Sales are down at the Applebee's restaurants operated by Lexington-based Thomas & King. Fewer customers are coming through the doors, and they are spending less than before.
Most other operators of casual dining restaurants are in the same boat, says Mike Scanlon, the company's president and CEO and Lexington's former vice mayor.
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”I don't think we are having a recession; I don't think we are having a depression; I think we are having a correction,“ Scanlon said last week.
Triggered by rising energy prices and changing consumer attitudes, the restaurant industry is seeing ”significant economic and cultural changes“ that will be long lasting, he said.
”It's my job to be an innovator or a dinosaur. I've made my choice“ — to innovate and survive.
Casual dining casualties are piling up, however.
On Tuesday, the parent company of Bennigan's, an Irish-themed bar and grill with about 200 sites across the country, filed for bankruptcy, a move that will put hundreds of employees out of work and leave landlords with empty retail space during a painful time in the real estate market.
A sister brand, Steak and Ale, will also close. Franchise units of Bennigan's will remain open for now, spokeswoman Leah Templeton wrote in an e-mail. Neither chain had stores in Lexington.
Such closings are ”something we're going to see more of over the next six to 12 months,“ said Amy Greene, a director at Avondale Partners who tracks the restaurant industry.
”The companies have been getting squeezed from all directions,“ she said. ”You have had minimum wage go up again, commodity prices continue to go up. We're in a softening consumer market where the consumer is less willing to accept the price increases than they might have been in the past. The companies are having to eat the cost difference.“
The casual outings that provide much of the business for mid-tier retailers are falling by the wayside, analysts said, as gas prices reach record highs and Americans tighten their household budgets.
Another hurdle facing these restaurants is their copycat nature. Though Bennigan's modeled itself as an Irish pub, its menu had Black Angus steaks, Southwestern-style appetizers and tempura shrimp, items that would not be unfamiliar to patrons of, say, TGI Friday's.
”All these bar-and-grill concepts are very, very similar,“ said Bob Goldin, executive vice president of Technomic, a restaurant industry consulting group. ”They have the same kind of menu, decor, appeal,“ which makes it more difficult to establish brand loyalty among customers.
Scanlon, who operates the nation's ”eighth largest restaurant company“ with 90 Applebee's and seven Carino's Italian Grill locations, said Bennigan's and Steak and Ale had other problems and might have failed even without the economic and cultural changes that are buffeting the industry.
Consumers are drinking less alcohol and eating smaller portions while seeking a more satisfying dining experience for the money they are going to spend.
Applebee's is countering with something new — allowing customers to chose smaller portions at lower prices. ”It's selling like hotcakes,“ Scanlon punned.
”The innovators are going to make it,“ he said.
”We are not having fun, and we are getting bumped and bruised,“ Scanlon added, ”but we are all doing what we need to do to not only survive but thrive as we figure this thing out.
”We are battered, but we are optimistic.“