Bennigan's …A Sign of the Times or Call to Duty?
By Amelia Levin, Sr. Associate Editor -- Foodservice Equipment & Supplies, 9/1/2008 12:00:00 AM
In the wake of the Bennigan's bankruptcy filing, research firms, the press and others cried out that this was the start of more economic woes for restaurants and foodservice to come. Chicago-based research firm Technomic, in particular, issued a release in the days after the bankruptcy, noting that this could be a sign indicating the decline of casual dining.
“These restaurants share many subtle and complex challenges that extend beyond this difficult economic climate,” said Ron Paul, president of Technomic, in the release. “To some extent they have become victims of their own success — a mature category with too many units and not enough differentiation, at least in the eyes of the customers.”
According to Executive Vice President Darren Tristano, “Casual-dining restaurants have been growing units at a rate of 7 percent, compared to 1-percent total growth rate for the rest of the industry. As a result, that segment has hit a saturation point. Unit growth translates to a whole lot of seats and not enough people to fill them. That has to do with the softening of the economy and as a result of all those factors, you're going to have weaker chains that are going to struggle.
“In looking at the casual-dining industry, one issue is that differentiation of concepts doesn't exist between Bennigan's, Applebee's and other similar chains so customers don't have a reason to go to one over the other,” Tristano said.
Consumers are tightening their belts, and that may include seeking out fast-casual restaurants or quick-service restaurants that offer cheaper prices than going out to eat at more upscale, full-service restaurants.
The question now has become, will this “decline” among the casual-dining segment be short-lived, or lead to more permanent changes in the restaurant industry?
Annika Stensson, director of media relations for the National Restaurant Association, said the association has tried to remain positive in light of the circling negativity. There are many steps restaurants can take to boost sales, drive traffic and operate more efficiently, it just requires more thought and effort in an already super-competitive industry.
“We don't keep lists of what individual restaurants are doing, but it's common to ramp up marketing efforts and other special promotions to get customers in the door,” Stensson said.
For example, T.G.I. Friday's launched “Give Me More Stripes,” a members-only food initiative, whereby frequent diners sign up to receive one point for every dollar spent, and then after the points add up, receive free food.
Controlling Other Costs
Controlling other costs in the back of the house also helps restaurants balance the higher food and energy prices, Stensson said. “For example, using multi-purpose equipment, energy- and water-saving equipment, and cross-training staff can result in lowered costs.”
Combi ovens certainly fit in with the multi-purpose equipment group. And there certainly has been no shortage of energy- and water-saving efficient equipment. In fact, many states offer rebates to operators who purchase, which may help offset initially higher costs despite significant savings over time.
Franchising
Another piece of Technomic research discussed the growing importance of franchising as a way for restaurant and other foodservice operators to increase their bottom line. Bennigan's franchisees, which together under Bennigan's Franchising Co. and Steak & Ale Franchising Co. operate a combined 138 domestic and international units, remain open for business.
The franchisees are hoping to buy between 40 and 60 restaurants closed by the chains' parent company when it filed for bankruptcy protection, the Associated Press reported. And, the franchisee group still had plans to open a Bennigan's restaurant in Cancun and an Acapulco location this month.
“The Bennigan's franchises seem to be in a position similar to Ground Round Bar & Grill when that company filed for bankruptcy several years ago,” Tristano said. “In that case, all the franchisees banded together like a co-op and continued to exist. Over time, some of the weaker restaurants closed, but now the group is in a position where they can think about opening restaurants and continue to grow.”
According to the franchising report published by Technomic, many top restaurant chains grew their 2007 sales through signing more franchisees, instead of relying on same-store sales increases. This held true for both limited-service and full-service sectors.
However, just last month 59 Burger King franchisees in South Florida rebelled in a lawsuit against the company, citing increased costs and overall economic hardship as a result of the enforced, expanded restaurant hours until 2 a.m., according to published reports. This is a clear example of the need for big operators to strike a balance between expanding a franchise empire and giving them the tools to succeed.
According to Stensson and research gathered by the NRA, this current restaurant downturn may not mean a permanent drop-off in dining out, but instead, affect the choices consumers make when they are at the restaurant themselves.
“Dining out is an essential part of many Americans' lifestyles, and many are loathe to cut back too much on their restaurant visits,” she said. “What they tend to do is spend less at the restaurants. They're often looking for restaurants with lower price-points and value specials, and may order fewer items, such as skipping dessert, or go for take-out options and supplement items at home.”
Nevertheless, Stensson said, the NRA has predicted a sales growth, not decline, of 4.4 percent this year.
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