CASUAL DINING – Fighting Back

More and more companies in the full service segment (casual dining) of the restaurant industry continue the trend toward smaller and less expensive menu options, as operators attempt to drive traffic at a time when customers are looking for greater value and more healthful options.

I have been beating the drum that, these lower prices have to help casual dining restaurants’ value perception relative to the QSR players. It is these low price casual dining offerings that cause me to believe that now is a difficult time for QSR players to push their more premium menu items to drive incremental traffic trends

We recently learned from McDonald's (MCD) that they are planning to introduce its Angus burger nationally this summer.   The Angus burger is a premium burger; the sandwich alone costs over $4.00 in some markets before you add a fries and a drink.  This implies the Angus combo meal will be $7-$8!  While I’m picking on MCD, the balance of the QSR hamburger chains are just as guilty.   

Here are the latest price points from some important full service restaurants:

Cracker Barrel Old Country Store said it is resurrecting two successful menu items from the past called Campfire Grill.  The Campfire Chicken and Campfire Beef dishes are slow-roasted in aluminum foil and served with carrots, corn on the cob, carrots and red-skin potatoes along with a choice of corn muffins or buttermilk biscuits.

Here is the best part; the chicken is priced at $8.49 and the beef is $8.99.

The Cheesecake Factory is now rolling out a line of smaller-sized dishes at lower prices.  According to the company the new Small Plates & Snacks menu is designed as a “pre-appetizer” or to be combined with other dishes to make a meal.

Cheesecake Factory’s new menu includes 16 dishes priced from $3.95 to $6.50 each.

Not to forget that Chili’s Grill & Bar, recently introduced 10 menu items under $7 earlier this month.

On the surface declining price point for new menu items should be a red flag for margins.  In the current environment operators are benefiting from lower commodity costs, reduced labor and growth related costs and a heightened mandate on efficient operations.  For the time being, all is well on the margin front.  Where future traffic goes is a key issue to watch.

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