Hello monkeys,
How many of you remember eating Buffalo Wild Wings and Applebee's as a kid?
I recently read this article about them: Millennials are killing chains like Buffalo Wild Wings and Applebee's
Turns out that millennials are to blame for the decline in these restaurant chain sales.
Brands such as TGI Fridays, Ruby Tuesday, and Applebee's have faced sales slumps and dozens of restaurant closures, as casual dining chains have struggled to attract customers and grow sales."Millennial consumers are more attracted than their elders to cooking at home, ordering delivery from restaurants and eating quickly, in fast-casual or quick-serve restaurants," Smith wrote.
What do you monkeys think about this? As the days become faster and faster, are we really not finding the time to go out and eat at these classic places?
Many of these options involve cooking at home. Grocery chains are increasingly competing with restaurants, thanks to lower prices and perks such as pick-up and delivery, new technology, and trendy features like wine bars and to-go meals. Plus, meal delivery kits such as Blue Apron are focused on getting millennials on a subscription plan that will convince them to stay in and cook a certain number of days a week.Convenience is also a factor, both when it comes to delivery and speed of service. And casual dining chains are still playing catch-up with regards to delivery.
I think the banking guys can relate to this when they only get to go out for 1 or 2 days a week, if lucky. Many people are switching over to takeaways that are often much more convenient and quick, but this spells disaster for casual food dining that often relies on alcohol orders to drive sales.
The growth of fast-casual chains such as Chipotle and Panera have been especially harmful. These chains manage to bring both convenience and lower prices to millennial customers, who are less enthused about spending more money just for the "experience" of sitting in a booth at a casual dining joint.
This is also another problem. What do you monkeys think about all this?
I think this one is pretty easy to solve, how many young people do you know of that want to spend an hour+ at Applebees?
If I'm spending that much time, I'm going basically for the food and experience, neither of which, Applebees excels at. I'd rather go to a bit trendier place.
On the flip side, if I'm hungry and just want some cheap food, I'm not calling in to Applebees ahead of time, I'm dropping into Subway for 5 minutes and walking out with a sandwich.
This and what WidespreadPanic90 said are what's key here. The crux seems to be where convenience meets quality. A lot of the place OP mentioned are complete shit, that much is undeniable. However, places like Chick Fil A post impressive same stores sales growth because A) having a drive through is great, and B) their chicken is delicious. A lot of people use Yelp if they're going more for the "experience," and what increasingly what that usually ends up meaning now is incredible food in maybe an otherwise not great part of town, because people will just want something that simply tastes better, even in Friday's is closer.
We specialize in the food industry. There is a "food recession," in which many fine dining and quick-serve restaurants ("QSRs") are seeing decreased sales. We always have the senior bankers asking our thoughts because millenials are often making an impact. But I'll flesh out these restaurants real quick:
-I don't view any of those restaurants mentioned in the OP as quality food. If I am going to get a steak, I'm going to a nicer restaurant than those or cooking it myself. -I do love wings. There is no other reason that BWW should be suffering other than that they are fucking overpriced for the quality they provide. I still think like a college student in many ways - I just won't pay for shit if there are cheaper alternatives. And in many cases, there are often local alternatives that are far better quality and far cheaper than BWW's. Pretty sure I'm not alone on that thought, and I'd be interested to see how the local shops are doing in comp sales.
-Blue Apron, as I understand it, is not profitable. There are way too many meal kit companies sprouting and only a few will survive. But they all provide their offerings at a price point that is not sustainable. Do I want to pay $10+ for a meal that I have to prep and cook myself? If I do, it better be exactly what I want and a good amount. It's a debated topic, but I honestly think Blue Apron and the other meal kit services are only showing some momentum because it's an interesting concept. It's just interesting enough to get someone to order once or a few times before that customer decides it's not worth it anymore. So, having worked with a meal kit solution provider (albeit in a limited capacity), it's no surprise to hear that their revenue per customer is probably 4-5 orders before the average customer stops ordering (I think they referred to is as "customer lifetime" or something). If I am going to pay $10 or more, the food needs to be prepped (think delivery pizza), otherwise I just go to the store and get exactly what I want at a cheaper price.
On another note, I'd be interested in hearing others' thoughts on what's affordable to us versus what was affordable to our parents when they were our age. I know my dad was far more successful than I am at my age, and he had a far lesser-quality job. I always assumed that real wage growth didn't match the inflation growth in general goods, but I think we actually get a lot of household appliances and whatnot far cheaper than they did (in terms of hours worked to afford something), so there is conflicted data to that assumption. Again, would love to hear thoughts.
Good insights. Blue apron just released some prospectus materials over the weekend, and their pro forma financials indicate as much as you're saying: most revenue is earned within first year or two of a customer's time with Blue Apron.
Thereafter, order volume and magnitude drops off,though it's hard to tease out whether the rev they get is enough to justify that. From what they are publishing, cost of acquiring customers is significantly below the rev generated per customer. I think if economies of scale materialize and SG&A/marketing/etc falls relative to rev, they may squeak into profitability.
I think you also find that a lot of these people ordering for the first time are doing so at a heavily discounted rate - that's how they draw you in.
