Chains such as Ruby Tuesday, Applebee’s, and Chilli’s are trying to claw their way out of the casual-dining death trap.
On Monday, Ruby Tuesday announced that it would be bought by private-equity firm NRD Capital after four straight years of declining sales.
Ruby Tuesday isn’t the only chain struggling. Brands across the sit-down, casual-dining industry, such as Buffalo Wild Wings, Applebee’s, and Chilli’s, are all facing sales slumps and dozens of restaurant closures.
A number of factors are contributing to these struggles. Fast-casual chains like Chipotle and Shake Shack are on the rise. People are gravitating towards independent restaurants. And, there are simply too many restaurants open in the US, with some worrying that the nation is “over-retailed” and “over-restauranted.”
But, casual dining’s biggest failure has been its inability to win over younger customers.
“In terms of casual dining, a lot of it kind of comes down to the brands that are just kind of dated,” Wedbush analyst Colin Radke told Business Insider earlier this year.
“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,” Buffalo Wild Wings CEO Sally Smith wrote in a letter to shareholders earlier in May.
Smith is stepping down as CEO at the end of the year, after a months-long battle with activist investors over the chain’s declining sales and business strategy.
In August, Applebee’s announced plans to close between 105 and 135 locations this year. John Cywinski, Applebee’s brand president, said in a call with investors that the closures follow the chain’s failed attempts to win over millennials.
“In my perspective, this pursuit led to decisions that created confusion among core guests, as Applebee’s intentionally drifted from what I’ll call its ‘Middle America’ roots and its abundant value position,” Cywinski said.
He added: “While we certainly hope to extend our reach, we can’t alienate Boomers or Gen-Xers in the process.”
At this point, much of the casual-dining industry is in crisis mode, pulling out all the stops to win over millennials, budget shoppers, or some combination of the two.
As Ruby Tuesday’s acquisition reveals, winning over millennials isn’t optional — it’s a life-or-death proposition for casual-dining chains.
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