By TED CARTER
Based on distress their independent counterparts nationally are enduring, the partners who own Amerigo, Char and several other casual dining restaurants in metro Jackson as well as Memphis and Nashville should be looking around for lifeboats.
Instead, the partners are seeing double-digit revenue growth and preparing to expand their restaurant holdings in Jackson and Nashville.
They are doing this in a casual dining category that has barely treaded water in post-recession years while the rung just below them, fast casual, has sailed along with revenue growth of 7 percent to 8 percent since 2011.
Especially distressed are the independently owned casual dining, or full service, restaurants, analysts say, citing a 1 percent drop in both sales and number of stores the past four years.
By contrast, corporate-owned casual dining establishments have increased sales and restaurant numbers by an equal percentage since 2011, research company the NPD Group says.
Still, “that is nothing to write home about,” NPD Group restaurant analyst Bonnie Riggs said in an interview last of the 1 percent bump up.
Large chains own 36 percent of casual dining restaurants, small chains 15 percent and independents the balance, a circumstance that makes their full percent decline in store traffic and stores stand out even more.
“Full service has struggled, independents in particular,” Riggs said.
“Having said that, we still made 61 billion visits to restaurants” last year, she added, breaking the visitations down with 70 percent going to fast-food outlets, 10 percent to family-style restaurants like Cracker Barrel and Denny’s, 10 percent to casual dining establishments like Outback and Olive Garden and the remaining percentage to restaurants categorized as fine dining.
The decline of full-service restaurants began before the recession and only recently has leveled off, according to Riggs.
“Polished casual,” a sub-category considered a step above casual dining, “seems to be resonating with consumers,” though so far only in a small way, Riggs said.
She cited the “different kind” of dining experience polished causal offers, often including entertainment.
Amerigo and Char owners David Conn, Doug Hogrefe, Ben Brock and Paul Schramkowski put their restaurants in the polished casual category. They would also add Anjou to that category, Hogrefe said.
The restaurant group’s newest entry, Etch, located on the ground floor of the Encore tower in downtown Nashville, fits the “extreme fine dining” category, Hogrefe said.
All of the group’s restaurants, including Sombra Mexican Kitchen in Ridgeland, have out-performed the independent casual dining sector as a whole, gaining double digit revenue growth over the last year while others have had declines, according to Hogrefe.
“We are above pre-recession levels with restaurants we had open before the recession,” said Hogrefe, who put revenues for the entire group of restaurants at “30 to 40 percent above the zenith of the recession,” especially in the last year.
Happy staff and happy customers make for “a happy restaurant,” Hogrefe said, summing up the restaurant group’s strong performance.
Riggs said it appears that Hogrefe and company “understand their market and who they want to target. They have done their studies,” she said, and understand the wants and needs of their customers.
“Those are the ones who are going to win the battle for market share,” Riggs added.
Assessing casual dining’s drop off
Analysts attribute some of the total decline in business at casual dining establishments nationally to the growing popularity of fast casual. Riggs said she thinks this category “is stealing from other concepts,” and added: “People are trading down or trading up from traditional fast-food places.”
The result has been higher traffic growth for fast-casual than food-food for five consecutive years, the publication Business Insider reports.
That statistic bolsters Hogrefe’s view that trading-up explains more of fast-casual’s rise than does trading down.
“I think that it is actually taking away a lot more from the fast-food” sector, Hogrefe said.
Beyond higher quality food, full service restaurants offer an experience fast-casual competitors can’t match, he said. “I call restaurants like Char and Amerigo 90-minute vacations. You just want to go and have someone take care of you with good food and good service.”
Knowing your customer
Millennials, an age group that ranges from early 20s to mid 30s, account for a large part of the rise in popularity for fast-casual, which includes the likes of Panera Bread, Chipotle and Five Guys, analysts say.
It’s a mistake to “generalize that many people into one single group,” Hogrefe said.
When Hogrefe thinks of millennials it is in terms of upward mobility and a market segment the full-service restaurants that his partnership owns can attract.
Riggs, the NPD Group analyst, said restaurateurs such as Hogrefe and his partners should make millennials a priority, but not at the expense of baby-boomers.
“Millennials are a very important group 74 million strong. Within a few years they will be the largest group,” Riggs said.
But millennials, she said. have cut back dramatically in their dining out. Boomers and the age group beyond have offset that drop off, Riggs noted.
“They have increased their visits,” she said, having decided “we’re done cooking.”
The result: Older age groups have kept the full service restaurant industry holding steady, according to Riggs.
Many restaurateurs haven’t paid attention, however. “They are so focused on millennials they are neglecting a group that has helped them to stay in business,” Riggs said.
Their customer strategies have not fully recognized that older customers want to be able to read the menu, get polite service and have comfortable seating and good lighting, Riggs noted.
Beyond that, “they want to be able to socialize and carry on a conversation,” she said.
In an industry whose market share is projected to grow no more than 1 percent annually for the next several years, fierce competition for customers is ahead, Riggs said.
The winners, she said, will be the ones who “focus on what you do best.”
That’s the plan Hogrefe and company intend to follow. “If you try to please everybody,” Hogrefe said, “you end up pleasing nobody.”