I did see the s1 for Blue Apron - I think the fact that their number of customers actually dropped in Q4 of '16 was concerning - when you're spending as much as $0.25 of every dollar of revenue on marketing, that customer number should only go up. I think the fact that customers decreased in their high-growth mode speaks a bit about their business model.
But I also think once they establish themselves and can functionally operate with a lower marketing and SG&A spend, they should be profitable, as you stated. I also think at that point, the only increase in efficiency will be sourcing cheaper raw materials or increasing the price to customers (which likely won't fly).
Anyone see amzn buying wfm today? Other supermarkets stocks are getting hammered. This is huge. Each whole foods locations will become a regional center for Amazon fresh. This could kill the meal kit industry.. Not certain but it could.. if they can compete on price (whole foods is expensive) they are already cutting out significant logistics costs with the acquisition.. current meal kit companies become "meal idea" companies if they cant compete on price. Any other thoughts?
I think another factor is services like Yelp. Whereas before the name brand chains like an Outback Steakhouse would be the default choice since you knew what you would be getting there. It is the same in every location. Now with Yelp or really just a google search on your phone, you can get customer reviews, the menu, pictures of the food and restaurant so you feel more (or less) comfortable branching out and trying that mom and pop restaurant opposed to Denny's.
TBH, I don't remember eating BWW/Applebee's/TGIF at all as a kid. Went to a Chilis a couple of times and the food was meh for the price point they had. We had far better local restaurants that served quality food at modest prices.
That being said, now looking at my groupies (a bunch of professionals in finance/consulting/corporate), we live near the centre of the city, so we're often in close vicinity of green grocers, butchers, fishmongers, supermarkets, etc. When we are not on Seamless (and right now, we aren't since we're all trying to control our waistline), we divvy up the tasks for buying groceries between ourselves for each week and just prep it en masse. To prep really amazing food, we just follow some Youtube channel of some cool chef for instructions, listen to Ainsley/Ramsay/Oliver while putting a game on the telly. Total control over the food we cook and eat - plus it's a learning experience in itself.
The tasks for buying the groceries are usually handled by guys with little time (IBD/consult guys), while prep is usually done by the guys with (relatively) more time on their hands (the dev guy, corporate guy and S&T guys). Roles are often exchanged based on time and availability. Of course, we do feel lazy oftentimes, but then we just decide to head out to some buffet at some fancy hotel nearby and splurge there as a group.
This arrangement is increasingly being followed by a number of our peers who live together. Meal companies are unsuccessful at capturing us since yes, we prefer to cook on our own, but we can get the recipes we need online, and we can literally hand over the recipes we want to prep to our grocers who'll provide us everything customized for our needs. It's a bit old school advice, but it's all about knowing your local merchants - if they like you, they'll go out of their way to help you, and even provide you discounts for loyalty.
Your second paragraph is spot on. I love Jamie Oliver. The production value of his videos are so high. The videos are short and easy to follow.
What kind of workplace communo-capitalist cross is that? This sounds like the dream. Now this is a real idea.
It usually works because of the football game we have on the telly, plus the misplaced notion that IBD/PE/consult guys can order groceries on their companies' tabs. Though we don't mind - time saved is time well-spent.
As for football, well, everyone has to watch football, so we often watch it together as much as possible.
It's all about the fresh quality, but also more about made to order.
Applebee's is really a frozen product pre-packaged and re-heated.
Chipotle lets you customize your order, infinitely better.
That's because TGI Fridays, Ruby Tuesdays, and Applebees are complete and utter shit. The food I make at home not only tastes better but is better for you and less expensive while using higher quality ingredients. If I'm eating out, it's because I need something fast (so Chick Fil A on the way somewhere), it's a social thing with friends (bar food at happy hour or after 18), or I want something nice. I'm not going to go out of my way to go to nasty ass chains. Last time I was at TGI Fridays they served me rare chicken...
Their customer base is literally dying
My personal take is that with the internet and recent (and pretty much already done with) explosion of popular food shows like "The Taste", "Chopped", and anything Anthony Bourdain, the younger American generation is better educated on quality food and dining.
I knew so many people growing up from "traditional American" households that religiously ate pizza, fries, and chicken nuggets growing up. My father was an international commercial pilot and not from the US, so I had exposure to a diverse culinary universe. He lamented chains in general and it stuck with me as well. I think that families now with the internet are getting that same exposure. Hamburger Helper is dead.
Your "pizza, fries, and chicken nuggets" example even works in this instance. Use google or yelp to find the best local pizza joints that will definitely beat dominos, pizza hut, papa johns, etc. or go to the grocery store and make fantastic local pizza yourself. Instead of fries and chicken nuggets you search for a sweet fried chicken or bbq place and get the adult version or you go to Chick Fil A, which will blow McD's or BK out of the water every time. There are simply better options and they're easy to find.
There are a lot of good points on this thread, all contributing factors. The reality is that Applebees and BWW just suck. The food is not good (both) and overpriced (bww).
I'm in a slightly different demographic than most WSO'ers. I'm in my 30s, married, family, in Corp Fin and in the burbs. My kids LOOOOOOOVE going to a restaurant, I am a chain restaurants dream. My kids have never been to an applebees and even though they like bww we don't go because I hate the food.
