The COVID-19 pandemic turned 2020 into the annus horribilis for the casual-dining restaurant segment.
The hospitality amenities that make the segment special — welcoming dining rooms, attentive service and adult beverages at a convivial bar —were devastated by coronavirus restrictions that closed dining rooms, enforced social distancing and silenced cocktail shakers.
Casual-dining restaurants both large and small pivoted like prima ballerinas pirouetting en pointe. Innovation, by necessity, accelerated.
Casual-dining brands created off-premises channels from to-go, carryout and curbside to even drive-thru lanes. They fulfilled customers’ necessary grocery needs through supply chains that still had access to scarce flour, butter, eggs and even toilet paper. They created family-meal offerings for customers to gather in their home pods. They quickly adopted touchless ordering and payments, quick-response code menus and other newer technologies. They rolled out virtual delivery-only brands that existed on third-party smartphone apps and used their excess kitchen space. They emphasized safety.
Brand strength gave vigor to the large casual-dining brands.
“I think America right now trusts certain brands,” said John Cywinski, president of the 1,600-unit Applebee’s Neighborhood Grill & Bar, a division of Glendale, Calif.-based Dine Brands Global Inc. “I think that trust is not just around safety and sanitation, but — in an uncertain world — that they’re predictable and reliable.”
The Top 500 found that overall U.S. restaurant sales declined 4.3% in 2020 compared to 2019, and casual dining, midscale and full-service restaurants fell 16.3%. Only fine-dining sales fared worse, with a decline of 20.6%.
Closures also hit the segment with brute force. Top 500 unit counts declined 3,616 overall, or 1.5%, from 233,595 to 229,979, but casual-dining declined 4.4% to 14,849 units.
Bright spots existed for some casual-dining brands in 2020. Buffalo Wild Wings, owned by Atlanta-based Inspire Brands, posted the highest gross domestic sales in the segment, totaling $4.061 billion.
Louisville, Ky.-based Texas Roadhouse Inc., known for its dinner-only steaks and a shift to curbside pickup and takeout during the pandemic, had the largest percentage increase in units, adding 16 for an increase of 2.9%. Buffalo Wild Wings and two brands from Orlando, Fla.-based Darden Restaurants Inc. — Olive Garden and LongHorn Steakhouse — also had positive unit growth in the pandemic year.
Among closures, Dallas-based TGI Fridays had the most, shuttering 47 units in 2020.
Casual-dining brands birthed an array of virtual delivery-only brands during the pandemic, accelerating ways to use excess kitchen capacity that had, in many cases, been planned before coronavirus hit.
“By their very nature, ghost kitchens and virtual brands are difficult to quantify in terms of their number or their contribution to sales,” Datassential noted for the Top 500. “However, given the widespread adoption of the virtual-brand model from some of the largest brick-and-mortar restaurant operators, it is safe to say that these new delivery-only locations were important to maintaining sales in the foodservice industry.”
Dallas-based Brinker International Inc. expected its virtual It’s Just Wings brand, which was expanded in 2020 to more than 1,000 Chili’s Grill & Bar and Maggiano’s Little Italy locations, to become a $150 million-a-year business.
Wyman Roberts, CEO of Brinker, noted in a January earnings call that It’s Just Wings, which was introduced in June 2020 with third-party platform DoorDash, drew consumer interest in a year when many were locked down because of the pandemic.
“We know the model resonates with consumers as long as you deliver a great product,” Roberts said. What began as a one-channel DoorDash brand was expanded in May to include ordering through Google Search and Google Maps.
Roberts said Brinker was proceeding cautiously and would likely launch another virtual brand by mid-year.
“We’re ensuring we have the right systems in place that will best support our operators’ ability to execute at a high level, especially as dining rooms reopen,” he said.
Other bar-and-grill chains jumped into virtual concepts as well, Datassential noted.
Tampa, Fla.-based Bloomin’ Brands Inc. launched Tender Shack at more than 700 of its Outback Steakhouse and Carrabba’s Italian Grill units. Applebee’s early this year started its Cosmic Wings brand. And Huntington Beach, Calif.-based Lazy Dog Restaurant and Bar created Jolene’s Wings & Beer.
Datassential noted that in a September 2020 survey, consumers indicated “the virtual or ghost kitchen trend will have staying power beyond the pandemic.” However, Datassential said, those patrons “will demand transparency from operators of virtual brands, and their standards for the off-premises delivery experience will likely only get tougher.”
While dining-room capacity restrictions were being eased this year, casual-dining chains were expecting to retain some of the increases they’d seen in off-premises sales volumes.
Bloomin’ Brands executives, for example, said in a February earnings call that across its portfolio, which also included Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar, it was doing an average $23,000 a week in off-premises sales, which were up from the fourth quarter.
Casual-dining brands also realized pandemic-fueled customer conveniences were here to stay. Bloomin’ Brands expanded its portfolio into drive-thru fast casual with the debut of a stand-alone Aussie Grill by Outback in May 2020, with plans to expand the concept. Applebee’s added a drive thru to its casual-dining offerings at a restaurant in Texarkana, Texas. Texas Roadhouse converted lobbies into to-go staging areas to keep up with the demand.
“When restaurants were barred from having full capacity in their dining rooms, off-premises strategies like takeout, delivery (either self-operated or with a third party like Uber Eats) or the drive thru became their lifeline,” Datassential said.
Going hand-in-hand with those convenience moves during the pandemic, casual-dining also leaned into technology enhancements.
“While 86% of operators said takeout and delivery sales could not completely make up for lost dine-in traffic, off-premises tactics nonetheless were the primary way they stayed open,” Datassential reported.
For example, Datassential found that online-ordering capabilities for all operators grew from 23% in 2019 to 34% in 2020. Other brands, facing a labor squeeze, turned to hand-held technology for wait staff to allow them to cover more stations.
While most restaurant brands were seeing robust sales in the summer of 2021 and were again looking at their expansion pipelines, chain executives were marveling over the challenges they had overcome in the pandemic.
As Roberts of Brinker noted flatly in the company’s calendar-year-end earnings call: “2020 was a crazy year.”