We’ve talked about one of the brands hitting it out of the ballpark—Wingstop. There are, as you know, other restaurants that are facing some challenges. Surprisingly, First Watch, the company that took advantage of America’s love of breakfast, falls into this category with a drop in same-store sales and traffic.
Another brand under the Bloomin’ Brands umbrella, Outback Steakhouse, has also taken a hit. It, along with Bonefish Grill and Carrabba’s Italian Grill, saw 41 locations close at the beginning of the year, citing underperformance, including sales and customer traffic.
Each of these concepts is taking a different approach to combating the current economic climate. Here, we’ll explore their very different roadmaps to recovery.
First Watch
In 2023, Yelp’s top 50 most-loved brands in the U.S. placed First Watch at the top of the restaurant category. In 2017, it began a rapid expansion trajectory, becoming one of the fastest-growing chains, even though it only serves breakfast and lunch and closes at 2:30 p.m.
The model worked, even during challenging times. When diners needed value, they traded in their evenings out for the less expensive breakfast or lunch experience. First Watch excels in this category.
So, what’s happening now?
Declining Traffic
According to Nation’s Restaurant News, the brand’s same-store sales in Q2 fell by 0.3%, while the traffic dipped by 4%. Their challenge: to reach lower-income guests and the more infrequent customers. The good news is that their repeat guests are resilient, helping them weather the changing climate.
While many other fast-casual brands have turned to broad discounting, First Watch does not believe this path is correct during the current challenging backdrop. Instead, they are targeting customer groups to increase their frequency using digital marketing campaigns. These campaigns are customized for the varying segments.
To offset the diminishing traffic, they are also strategically increasing prices.
In an interview with NRN, CEO Chris Tomasso shared, “I think as an industry we’ve been behind when it comes to data. We now have more access to data like that, so really, what we’re doing right now is building that customer profile database. Whether it’s frequency, demographics, psychographics, purchasing habits, etc. just to inform our decision-making around site selection for new restaurants, around marketing, and around impacting individual visits to the restaurant.”
Despite declining traffic, this much-loved brand is expanding rapidly. In April, they acquired 15 restaurants in the Raleigh area, bringing their total to 538 locations.
Outback Steakhouse
Outback Steakhouse is taking a different approach to turning around declining sales. Like many in the industry, they’re turning to technology and simplifying their menu. Q2 saw same-store sales decline 0.1%, a decline occurring over the last four quarters. Their goal is to improve the guest experience, provide additional value, and enhance their customer and digital capabilities.
A Simplified Menu, Increasing Value, and LTOs
David Deno, the CEO of the Australian-inspired steakhouse, believes adding value is essential as the consumer environment softens. This comes in the form of three-course LTOs priced at a starting point of $14.99. Called the Aussie Aussie Aussie deal, it represents the lowest-priced offering in 2024.
They’re also reducing the number of items while increasing value and focusing on the menu items that appeal the most to guests.
Other Changes
The technology they’re implementing, such as server handhelds, is designed to enhance the customer experience. The new marketing strategy aligns with First Watch, making it a point to communicate better with guests and doing so in a multi-channel advertising strategy.
As time marches on, it will be interesting to see which strategy reveals itself as the best solution in a time of change. Time will tell.
