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Casual Dining: Visits by Cuisine Type Underscore the Significance of Value, Experience, and Migration

R.J. Hottovy
Jul 14, 2023
Casual Dining: Visits by Cuisine Type Underscore the Significance of Value, Experience, and Migration

A few weeks ago, we took a deeper dive at Darden's most recent quarter, discussing why the company’s different concepts have outperformed the broader casual dining category and concluding that it was a combination of pricing strategies (which is ultimately a byproduct of the company’s tremendous scale advantages), a ‘back-to-basics operating model, and promotional strategies that promote accessible entry price points (like Olive Garden’s $13.99 Never Ending Pasta promotions that have a number of add-up options to raise the average ticket but avoid deep discounting like the 2 for $20 meal promotions that other operators have historically used to drive visits in a normal inflationary environment). We also discussed how Darden’s fine-dining concepts were seeing fewer visits from younger, less affluent customers–something we’re starting to see in the visitation trends between the casual and fine dining segments, where fine dining visits have started to trail casual dining after outperformance in 2022 (below).

Since publishing that analysis, we’ve received questions from retail commercial real estate executives about what types of full-service chains are doing well, as there is increased demand to bring innovative restaurant concepts to malls. To answer this question, we divided a list of almost 150 full-service restaurants by cuisine types and looked at 1H 2023 visits compared to 1H 2022 (below).

A few things stand out from this analysis:

  • Buffet chains (which include chains like Golden Corral and Sizzler) have had a strong 2023, something we’ve discussed in the national media and broken down further by Placer’s blog team in May. We attribute some of the success that buffet chains are seeing to the value-driven mindset driving visits across the retail category in 2023, as well as lower median household incomes for these chains' collective trade areas and a higher percentage of family visitors. However, many of the most frequently visited buffet chain locations are in smaller markets that saw strong in-migration trends the past several years, which is also likely contributing to the strong visitation trends.
  • Despite having strong 2022 visitation trends, steakhouse has carried its momentum into 2023. Standouts include Black Angus Steakhouse (year-to-date visits up +11% year-over-year), Texas Roadhouse (+6%), and Darden's LongHorn Steakhouse (+4%). Looking deeper at the data, there also appears to some migration benefits for these chains as well.  
  • Breakfast chains continue to do well on average. Similar to buffet chains, we believe there is a perceived value component underpinning the success of these chains, something we’ve looked at when analyzing trends for First Watch in the past. Still, the highest growth concepts in this including First Watch (year-to-date visits up +13% year-over-year) and Snooze (+6%) have trade areas that skew to higher household incomes, putting further credence behind every segment of the consumer is making adjustments (as discussed above).
  • Italian is also doing well, though entirely due to the outperformance of Olive Garden (year-to-date visits up +4% year-over-year). Every other chain in our Italian casual dining index has posted a decline in visits year-over-year, reinforcing the chain's operational strategies and continued market share shifts.
  • The year-over-year declines in Asian casual dining concepts was surprise to us for this analysis, especially given that we’ve highlighted the success of more experiential chains like GEN Korean BBQ House and Kura Revolving Sushi Bar this year. However, P.F. Chang’s makes up almost half of the total visits for this category, and with year-to-date visits decreasing by a low-double-digit clip year-over-year, it had an outsized impact on category performance.
  • Seafood underperformed the rest of the casual dining cuisine types despite facing less food inflation pressures than the rest of the industry (and driving an increase in shrimp-based promotions so far this year). Red Lobster--which accounts for almost 70% of category visits), has seen year-to-date visits decrease by 5% year-over-year.

Ultimately, finding a casual or fine dining fit for a retail real estate vacancy depends on a number of factors, including existing tenants, competitive density, trade area demographic and psychographic composition, and other factors (something Placer's void analysis tool can help out with).

One other trend having a impact on full-service dining chains in 2023 is occasion-based spending. Last week, we looked at how consumers are flocking to retail locations around major holidays. Looking at restaurant industry visitation trends thus far this year by category (using the beginning of the year as a baseline), we see big increases in relative visits around holidays like Valentine’s Day, Easter, and Father’s Day. In between these events, restaurant operators have struggled to drive visits, but we're finding that those chains emphasizing everyday value and new ways to engage with consumers in-restaurant (not every chain has to be an eatertainment concept, but there are still lessons in making the experience more interactive).


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R.J. Hottovy

Head of Analytical Research,

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank. R.J. also brings a wealth of experience with early-stage investments as a committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he advised over 50 food service companies on more than $200 million in early-stage capital raises and M&A transactions.

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