Nancy KruseThe following is Kruse Company president Nancy Kruse’s response to NRN senior food editor Bret Thorn’s take on the state of the casual-dining segment.

Holy mackerel, Bret, I feel as though you just lobbed a grenade at me. The question you raise about the viability of casual-dining chains is the biggest issue facing the industry today, and if I knew how to patch up that ailing segment, I’d be the hottest ticket in the business. Unfortunately, I can’t offer any sure fixes, but you won’t be surprised to learn that I have some opinions on the subject.

It’s worth remembering that there was a time when casual-dining chains were every bit as hot as the fast casuals are today — maybe even hotter. Buoyed by demand from the burgeoning baby-boom cohort, many chain executives adopted what became the default path to company growth, which they followed successfully for a very long time. They opened as many restaurants as quickly as they could. They were aided and abetted in this endeavor by Wall Street, an extremely unforgiving equity partner that calls them to account every quarter, come what may. To support the unbridled expansion of the sector and to meet the expectations of the Street, chains created hugely efficient support systems that maximized consistency in purchasing, marketing, operations and other disciplines. Efficient and profitable systems spawned uniformity from unit to unit that lends an institutional image to many brands that may have been cool in the 20th century, but have lost their mojo in the 21st.

But I think the situation is more complicated than too many units operated by a flock of brands that aren’t always clearly differentiated, though both of these conditions apply in many instances. The segment has also become a victim of its own success, because in the course of building their brands, casual-dining icons also created a savvy, well-educated dining populace. They introduced the American public to everything from wine to wasabi, they took the starch out of full-service dining and they made the sit-down restaurant experience accessible to a broad market. They helped diners develop their tastes, to become more sophisticated and demanding. But while diners’ tastes evolved, it has been difficult for large chain systems to evolve with them.

It’s also true that the foodservice industry is more complex than it was even a few years ago. Competition has become more fragmented and intense. And we’ve gone through a culinary revolution that has unleashed legions of tyro chefs into the casual-dining business at the same time that substantial numbers of established chefs migrated from fine dining. Fresh, new faces in the game, they are unencumbered by the baggage of the big, corporate brands. Their key differentiator seems to be their emphasis on “authenticity,” a concept that is difficult to explain and often is defined by other equally muddy descriptors like artisanal, local and craft, which apply to both food and beverage. They see themselves as purveyors of real food, often served in a rustic-chic environment heavy on reclaimed barn wood.

To make sure patrons really get the point, they identify themselves with a range of new-age monikers, like gastropubs or farm-to-table restaurants or even larders, which evoke an old-fashioned pantry and are popping up all over the place. What they don’t call themselves is chains. The best of this new breed are nimble and customer-responsive, often building on a foundation put in place by the casual-dining giants. From the chain point of view, it’s like being nibbled to death by ducks, as independents and regional groups proliferate from coast to coast in markets large and small, adding layers of competitive activity in an already crowded marketplace.

So, Bret, this brings me to your question: Can casual dining get its groove back? At this moment, it seems a tall order, but I would never discount that possibility, given the collective smarts and experience housed in so many chain headquarters. They have leverageable assets of location and market presence, not to mention strategic competitive advantages in areas like the dinner daypart, bar business and culinary innovation. But while the old chain model prized sameness, the new model rewards a localized, personalized approach. This means that they should all step away from the flatbread and take a look at what they can learn from the upstart competitors. Their new formula can’t look formulaic, and success may require a wrenching but necessary reengineering of the brand to bring it in tune with the zeitgeist.

 Meanwhile, fast-casual operators should watch and learn, since their business is also aging. In fact, some segments like hamburgers and pizza are getting pretty darn crowded and are maturing rapidly. Since what goes around usually comes around in this business, Bret, at some point in the future, you and I will likely be having this discussion about that segment.

Contact Bret Thorn at bret.thorn@penton.com.
Follow him on Twitter: @foodwriterdiary



Nancy Kruse, president of the Kruse Company, is a menu trends analyst based in Atlanta and a regular contributor to Nation’s Restaurant News. E-mail her at nancykruse@aol.com.