The long-stagnant family-dining segment is trying to reinvent itself, as several players work to modernize their operations and improve speed of service to attract younger quick-service customers.
IHOP, Denny’s and Friendly’s are among the operators testing fast-casual or express-style concepts they say will appeal to on-the-go customers who seek efficiency and portability. Those attributes are particularly important during breakfast, a daypart the family segment ruled until fast-food giants like McDonald’s and Burger King started muscling in.
Now, industry watchers say, family-dining chains have realized that they need to make their full-service offerings available in quick-service fashion. Also, the recession is working to their advantage as consumers rein in spending but still seek out quality fare.
“Family dining as a category is not nearly down as much as fine dining or casual,” said Dennis Lombardi, executive vice president of WD Partners, a foodservice consultant based in Columbus, Ohio. “It’s been insulated somewhat from the downturn—down about 2 or 2.5 [percent]—but that’s not universal or across the board. If you look at 2008 numbers, Bob Evans’ same-store sales were flat, Denny’s was down about 3.7 percent and IHOP was up about 1.5 percent. By the way, you do know that flat is the new up. If you’re flat, you’ve got bragging rights.”
Lombardi said the new express or fast-casual concepts should not only improve unit economics, but they also should increase traffic without taking away volume from the core family-dining business.
“Express units allow for quick in and quick out, and breakfast is all about how much time you have to spend,” he said. “This is a way of expanding reach and hopefully frequency of customers because now they have something that appeals to individuals under time constraints. If I’m on my way to work, I’m not stopping for a full-service meal, but I may stop and get something and eat it in my car or at my desk.”
Spartanburg, S.C.-based Denny’s has been testing its Fresh Express counter service since 2007 and now plans to expand it to the Northeast and Mid-Atlantic regions of the country as well as offer drive-thru service and curbside takeout at its restaurants.
Denny’s grab-and-go concept is actually a 200-square-foot counter offering an abbreviated menu that features the Grand Slam breakfast sandwich and signature Pancake Puppies as well as smoothies and coffee beverages. Already in place in three units in Dallas, Fresh Express will be installed at six more stores in various markets, chain executives said. In addition, drive-thrus will be added to two of the stores and curbside pick-up also will be offered.
“We look at this as a way to really establish a takeout beachhead,” said Mark Chmiel, chief marketing officer for the 1,500-plus-unit chain. “The overarching theme of this is to take the family diner and make it more convenient, more on the go and give consumers more choice opportunity.”
He added that Denny’s expects the express counters and drive-thru additions to increase sales between 15 percent and 20 percent.
IHOP also has been testing a fast-casual counterpart to its full-service concept called IHOP Café. A franchisee of the Glendale, Calif.-based chain quietly opened the store in a San Antonio suburb late last year.
Patrick Lenow, a spokesman for DineEquity Inc., parent of IHOP and Applebee’s, would not offer specific details about IHOP Café, but said the chain “announced some time ago it was looking for new ways—anything from licensing to gift cards to [opening in] alternative sites—to bring the brand to guests.”
Lenow also would not say whether the chain would expand the tests to additional markets.
“We have a set strategy on this, and we’re not going to detract from our core business,” he said. “This is a single-unit test. We’re always looking to raise the bar and make the brand better.”
Those who have seen the cafe describe it as a coffeehouse that looks like a cross between Panera Bread or Au Bon Pain and Starbucks. The menu, also reduced to feature some of IHOP’s popular core items, serves silver-dollar pancakes, wraps, sandwich melts, coffee drinks, smoothies and shakes.
Chris Wolf, a foodservice consultant who recently spotted the store while visiting San Antonio, said its interior featured “lots of light-stained wood and glass, bright blue awnings and a new logo. It just has this modern kind of coffeehouse look.” Wolf, director of innovation for Springfield, Mo.-based consultant Turover Straus Group Inc., further noted that the cafe’s menu items have a more “contemporary presentation, something you’d expect Starbucks or someone newer to do.”
“They’re holding onto the past, but touching the future,” he said.
Wolf said he gives IHOP high marks for trying to modernize and reach broader markets than the baby boomers and mom-with-kids targets known to frequent its full-service restaurants.
“This really feels like more of a brand evolution,” he said. “What IHOP is doing is keeping an eye on its core business, but at the same time they’re asking themselves whether the brand they’ve had for decades can carry them through the 21st century. They don’t want to look like they’re taking their eyes off of the core brand, but it’s smart to look at consumers who [want] lighter fare or handheld [items] they can take with them.”
Meanwhile, Friendly’s Ice Cream Corp. is moving ahead with plans to debut Friendly’s Express, its smaller, more modern, fast-casual concept, in the summer. The Wilbraham, Mass.-based company said it plans to open three stores in Massachusetts and one in Providence, R.I.
“I wouldn’t say we’re in full launch mode of testing,” said Jim Sullivan, Friendly’s vice president of franchising and development, “but we have identified our first site, in Mansfield, Mass. The menu has been greatly reduced; it will not have breakfast, just lunch and dinner, and reduced hours of operation—Monday to Thursday from 10:30 a.m. to 10 p.m., and on the weekend we’ll extend that to 11 p.m. or midnight.”
Sullivan isn’t concerned about the lack of breakfast items on the menu. He said breakfast accounts for only 12 percent to 14 percent of the chain’s sales. When asked about the growth plan for Friendly’s Express, Sullivan said it would depend “purely on the [return on investment].”
“We’ll do intense research—guest intercept work—and based on sales and investment, we’ll see what the ROI looks like,” he said.
He added that the chain expects its fast-casual offshoot to “cut operating costs by 10 percent to 15 percent.”
