Restaurant chains trying to understand why customer traffic is down should follow Cupid's arrow.
Olive Garden parent Darden Restaurants Inc. revealed Tuesday that the breadstick purveyor's biggest day for take-out orders is Valentine's Day -- a surprising admission that should strike fear across the industry.
Super Bowl Sunday would have made more sense as the top take-out day, given the widespread carbo-loading that happens on that day. But Valentine's Day? As Nation's Restaurant News editor Jonathan Maze put it: "Huh."
Americans choosing to dine at home on the one day a year couples feel most pressured to go out is the latest sign of dramatically shifting consumer preferences. The eat-at-home trend has helped push restaurant traffic down by 3 percent so far this year from a year ago, after a 0.8 percent drop in 2015, according to Black Box Intelligence.
Sales of full-service restaurants built on the notion that diners would take an hour or so for a sit-down meal were already strained by the rise of fast-casual restaurants such as Chipotle Mexican Grill Inc. and Panera Bread Co. They offered more variety and higher-quality food than fast-food chains, but with fast-food speed and convenience.
Sit-down restaurants were 53 percent of the restaurant market a decade ago, while restaurants without wait staff made up the rest, according to industry tracking firm Technomic. Now those shares have flipped.
And increasingly customers are skipping going to restaurants altogether, in favor of take-out and delivery, along with at-home meal kits. Thanks in part to this trend, 2016 has seen the highest number of bankruptcies of public and major private restaurants since 2011, according to New Generation Research.
Chains such as Ruby Tuesday Inc. -- whose CEO resigned earlier this year -- Brinker International Inc.'s Chili's and DineEquity Inc.'s Applebee's are struggling to reverse more than a year of declining sales.
They might want to take a cue from Darden, which got a head start on dealing with these trends in 2014. That's when activist shareholders pushed it to sell off its sales-hemorrhaging Red Lobster chain and cut costs by simplifying its menu and operations. That freed up cash to invest in technology for digital ordering, tabletop tablets and labor scheduling, which have boosted sales and profit margins.
Olive Garden's take-out sales have risen more than 50 percent in the past three years, executives said on Tuesday, and now make up nearly 13 percent of total sales. Growth in digital and off-premise sales helped make the company confident enough to reaffirm its 2017 guidance, even as the rest of the industry struggles with what some are calling a restaurant recession.
The chain's next target is delivery, which it's testing in some markets.
Executives on Tuesday gushed over the e-commerce and delivery prowess of Amazon.com Inc., saying they're constantly asking, "What would Amazon do?"
It's the right instinct. Given changing consumer habits, restaurants should lust after Amazon's ordering and delivery capabilities, just as retailers have started to do. Who said romance was dead?
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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