: Applebee’s

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