We make equal time and money investments necessary for those examples, but choose to go to Chilis fairly regularly. The nearest Applebees closed, but the Chili's is always busy. The food is good enough, reasonably enough priced and its a great place to take kids. When we go out with the kids it's either Chilis, Naf Naf, Chick-fil-A or maybe chipotle (although my 4 year old now irrationally "hates" Chipotle). The little dudes just got introduced to the fast casual make you own pizza and went bananas, we'll be doing that more often too.
I guess long story short, we eat all types of restraurants and enjoy it. However, the reality is that the new QSR restaurants are usually better, cheaper and faster. In my mind it's less about not being willing to sit down at a restaurant, it's about the value proposition and these old chains are losing.
I think this hits on another pain point for these restaurants which the OP perhaps unintentionally hinted at: "as a kid" we went to these places. The average age of a first time mother in 1980 was 22.7, today that figure is above 28-29 years old. Therefore, I don't think the market size for single people to go to casual restaurants has changed as much as the addressable market of young families with children has shrunk markedly. The older people with children can afford a quality dining experience, while the younger people with children have less disposable income and time, and therefore prefer QSR.
Everyone knows Chili's is better than these shitholes. Instagram said so.
Someone said it earlier but I think the point stands for younger people in general they might make bank but still act as cost conscious consumers in college.
My diet has not changed from college and other than the occasional trendy restaurant you will likely find me at the same places I ate in college including fast casual chipotle, make your own salads etc.
As a kid? B Dubs is a staple of my adult life.
Do you live in the burbs?
Moved to the city, but old habits die hard.
As has been echoed in a comment above, 90% of the week I am shooting for quick efficient meals that I can prepare and eat in under 45 minutes. However, the 10% of the time during a weekend or occasional weeknight when I want to sit down and enjoy a meal for an hour+, I sure as hell won't be doing it at some suburbia chain POS like Applebees or TGI, I'll go to an actual restaurant and enjoy a real meal.
Yeah this exactly.
Quick, healthy eats for fuel during the week.
Out and about at the weekend at whatever London brunch/market/pop-up/restaurant/etc/etc I can find. Really no need to go to a chain when there are 100's of smaller places to try out. Variety is the spice of life and all that..
I think chotchkies and flingers are still doing ok. People really love the pieces of flair.
+1 SB for the reference.
pretty much all of those casual dinning spots you mentioned are pretty not in style anymore, at least in my opinion of the places by me. I still think buffalo wild wings is alright, but I've been opting for the local pubs instead
In other news, does anyone here feel Hardrock Cafe is a dying as a brand experience? I think they've started the descent into shittiness.
Hardrock Cafe probably dies as a brand experience in-line with the decline in rock music itself. Perhaps it should rebrand as "Chillstep Conscious Trap Rap Cafe"
As long as there are 90s kids around who want to show they're fans of the Jefferson Starships or the Bee Jays, and old farts too, I'm thinking they'll survive. Basically the really pretentious types who think of themselves as huge rock aficionados. But yep, I'm predicting a huge decline with the revenues and the brand overall gradually, as the GenZ kids move away into "street culture" and nightclubs with more updated tastes in music.
EDIT:- Seems I got some rock music lovers butthurt. No worries, I hate the crap the GenZ calls music these days too. Me? I'll listen to anything that has a beat to it
All chain restaurants get boring after awhile. I prefer the mom's and pop's eateries, the food is better.
I still go to Applebee's from time to time. If BWW were to offer delivery I would eat them a hell of a lot more. The CEO thinks they are fine as they are. One thing worth noting though is these restaurants do better during recessions. People still want to go out to eat, but don't want to spend anywhere near as much.
Oh no some bland microwave prepared cookie cutter suburban restaurants are struggling! Maybe Americans are sick of eating over marketed prolefeed and prefer to eat at locally owned ethnic and thoughtfully prepared food establishments.
This. This x1000000. Idk where the love for Chili's is coming from either, it's also terrible.
Corporis non harum dolores ullam omnis et suscipit. Quis aut qui est eligendi nam perspiciatis a. Sed consequuntur nostrum in nobis similique neque alias. At et qui qui mollitia iusto. Ut unde et quae veniam aut. Quasi enim sed dolorem nihil blanditiis qui sed.
Delectus nulla excepturi dignissimos minima maxime. Ipsa officiis eius amet ut provident ducimus libero quos. Doloremque voluptatem neque recusandae autem. Velit nulla rerum officiis. Porro magnam voluptates vel qui. Aperiam ut quisquam consequatur quas odio.
Facere aperiam quaerat consectetur quibusdam ullam. At aut soluta ut fugit repellat porro fugit. Eaque fugiat eum et ipsam neque. Sunt aut soluta explicabo ullam. Enim omnis vel voluptas impedit voluptas cum similique. Voluptates accusantium aut sequi tenetur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Et id debitis labore ut recusandae maiores dolor est. Inventore quos voluptates ut id. Iusto placeat et perspiciatis ducimus aliquid aut rerum praesentium.