How Casual Dining Restaurants Can Take Back Their Lunch

Anyone eating at an Applebee’s, Buffalo Wild Wings, Chili’s, Olive Garden, Outback Steakhouse, Ruby Tuesday, or TGI Fridays is patronizing a casual dining restaurant. Casual dining establishments provide table service and have “price points of approximately $15 per meal” and “menus with a much wider range of choices” than the hand-held food offerings of quick-service restaurants (QSR, i.e., fast food restaurants).1 “They include more extensive beef, fish and poultry options, as well as an extensive line of salads. Most casual dining restaurants serve alcohol.”2 Their atmosphere and décor can vary considerably.

More than QSR, fast-casual (e.g., Boston Market, Noodles & Company, and Chipotle), and upscale dining restaurants, casual dining has been under attack for years by a series 
of disruptive trends. As a result, 
“[c]asual dining went through eight consecutive quarters of negative sales growth before finally being able to turn the trend around in the fourth quarter of 2017.”3 This article highlights a few of those disruptive trends and provides advice on how casual dining restaurants can take back their lunch.

Disruptive Trends

Casual dining restaurants can point to many trends that have negatively impacted their business over the past few years. A few of those trends include the death of the one-hour casual lunch, the preferences of millennials, and labor issues.

The days of the three-martini lunch or even the one-hour power lunch are long gone. Unfortunately for the restaurant industry, lunch traffic is at its lowest level in at least four decades. Declines in lunch traffic are driven by many factors, including the price of a restaurant meal relative to the cost to bring lunch from home, work/life demands forcing individuals to keep more efficient schedules, and individuals placing a premium on their time and therefore demanding convenience. According to market research firm NPD Group Inc., “Americans made 433 million fewer trips to restaurants at lunchtime last year [2016], resulting in roughly $3.2 billion in lost business.”4 The casual dining sector bore a disproportionate share of that lost lunch traffic and revenue.

Select casual dining CEOs certainly believe the preferences of millennials are a major factor in the decline of restaurant lunch traffic. In a message to shareholders in 2017, Sally Smith, CEO of Buffalo Wild Wings, said, “Casual dining restaurants face a uniquely challenging market today. Millennial consumers are more attracted than their elders to cooking at home, ordering delivery from restaurants and eating quickly, in fast-casual or quick-service restaurants.”5TGI Fridays’ CEO John Antioco stated, “When you look at the alternatives out there in the marketplace today and who’s creating buzz and creating excitement, it’s gone away from chain casual dining.”6

Fortunately, it is not all doom and gloom for casual dining restaurants. Business models can change. Management teams can innovate.

Millennials want convenience. To the detriment of casual dining restaurants, convenience aligns more with fast-casual restaurants.

It is also extremely difficult and costly to find, train, and retain good employees in the restaurant business. “The National Restaurant Association estimates that turnover was an average of 61 percent for the total restaurant industry. The estimated turnover for regular line employees is closer to 110 percent.”7 With restaurant employee turnover in some job classifications reaching triple digits, it is difficult to manage guest experience (customer service), productivity, and operating costs.

Based on a Center for Hospitality Research study, costs associated with staff turnover could be as high as $5,864 per employee.8 Restaurants respond to turnover costs, coupled with rising labor costs—brought on either by federal or state minimum wage increases or competitive wage increases—by raising menu prices. As the price of a meal prepared outside the home increases, other food options—e.g., eating at home, whether that involves takeout or delivery, subscribing to a meal-delivery service, or cooking—become more appealing.

Fighting Back

Fortunately, it is not all doom and gloom for casual dining restaurants. Business models can change. Management teams can innovate. With a renewed focus on guest tastes and preferences, casual dining restaurants can drive traffic and increases in same-store sales again. The following suggestions offer a road map to success for casual dining chains.

Location, Location, Location. Casual dining restaurants face intense competition not only from within their segment of the industry but also from QSR and fast-casual restaurants, grocery stores, and meal-delivery services. A premium should be placed on selecting new locations that maximize a restaurant’s chance for success. Existing and new restaurants need to be evaluated not only on present day metrics, including traffic patterns and volume by day/time; casual dining restaurants, competitors, and retailers within a specified distance; area demographics; etc., but also on those same future metrics matching the term of the lease.

Get Lean. Net restaurant cash flow (NRCF) should be analyzed for each restaurant in the existing footprint. Corporate overhead (general and administrative costs) should be allocated to each restaurant to confirm that each location is contributing to capital expenditures, debt service, and distributions or dividends. For restaurants with negative NRCF, terms in the lease should be reviewed. Armed with facts, management should negotiate with landlords to close as many locations as economically feasible to mitigate the cash burn.

Consider Shrinking. Traffic and sales per square foot should be analyzed for each restaurant in the existing footprint. Given the growth in off-premise food consumption from delivery, takeout, or pick-up, do on-site sales justify the square footage of each location? This information will help inform future decisions with respect to the size of new restaurants.

Become the Preferred Employer. People management is critical to the success of a casual dining restaurant. Casual dining restaurants need to become the preferred employer in the sector. They can accomplish this by designing incentive programs that reward team members for factors within their control. They can also share in the financial success of the restaurant or franchise. Incentivized and motivated team members generally provide superior customer service, which drives return guest visits.

Focus on Convenience. Convenience takes many different forms, including seamless ordering, service speed, delivery, and payment options. Casual dining restaurants need to play catch-up when it comes to delivery. They can outsource the service to the likes of UberEATS, Door Dash, and Grubhub to reach the broadest number of potential guests or keep delivery in-house to maintain control and food quality.

Introduce Fast-Casual Lunches. Casual dining restaurants need to drive traffic through their existing restaurants, specifically at lunch. One novel idea for casual dining chains is to introduce fast-casual lunch options featuring smaller portions and limited table service. They should also consider providing millennials and other guests with online and mobile ordering; limited table service, along with curbside, takeout, and delivery options; and the ability to pay online or via a mobile device.

The casual dining sector has faced numerous headwinds over the past couple years that have hurt traffic and same-store sales. While this article highlights only a few of the disruptive trends negatively impacting casual dining, there are numerous other trends chipping away at the sector. Following the road map to select the right locations, get lean, shrink square footage per restaurant, motivate and incent team members, focus on convenience, and introduce innovative ways to drive traffic, casual dining restaurants might be able to take back their lunch.

  1. “Three Basic Restaurant Formats,”, November 20, 2017. Hand-held foods are portable and easily consumed on-the-go.
  2. Ibid.
“Restaurant Industry Achieves First Quarter of Positive Sales Growth in Two Years,” Restaurant Industry Snapshot,, January 11, 2018.
“Going Out for Lunch Is a Dying Tradition,” The Wall Street Journal, May 30, 2017.
Buffalo Wild Wings President and CEO Sally J. Smith Letter to Shareholders, May 30, 2017.
“Applebee’s, TGI Fridays, and Chili’s are trying to claw their way out of a restaurant death trap,”, March 7, 2017.
“The real cost of restaurant staff turnover: $146,600/Annually,” www.TheRail.Media(link is external), March 17, 2016.